Wealth Management Panel Stresses More Holistic Approach To Financial Planning

According to a recent survey by Univita Health, "Cost of Care Survey 2012," the national average monthly cost for a private room in an assisted living facility is $3,283 per month. ²

"Expenses for long-term nursing care are a definite threat to any client retirement plan," said Bruyette. "So it should be natural for advisors to bring up this topic during review of a client's plan for retirement. If the client is financially independent and wants to preserve an estate for children, then long-term care should be considered in the overall estate plan.

According to a 2012 research paper by Judy Feder and Harriet Komisar, supported by a grant from The SCAN Foundation, in 2009, of $203 billion in total national long-term care expenditures, approximately 23 percent was paid out of pocket. The SCAN Foundation is an organization dedicated to creating a society in which seniors receive medical treatment and human services that are integrated in the setting most appropriate to their needs. ³

"Advisors should be counseling their clients on ways to reduce the financial risks associated with the unanticipated costs of long-term care," said Spickler. "People insure cars, homes and other valuable items hoping to never make a claim.  So too should people be looking to protect their assets. Preparing for unanticipated events during retirement is the prudent thing to do. That's where long-term care insurance products can play a very important role," she said.

"What differentiates long-term care insurance from life insurance is that the long-term care insurance needs cannot be calculated or analyzed, since we don't know if the client will incur long-term nursing costs, and if so when those costs might start or how long they might last," said Bruyette.  "As a result, it tends to be more of an emotional discussion and an emotional purchase by the client, as the protection against nursing costs either makes the client more comfortable or it doesn't."

In 2010, Lincoln's "Financial Life Stage Survey" showed 65 percent of the participants agreed it was important to plan for long-term care. However, only 44 percent actually had plans." ⁴

"Financial advisors have a central role in educating clients about the potential impact of not being prepared for a long-term care event," said Spickler. "It is especially valuable for advisors to walk clients through the various long-term care funding options, such as hybrids which may offer a return of principal if a long-term event does not occur."

Bruyette highlighted four key rules he recommends advisors take into consideration when starting the long-term care conversation with clients:

1. The optimal age to begin thinking about purchasing long-term care coverage is generally after age 55.
2. If a client's net worth is less than $1.5 million - $2 million, then in many cases they can't afford the amount of long-term care coverage needed.
3. If a client's net worth is more than $3.5 million - $4 million, then long-term care coverage should be viewed as estate planning in an effort to help protect estates from depleting later in life.
4. The average nursing stay is 3-4 years or less, and coverage should generally be obtained for this time period.

"People need to be educated and understand that planning for long term-care is becoming more difficult," said Nash. "There are many products and assistance programs to choose from in today's marketplace, both government and private. It's never been more critical to ensure consumers are properly educated, that they understand the risks they face, and the sense of urgency needed to properly prepare for possible long-term care issues and the options available to mitigate those risks."

According to AARP, by 2015, unmarried boomers will account for 21 million households, or 46 percent of all boomer households. ⁵

"Our industry has been challenged with making the connection to the next generation of our clients," said Nash.  "The topic of long-term care can be an emotional one and is as much a family issue as it is an individual issue, in many cases highlighting the need to engage clients' children in the discussion. It drives the need for planning strategies that protect the retirement portfolio from risk."

"People really need to be in the right frame of mind to have this type of conversation," Spickler said. "It can be very emotional and often times it takes a trusted financial professional to help their clients realize the risks associated with not preparing in time."

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About Lincoln Financial Group
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE: LNC) and its affiliates. With headquarters in the Philadelphia region, the companies of Lincoln Financial Group had assets under management of $186 billion as of March 31, 2013. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life, disability and dental insurance; employer-sponsored retirement plans; savings plans; and comprehensive financial planning and advisory services. For more information, including a copy of our most recent SEC reports containing our balance sheets, please visit www.LincolnFinancial.com.

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SOURCE Lincoln Financial Group