Points of reference

So, your financial planning practice is up and running. In fact, maybe it has been humming along for several years now, and you’ve done a fine job for your clients. But you’re finding it harder and harder to stay on top of every latest development. Changing tax laws. Medicaid phase-outs. And then, the biggie: long term care insurance underwriting.

If you’re having difficulties managing your own LTCI affairs or driving any traffic through the door, you’re not alone. In fact, it is an area that has experienced radical changes over the past two to three years.

There’s a trend here
If you’ve noticed that the number of seniors who’ve come knocking on your door asking for help in addressing their LTCI needs has dropped sharply, you’re picking up on a much broader trend. It’s commonly known that individual LTCI annualized premiums have been slipping for several years, much to LTCI specialists’ chagrin and carriers’ dismay. And, if industry experts are correct, according to Marilee Driscoll, a speaker and founder of long term planning month based in Plymouth, Mass., a similar decline can be expected in 2005 over 2004.

Why’s that? Driscoll reasoned that advisors and producers are shifting how they run their LTCI business for three main reasons. “First,” she says, “they’re forming referral relationships and are getting serious about going after referrals as opposed to [writing the business] on their own.”

Second, there’s an industry trend where LTCI is being handled in packages known as “multi-life” plans, whereby individual policies are clustered together so that they get a “group” discount. Marketing these policies has been similar to workplace disability insurance: There has been an explosion in workplace and association long term care sales and there’s a growing awareness among employers that this is an important coverage to consider, particularly if it’s offered as an employee benefit.

Third, and perhaps most importantly, planners who are being hit with the downturn in LTCI sales are looking for other ways to market it. “[LTCI] is a complicated product,” Driscoll notes. “Most planners don’t want to go near it.”

Her advice? If you’re a planner, the best way to take care of your clients is by forging a referral relationship that allows you to farm that work out to a specialist. “I didn’t used to say that,” Driscoll says, “but now I do – even going through the underwriting process, you can really go down a bad rabbit hole.”

Why a specialist?
Given what you have to deal with as a financial planner, the idea of farming out your LTCI work is likely to strike chords that are both appealing and nerve-wracking: You may free up a difficult task, but how can you ensure you’ll do what’s best for your clients?

Perhaps this angle will win you over: Given what you already have to deal with in your practice, how do you plan to stay abreast of the latest and greatest within the ever-changing world of LTCI? And another benefit: There’s nothing better than getting a piece of the action without having to do any of the work. If you forge a solid relationship with the right LTCI specialist (where you split commissions on work that gets written), not only will your client base be well served, but the specialist wins and so, too, do you.

Case in point is connecting with someone like Steve Sanders, national director of long term care for Asset Marketing Systems in San Diego. Having worked as a long term care specialist for 13 years, Sanders understands many nuances of the LTCI underwriting process.

For starters, Sanders asserted, the client landscape itself has changed. Where the average LTCI purchaser used to be 66 years old, that person is now 55. Moreover, many advisors no longer sell LTCI because it’s too complicated.

“It has too many moving parts,” Sanders says, adding, “Plus, it’s more of an emotional sale than a financial sale: People do not buy this, it has to be sold to them.”

Another challenge in selling LTCI for financial planners is they simply don’t know how to position it so it’s affordable.

“The average financial advisor presents a plan that may cost their clients $4,000 to $5,000 per year, which they’ll end up declining.” he says. “When in reality, they often need to buy a policy to cover just three years in a nursing home, which is the average stay.”

So how does Sanders enjoy such success? “What I’ve done to be successful is I go to where [seniors] already are and I give an informational, educational and entertaining program for the monthly meeting of the AARP, the church, the civic organization,” he says. LTCI is sold based not on protecting money, Sanders asserts, but to protect a client’s quality of care and control. “Without LTCI in America, you’ll go into a nursing home [where you can easily] spend yourself into poverty and lose your control.”