Planners Have A Fiduciary Obligation To Recommend LTC Insurance
By Harley Gordon
One risk that threatens the best-thought-out retirement plan, but is often overlooked, is the risk of long-term illness.
Financial planning traditionally focuses on investing assets in such a manner as to preserve a familys lifestyle at retirement, taking into consideration continuing obligations (education of grandchildren, dependent adult children, etc.). Assets are allocated to provide for those specific needs based on many factors, including current age, risk tolerance, and estate planning.
Missing from this time-honored model is consideration for the risk of long-term illness. Failure to understand what long-term care is, how it is financed, and the resulting impact on lifetime savings, exposes clients to potential financial ruin, and planners to lawsuits for breach of fiduciary obligation. This article deals with the profession of long-term care and why financial professionals must understand both it, and the role LTC insurance plays in a responsible retirement plan.
Take a moment to review the mission statements of the established designations in the financial planning and insurance fields. There is little, if any, mention of establishing a dialogue with clients about the risks of long-term illness and how it should be dealt with in a financial plan. Yet, it is the number one threat to retirement income and the preservation of principal upon which that income depends.
Twenty-five years ago no one heard of, let alone used, the term "long-term care." Why bother? If you had a stroke or heart attack, you simply died. A diagnosis of cancer was tantamount to a death sentence. Few heard of Alzheimers disease. Living to age 75 was a singular accomplishment. Today, the first thing people say when a friend or colleague dies at 75 is "he was so young!"
We have, in the period of a generation, solved the problem of keeping people alive for long periods of time. What we havent figured out is how to keep them healthy. Everyone expects to live a long life. Simple logic dictates that the longer one lives, the more likely the need for care increases. My 25 years of experience in elder law shows all too often that clients understand this more than financial professionals.
Financial planners have failed to address this reality and the impact it has on a clients financial plan, primarily because they themselves do not understand the profession of long-term care. What mention there is of the subject is raised by a family, and usually ends with the off-handed remark that "you can self-insure." It does neither the profession nor the client justice to slide over the subject or hope it doesnt come up.
