How can advisors bridge the “care-years information gap” that exists among aging boomers? Patty (Randall) Buchanan says the first step lies in recognizing that “care” is not the same as “illness;” Canada’s universal health system will not cover total costs. The next priority? Educate clients about the need for long-term care insurance

As many Canadians near the end of their “biological warranty period” and aging starts affecting regular activities, they enter a phase of life known as “long-term care (LTC).” This is a relatively new phenomenon, but as families from Labrador to British Columbia are gradually discovering, it is a significant stage of life that each must plan for well in advance.

To protect their clients, financial advisors in Canada must educate them on the issues of long-term care, particularly the financial implications of living to a ripe old age. They also need to present available options, including the most affordable yet also most poorly understood solution for Canadians today: long-term care insurance (LTCI). 

Boomers with aging parents, soon-to-be retirees and seniors are currently experiencing long-term care as part of their lifestyle. They will continue to do so for the next 40 years because of five crucial factors.

1. A greatly increased life expectancy for Canadians. According to the Canadian Institute of Actuaries projected to 2015, for a couple both aged 65, at least one partner has a 50 per cent chance of living to 90 and at least one has a 25 per cent chance of living to 94.
2. A rapidly aging population in every province and territory. For example, Alberta’s seniors will increase from 10.1 per cent of its population in 2000 to 17.1 per cent in 2021 and Ontario’s from 12.6 per cent to 17.7 per cent over the same period. Some provinces will soon have more grandparents than children.
3. A dramatic drop in the country’s fertility rate since 1945 (now at 1.3), falling below the rate for natural replacement of our population.
4. Significant advances in medicine, allowing Canadians not only to reach “old-old” years (ages 85 years and on) but also to stay there for long periods. This segment is the fastest growing of the overall senior population.
5. Sweeping changes in our health delivery services away from the traditional institutional care model to a community care system (with no “front door” for guidance, forcing families to learn as they go).

Given these factors, there is a monumental “care-years information gap” when it comes to the alarming organizational, emotional and financial risks facing clients. Simply put, clients do not understand the impact of long-term care. And who can blame them?

Many have grown comfortable with our universal health care system and are making a gigantic leap of faith, assuming that “care” will be provided by each provincial government when needed. However, growing older and needing care does not mean someone is necessarily sick or ill; it may merely mean they have met a threshold of dependency. This dependency to undertake everyday activities safely does not imply they will automatically receive health services from government.

In fact, how each province responds to the long-term care needs of its citizens differs drastically. Provincial governments indicate they are the “providers of last resort.” For example, Saskatchewan states it will continue “to subsidize approximately 77 per cent of the overall province-wide cost of long-term care.” In New Brunswick, “long-term care services are not covered by Medicare. Your income and assets will be considered in determining what you will pay. (But) the government pays for those who are unable to pay the full cost of their services.” 

So the confusion is exacerbated — many consumers don’t identify with the issue and its devastating costs. They are not aware of the criteria governing long-term care services in our provinces. Many feel entitled to government assistance and, under certain circumstances, receive subsidization depending on assessment procedures. At the same time, usually when facing a LTC-crisis, others are told they have to assume personal responsibility for their own care and the care of a loved one. Lack of understanding and feelings of entitlement are the biggest obstacles facing LTCI and financial advisors.

This obstacle can be seen as a challenge or opportunity by today’s financial advisors. I believe it leaves advisors with an enormous business opportunity to help their clients find the right solutions for their individual circumstances. Clients need personalized long-term care plans to reduce their financial risks. They are looking to their advisors for information and guidance. Advisors need to include the sale of long-term care insurance in their business plans since LTCI is the most reasonable solution available to most Canadian families.

An advisor’s obligation is not just to sell this complex product, but to help clients understand the impact of their choices on their independence, quality of life, financial stability, assets and family. What then are the broader, tangible benefits of LTCI and how can it be effectively presented by today’s financial advisors?

LTCI is about care-receiving and care-giving

Here are some more alarming figures. In Canada, 62 per cent of caregivers have already been providing care to their family members for at least three years (22 per cent for more than 10 years). Fifty-four per cent of caregivers report having to adjust to financial difficulties as a direct result of care-giving. Seventy per cent of caregivers acknowledge that providing care has been stressful — one in six caregivers fits into a “high stress group.” The main indicator of care-giving stress is the lack of choice in taking on this responsibility. 

The family should always be the focal point in LTC-conversations. Advisors will want to discuss with clients who they think their caregivers will be when the need arises.  Advisors can then discuss the impacts of a lengthy care-giving role by a family member. Discussing with clients if they have factored becoming a caregiver into their retirement plans (31 per cent of Canadian caregivers are most likely to be retired and that number is increasing rapidly) enables advisors to go one step further asking how clients picture their own care stage of life unfolding.

Based on findings by Mature Market Institute at MetLife, Warren Hersch, a U.S. advisor, has identified the birth of a grandchild as another “door-opener” for a financial planning discussion around long-term care. Boomer-grandparents, a new demographic (as of 2006), are the “clubhouse” generation.  They cannot rely on company pensions for retirement, they have adult children living with them, they are raising their grandchildren and they are funding the LTC costs of elderly parents.  It is not uncommon today for a boomer to retire at 65 and live to be 100.

Any discussion about an appropriate time to buy LTCI permits advisors to talk about urgency; LTCI is primarily driven by health, age and the type of benefits selected (leading to catch phrases, such as “Buy before your health goes south and your premiums go north” or “Long-term care insurance, you can’t stay home without it”).

LTCI “complements” a family’s care and attention; it does not replace them

Understanding a family’s interaction, as part of a long-term care dialogue, is a must for advisors. Given a choice, how do clients in their elderly years want to be spending their time with their children or spouse? Harley Gordon, president of the Corporation for Long-Term Care Certification Inc., says, “Don’t present long-term care insurance as an alternative but rather as a complement. Emphasize that LTCI doesn’t replace what families do but rather builds on an existing infrastructure of support, allowing caregivers to provide care better and longer by offering help with the things that a family may find the most difficult or embarrassing to perform.”

When presenting LTCI, advisors can show themselves in a supportive role to the family structure. Of course, to fully understand care-giving of one’s parent, boomers have to be reminded that the alert parent they see now and are having a glass of wine with will not be the same parent who requires care — there will be a much changed role in the future. 

If a client decides to purchase LTCI, it becomes important to inform the family of the decision (many family members have discovered a policy after a loved one has spent costly years in care or died). When a policy is sold, advisors should put a LTCI folder together for each client containing a copy of the policy or policies if split between two carriers, the carrier’s marketing brochures showing what the company is offering, exchanges of e-mails with the carrier in order to clarify understanding of conditions (i.e., “use of a licensed agency”) and educational resources.

LTCI helps families finance costs — and choices — during older years

Advisors can overcome clients’ “denial of aging” by acknowledging the intention to live a long life — isn’t that how they originally organized their retirement portfolios? This tacit acceptance of aging leads to a discussion of options for funding a long-term care stage of life in their “old-old” years.

Advisors must also discuss LTC costs. Try presenting the question: “If the government is the provider of last resort, who is the provider of 1st, 2nd and … resort?” This leads to the entitlement talk — discussions with clients of who is going to carry the financial load to cover the costs of their care and how that care will be funded. Clients need to see that they purchase LTCI for their families as well as to protect their retirement.

As Jesse Slome, executive director of the American Association for Long-Term Care Insurance, so aptly states: “A small amount today can protect a huge drain tomorrow.”

In her book The Savage Number, Terry Savage notes “LTC costs can devastate retirement plans and dreams faster than a bear market.”

Clients may need reminders that LTC is measured in years, not months. Doing the math with a client for five to eight LTC years is a reasonable exercise for planning purposes. When income is decreasing, after decades in retirement, clients should be able to cover ever-increasing care costs in proportion to their needs. Most clients do not want to be dependent on their governments or their children.

In addition, discussions with a couple must include what might happen if an “involuntary separation” occurs (i.e., each requiring care in different locations, such as paying for nursing home care and for at-home care at the same time). A dual care situation is not an uncommon circumstance in Canada, creating a potential financial tsunami for families.

LTCI is about sharing the risk, not self-insuring 

Presenting the concept of risk-sharing as a way of gaining peace of mind is a familiar concept for clients; they have been practicing it for years. Risk-sharing conversations, according to M. Barrie, author of 50 Ways To Boost Your LTCI Sales, put LTCI premium costs in perspective. The chances of using your house insurance are 1 in 1,200, car insurance 1 in 240, of needing long-term care, 1 in 2. Ask clients, of all income levels, why they would consider self-insuring the greatest financial risk they face from age 60 onwards when they rarely have self-insured other risks in their lives. It forces them to question the logic and turns the issue from costs to risks.

Long-term care insurance is not really about cost, but cost is an obstacle. One of the most common questions asked in seminars is, “How much does it cost?”  My response is always the same, “There isn’t one answer to that.” When asked about cost, I compare buying an LTCI policy to purchasing a house — you can buy a house with a view, with hardwood floors, five bedrooms, a wine bar, a two-car garage, and each one of those features is worth something and, along with inflation, alters the overall cost of the house. It is the same for LTCI; it can be “customized,” thereby affecting cost. 

Advisors, due to the potential financial ramifications, have no choice today but to present the LTC topic to their clients (either on their own or in co-operation with a LTCI specialist). Advisors need to protect their own future as well. If a client decides not to purchase a LTCI policy and an advisor has presented an LTC education plus the care-funding options, it is wise to retain client documentation and a letter of decline. Some advisors even use “hold harmless” documents when clients refuse LTCI. 

Advisors are in a trusted relationship with clients and never more so than when discussing how these clients want to live in their senior years. Consumers are looking to advisors for guidance on the issue of long-term care; they want and need information. Who better than financial advisors to give them the tools to make the right decisions?