Practical analysis for investment professionals
30 March 2016

Linking Health Care Discussions with Wealth Care Results

Linking Health Care Discussions with Wealth Care Results
The CFA Institute Wealth Management Conference is an annual event covering tools and strategies important to private wealth management, including financial planning, practice management, and client relationship management. The CFA Institute Wealth Management 2019 Conference will be held in Fort Lauderdale, Florida, on 2–3 April.

It is imperative to talk to your clients about their health when discussing financial planning. As an adviser, do you do that? Or do you focus on less intrusive topics, planning instead for rosier, big picture goals like an early retirement with plenty of leisure time?

Advisers should be aware of their clients’ health — not only current, but also potential future states. They should regularly talk about it, and then they should integrate what they learn into a more comprehensive and effective financial plan.

Carolyn McClanahan, founder of Life Planning Partners, asserts that advisers must pay attention to the health status of their clients. At the 2016 CFA Institute Wealth Management Conference, she warned that unpredictable health care costs could send an otherwise safe financial plan completely out the window.

For context, a 2014 Employee Benefit Research Institute note stated that “a man would need $64,000 in savings and a woman would need $83,000 if each had a goal of a 50 percent chance of having enough money saved to cover health care expenses in retirement.” But those numbers are for an “average” man or woman. Are your clients average? Or, are they smokers? Overweight? Do they have early onset dementia or diabetes? Do you know?

According to McClanahan, better discussion leads to better preparation. The components of an effective health care conversation should include a client’s health history, health care mindset, and what their advance medical directive planning is. You can watch McClanahan’s full presentation from the conference below.



So how do you ask about health? McClanahan suggests starting with open-ended questions, and then filling in the details. The one question she stressed asking clients is, simply, “Tell me what you do to take care of your health.” Advisers want to make certain that clients do not outlive their money. And because they cannot predict exactly how long clients will live, they must make educated guesses based on a number of factors. As McClanahan notes, “a significant factor is lifestyle.”

In her talk, McClanahan also observed that we each have a “health care mindset.” As an adviser, you should understand your client’s individual mindset so you can include that in your planning. Most mindsets fall into one of two types — maximizers or minimizers. Maximizers are people who want the best all the time, and will go to a doctor for anything and everything. Minimizers are those who will only go to a doctor if they truly think it will be a benefit. The resulting health care costs for either mindset are important to consider.

In addition, it is important to discuss your client’s medical decision-making process. Many clients haven’t thought about how they make medical decisions, so ask them: “If you are diagnosed with a serious illness, what would you do? To what ends will you go?” Without a clear advance medical directive, according to McClanahan, the average extra, out-of-pocket expense in one year is $18,000. Advisers can help clients avoid significant expenses by having better advance care discussions with their clients.

Integrating this information into a comprehensive financial plan is the final step in the process. Determine “regular” expenditures first, says McClanahan, and then determine potential health care expenditures by incorporating the client’s health status and health care mindset. Then consider the possibility of short- or long-term care costs. Per McClanahan, the average long-term care need is three years (five years for someone with dementia). Document your client’s quality of life measures (e.g., communication, feeding, grooming, and interaction, and discuss these wishes regularly).

Advisers should revisit their clients’ plans on a recurring basis or as conditions change. The cost of unplanned elder care on a family can be staggering, both emotionally and financially. It’s much better to be prepared.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockphoto.com/kmlmtz66

About the Author(s)
Susan Hoover, JD

Susan Hoover was the editor of Connexions, the CFA Society Leader newsletter and the digital editor of the Enterprising Investor blog at CFA Institute. Prior to CFA Institute, Hoover worked for McCallum & Kudravetz, PC, and the US Department of the Navy in real estate and labor law. Hoover earned the CFA Institute Investment Foundations™ Certificate and holds a BA degree from Lehigh University and a JD degree from the Washington College of Law, American University.

4 thoughts on “Linking Health Care Discussions with Wealth Care Results”

  1. Anil Nair says:

    This is really interesting. I started career selling life insurance and I understand deep within that Living too long is far bigger risk than living short.

  2. John Snow says:

    Hi Susan,

    It is no doubt a very informative article. I liked the idea about the ‘health discussions and also the following line:

    ‘Advisers can help clients avoid significant expenses by having better advance care discussions with their clients.’

    I hope, you will share more such ideas in the future too.

    1. Susan Hoover says:

      Thank you John, I appreciate your comment, and yes, I will be working on more articles in the same subject area.

  3. Hethre Honna says:

    I completely agree with your views, Susan. With the rising healthcare costs, it is important for all financial and insurance advisors to focus on healthcare as much as on retirement plans. This is a really important point.

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