In our December column (“The Value of Client Education”), we discussed the importance of knowing your clients and understanding their needs. This month, we reiterate this important message with a focus on an issue that could have major consequences for clients: rising healthcare costs. While younger to middle-aged clients in good health may not see health costs as a financial planning issue, recent federal legislation has created a type of “medical IRA,” called the Health Savings Account, that permits individuals and families to save tax-free for future medical expenses. As our latest Rydex AdvisorBenchmarking survey shows, healthcare costs are a prime concern for older clients, and forward-thinking advisors can use this information to help younger clients alleviate those concerns.
Our online and telephone survey of 450 registered investment advisor firms, conducted in November 2004, reveals a gap between retiree clients’ needs and the services provided by their advisors. Advisors say that while 87% of their retiree clients are either very or somewhat concerned about rising health care costs (see Chart 1 below); less than 2% of advisors considered health care expenses to be an important topic of discussion (Chart 2); and they spend only a fraction of their time (3%) discussing the topic.
*(Advisor answers tabulated as “Other” in Chart2 ranged from market performance to stock performance to specific security performance to specific needs cited by clients.)
The HSA Learning Curve
In today’s increasingly competitive business environment, 46% of advisors agree that offering additional products and services would help to grow their businesses. One area advisors may want to consider is health savings accounts (HSAs). Created by Federal legislation enacted in December 2003, HSAs were designed to help companies and individuals save money on their medical costs.