As financial professionals, we are committed to providing our clients the best possible counsel so that they can be prepared for life contingencies.
But what happens when a client no longer can make financial decisions or no longer are the people we have come to know?
All too often, such a client requires long-term care — and family members who must make the tough financial decisions involved typically have not had the necessary conversations and do not possess adequate information to make such decisions on behalf of a loved one.
It is my belief that financial advisers should do more to help clients and their families plan ahead for the possibility of care. While some advisers do just that, unfortunately, most of us don't. We need a new emphasis on helping guide our clients through possibly the most vulnerable time of their lives.
There are few experiences more emotionally devastating than having to move a parent into a nursing home or assisted-living facility, or caring for a family member who has suffered a debilitating accident.
Even if there is no immediate need for care — if a family is merely looking ahead to prepare for some eventuality — contemplating LTC options brings them directly into territory that most of us would prefer to avoid. In the midst of such emotionally wrenching and financially complex circumstances, it comes as no surprise that people who normally make financial decisions find their judgment affected and sometimes significantly impaired.
Families simply don't make financial decisions about the long-term care of loved ones in the way they make financial decisions about, say, saving for retirement or refinancing a house. In addition to the pressure of negotiating all the physical, emotional and financial realities precipitated by a health challenge, there are numerous factors that can adversely affect families' decision-making processes.
They include cognitive impairment affecting the primary financial decision maker; the extended or immediate family's unwillingness or inability to accept new financial decision-making responsibilities; the natural impulse to procrastinate when faced with pressing financial decisions because of uncertainty or fear regarding mortality or morbidity; guilt associated with financial planning for the rest of the family while the focal energy remains centered on a family member in need of care; the difficulties of dealing with shifting fiduciary capacity and willingness among family members and/or professionals to assume responsibility; the difficulty or inability to deal with new financial realities that significantly affect one's standard of living; and immediate or extended family members' complicating financial decisions while second-guessing choices in long-term care.
My experience as a wealth manager has taught me that each of these psychological factors can derail effective financial decision making in unique ways. Often, several factors are at work simultaneously.
It is the responsibility of all advisers to recognize that even our most sophisticated clients may not be equipped to act in their own best financial interests when it comes to LTC decisions. To help them do so, we need to be aware of the non-financial complexities that influence such decisions.
Most of us are familiar with the utility of good legal documents in such circumstances: durable powers of attorney, advanced medical directives and well-drafted trusts. These provide a foundation for more effective financial decisions. However, I have learned that it is foolish to think that legal documents are a panacea for the financial decision-making challenges regarding long-term care that confront advisers in greater numbers every day.
We need to be fluent in the latest exigencies affecting the cost of long-term care and how clients can meet those expenses. This includes knowing where to go to get accurate information about different entitlement programs, such as Medicare, Medicaid, the new CLASS part of the health care reform bill, and the Veterans' Aid and Attendance benefit program, which helps pay for a home health aide.
But beyond pointing people toward appropriate public resources, we as professionals need to master the technical nuances of managing wealth through a prolonged dependency. Currently, the financial services industry doesn't, in general, excel in this area.
Thomas West is a principal and lead adviser at Thomas West Financial Services, specializing in managing family wealth through long-term care.
