|Wealth Management and Chronic Illness
One hundred and twenty million Americans live with chronic illness. How can you tailor wealth management services to meet their needs?
August 19, 2010
Whether or not you realize it, a substantial portion of your clients are themselves living with chronic illness or have a loved one who is. The statistics are startling:
You cannot effectively provide wealth management services, while ignoring this significant segment of your client base.
Most advisors estimate much lower percentages of their affected clients. This is because many clients are not forthright with discussing personal health issues, although a significant cause is undoubtedly advisors not asking. Many hate to discuss illness because they do not understand how advisors can use that information to help them. But in fact, a reasonable understanding of the current status of a client’s chronic illness and the likely disease course can enable advisors to provide more tailored and beneficial financial planning and wealth management services. This article will provide an overview of some of the many considerations.
Budgets are part of the foundation of any comprehensive financial plan. Relying on standard assumptions could be dangerously inaccurate for the client. Many chronic illnesses are progressive so that the disease and its financial impact can worsen over time. Consider the following modifications:
Investment Plan and IPS
Too often advisors assume that if a client has a chronic illness that investment portfolios should be less risky, more liquid and so forth. This may be true in some situations is only coincidental. Assumptions and generalizations are no substitute for knowledge and planning.
The physical symptoms of Huntington's disease, for example, typically begin between ages 35 and 44 (although no assumptions should be made because they can begin in childhood or old age). Huntington’s disease is a chronic, progressive, neurodegenerative genetic disorder, which affects muscle coordination and leads to cognitive decline and dementia. Life expectancy has been estimated at approximately 20 years following the initial appearance of symptoms. A client in their early 40s, who has some significant savings and wealth from a career that could be nearly two decades long and a life expectancy of 20 years, may in fact be harmed by an excessively conservative, liquid short-term portfolio.
The prognosis for each disease varies substantially from other diseases. Even each client with a particular disease can face widely divergent prognosis. Advisors do not need to become experts in each potential disease, but rather open a dialogue with the client and, with the client’s permission the client’s family/loved ones and physicians (with appropriate HIPAA releases) to ascertain some of the anticipated major events. With that knowledge and a budget tailored to the client’s circumstances above, an appropriate investment plan may then be devised.
A few additional considerations:
There are myriad of ancillary steps and considerations that might be relevant and helpful to clients with a particular illness. While many will be obvious, listing several might provide a useful starting point for advisers:
Every adviser has a large number of clients living with chronic illness, even if that fact is not presently known. Empathy and giving clients a safe environment to share their vitally important health issues will encourage clients to disclose the information that will enable advisers to better provide tailored services.
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Martin M. Shenkman, CPA, PFS, MBA, JD, is an attorney in Paramus, New Jersey and New York City. His practice concentrates on estate planning and administration, tax planning and corporate law. Shenkman was included in Top 40 Tax Accountants in 2009 and was the recipient of the New Jersey Bar Association’s Alfred C. Clapp Award in 2008. His recent books include Estate Planning for People with Chronic Illness and Disabilities (Demos); Estate and Related Planning During Economic Turmoil (AICPA) and Life Cycle Planning for the CPA Practice (AICPA), The Complete Book of Trusts (Wiley) and others.