Financial services firms are teeming with clients who need help dealing with aging parents, but many advisors may not have the focus or proper tools to provide that help, according to a study released Thursday by research and benchmarking firm Hearts & Wallets.
According to the researchers, about 36 million out of 131 million U.S. households are responsible for financial caregiving tasks that range from helping to pay bills to tax planning to managing medical payments and fulfilling drug prescriptions.
Such caregiving strains time and wallets. Forty-one percent of households managing five or more such financial caregiving tasks are highly concerned about their loved ones’ ability to “manage their finances as they age,” according to Hearts & Wallets’ survey of about 6,000 households with financial service firm relationships. Some caregivers even said the tasks cut into their work and income-earning.
“Aging family members often face their most difficult life challenges when they are less able to handle finances, especially given the growing complexity of retirement finance,” said Laura Varas, CEO and founder of Rye, N.Y.-based Hearts & Wallets.
Varas and team cast the need for financial caregiving support and advice as a business opportunity for financial advisors for current and future clients, with many willing to pay for such guidance.
The advisory firms with the most clients managing financial caregiving needs in Hearts & Wallets’ sample group were Wells Fargo Advisors, Morgan Stanley and Ameriprise, which showed 43% of clients dealing with such issues. Meanwhile, about one in four clients with broker/dealers LPL Financial and Edward Jones provide some financial caregiving.
Michelle Ash, a senior wealth advisor with Mercer Advisors, said she has seen an increase in clients seeking advice on how to best support an aging parent with a broad range of financial concerns over the years. Such conversations, however, are rarely about actual financial payments to parents, but questions about how to help them best manage the life transitions from aging.
“It’s not generally socio or economic circumstances,” Ash said. “Much more often it’s a worry or concern that Mom or Dad doesn’t have the financial acumen they used to have, or that they are not as comfortable at home, and they are wondering what that next transition step is and what the finances are going to be to support it.”
The fact that it’s not a cash issue makes it no less important, however. Other questions Ash noted revolve around managing Medicare, changing tax situations or figuring out long-term care insurance payments, all of which disadvantage younger caregivers because “it’s not a stage of life they have gotten to yet.”
First Point of Contact
In a sign of the growing attention to financial caregiving, a firm providing aging and end-of-life resources called bQuest earlier this week launched a turnkey client support platform built with advisors in mind. The platform offers access to care-related services such as senior placement experts, in-home caregivers, elder law attorneys and grief counselors to be used as an extension of an advisor’s core financial planning.
Ash, based in Jacksonville, Fla., said she usually starts caregiving conversations by asking the client about the circumstances of aging parents needing attention and how they want to help.
Michelle Ash
“It’s incumbent on the advisor to understand who they are speaking with and be candid whether they have the skills and expertise to help, or to otherwise point those individuals in the right direction,” she said.
In some cases, the younger generation is being relied on to help parents financially. Today, 7% of households provide financial assistance to parents or in-laws, often through shared living arrangements (5%) but also sometimes through monetary help (2%), according to Hearts & Wallets.
Samuel Wagner, founder and chief financial guide of Indianapolis-based advisory WealthGuides, said there may be a gap in advice for such support simply because it is “difficult work.”
“When you’re in this situation there isn’t much that can be done other than establishing an extremely stable foundation for the kids with a financial plan and working with them to increase income to boost their savings so they can continue to take care of themselves and their dependents (parents and their kids),” he said. “Often, this type of planning can require a lot of work and difficult conversations. Perhaps even meetings with the entire family. And only the best advisors have the skills to take this on.”
Wagner noted two other factors that may create a strain: people live longer, meaning their financial needs last longer, and many are emerging from an age of poor financial advice.
“We are just now getting to a place where more people are able to get affordable access to real financial planners,” he said. “For many baby boomers and the Silent Generation, they received terrible financial advice in the form of poor insurance products, misleading stock brokers and annuities that protected their savings but didn’t grow at a rate high enough to give them financial security in retirement.”
System Failure
Wagner said financial advisors can and should do a better job of helping support financial caregiving needs, calling it a “preventable system failure, not a family failure.”
“We all need to do a better job to help these people,” he said. “Caregiving is expensive, but it’s extremely important that we take care of the people who took care of us.”
Sometimes, working with these multi-generational situations can require an advisor to work with a peer who may own one side of the relationship, said Jason Hemoen, principal at Argo Wealth Advisory based in McLean, Va.
“We will typically perform some level of planning if this potentially becomes a formal relationship,” he wrote via email. “This leads to working with their other financial professionals and reviewing their estate plan … [power of attorney], account titling updates, etc.”
Ash of Mercer agreed, saying that an advisor must be comfortable working across the aisle. She said being open to such work can help overcome the challenge of discussing money across generations, which can seem “taboo.”
“We sometimes start by just helping them broach the topic and then address the right steps to move forward,” she said.
Ash cited one example in which the parent of a client saw a spike in the cost of her long-term health insurance. Their mother was considering dropping the coverage to save money.
But after Ash helped her and the client run an analysis, they all agreed it was worth it for her to keep the insurance, due partly to her advanced age.
“It was helpful for them to talk with a third-party who had all the tools and resources to help,” she said. “The more our industry can speak to [the caregiving] aspect of things, the more advisors can really have a holistic practice.”
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