Advisors Agree Health Care Planning Important to Client Retention

More than half find planning for health care costs challenging

Financial advisors, often lauded for protecting investors’ financial health, should make sure their clients’ physical health is protected as well, a survey released Monday by Nationwide Financial found. Failing to discuss how their clients will pay for their health care costs could cost advisors their clients, the survey found.

The report, conducted by Harris Interactive for the insurer, found about 80% of advisors know they can keep their clients if they help them plan for the cost of health care. However, of the 501 advisors surveyed more than half said they find it challenging or very challenging to talk about their clients’ health, despite 58% saying their clients want to have those discussions. 

The key to getting clients to talk about health care and how they will pay for it in retirement is for advisors themselves to feel competent and comfortable talking about it, John Carter, president of distribution and sales for Nationwide Financial, told AdvisorOne on Thursday. “Advisors need to be more knowledgeable and comfortable with this complex topic,” he said. “It can be overwhelming if you don’t educate yourself.”

The survey found almost three-quarters of advisors say their clients don’t appreciate how important discussions about health care are to their financial plans. Advisors were also found to be somewhat complicit in clients’ reticence. More than half of advisors surveyed said they point out the topic’s importance before changing the subject. Just 4% insist on discussing health care with their reluctant clients.

That 4% is too low, especially when you consider the impact that out-of-pocket expenses will have on a client’s income, regardless of how well advisors have prepared them for retirement, Carter said. “Most advisors should be better versed on the role of out-of-pocket expenses, Medicare and longevity risk,” he added.

As Carter sees it, the challenge is that as clients get closer to retirement, their options become more limited and out-of-pocket costs can be as high as $240,000—not including long-term care. “Studies have shown people who live to 65 have a 70% chance of needing long-term care,” he said.

Even when getting clients to talk about health care and their plans to pay for it isn’t difficult, trying to determine how much a client will need to have can be a hurdle. The survey found 30% of advisors doubt their ability to even estimate how much their clients will need. Eighty percent of clients underestimate their own health care costs, according to an earlier Nationwide Financial consumer survey.

Advisors are asking for more information about health care, Carter said, and to that end, Nationwide offers personalized assessments that help advisors find up-to-date actuarial information to estimate their clients’ needs. He’s also seen advisors who work on teams establish one member as an expert in long-term care, Medicare and other health care related issues. Advisors who take a holistic approach to retirement, combining health care planning with more typical retirement planning, will keep more clients, he said.

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