Wealth Management Panel Stresses More Holistic Approach To Financial Planning

RADNOR, Pa., May 22, 2013 /PRNewswire/ -- A panel of wealth management professionals participating in a recent program in Washington D.C., sponsored by Barron's (www.barrons.com), and Lincoln Financial Group (NYSE: LNC), stressed that financial advisors and clients benefit from taking a more holistic approach to financial planning, and developing customized programs to help protect assets, prepare for retirement and unexpected long-term care issues.

Barron's "Health and Wealth Symposium" is a forum focused on industry best practices, presented by leading regional advisors listed in Barron's Top 1,000 Advisors: State-by-State Ranking.

The panel included Melissa Spickler, managing director, wealth management advisor, Merrill Lynch; James Bruyette, managing director, of Sullivan, Bruyette, Speros & Blayney, Inc; and, Keith Apton, senior vice president of investments, The Capital ESOP Group. The panel was moderated by Bill Nash, Lincoln Financial Distributors' National Sales Manager for its Lincoln MoneyGuard® Solutions Distribution business.

According to an August 2012 Neilson Newswire report, "Don't Ignore Boomers – The Most Valuable Generation," in the next five years those 50 years old and older will compose half of the U.S. population and control 70 percent of the disposable income. This will result in a large change to a client population in the distribution phase of retirement rather than the accumulation phase. Nielsen is a leading global provider of information and insights into what consumers buy and watch.¹

"For years, the industry has built its message around accumulation," said Nash.  "As demographics continue to change, and baby boomers continue to move into retirement, we are seeing a dynamic change from that focus to distribution of income. The need for customized solutions has never been more important to secure lifestyles and address challenges that often accompany longevity, such as long-term care issues, perhaps the biggest challenge a retiree faces," Nash said.

"Clients need to focus more on protecting their assets so they can plan for retirement accordingly," said Spickler. "Too often, people, for a variety of reasons, end up not preparing for long-term care and are forced to make rushed and very expensive decisions almost overnight. The result can put huge amounts of assets at risk and bring about a rapid draining of financial resources."

"It's really important to ensure clients are properly educated and understand the possible risks that often come along with retirement," said Apton. "As the needs of every individual are different, it is critical consumers work with knowledgeable financial professionals in building a customized plan that meets specific needs, individually and for families. A good approach is to begin the planning process with goals set on asset accumulation and to continue with tailored income distribution strategies."

According to a recent survey by Univita Health, "Cost of Care Survey 2012," the national average monthly cost for a private room in an assisted living facility is $3,283 per month. ²

"Expenses for long-term nursing care are a definite threat to any client retirement plan," said Bruyette. "So it should be natural for advisors to bring up this topic during review of a client's plan for retirement. If the client is financially independent and wants to preserve an estate for children, then long-term care should be considered in the overall estate plan.

According to a 2012 research paper by Judy Feder and Harriet Komisar, supported by a grant from The SCAN Foundation, in 2009, of $203 billion in total national long-term care expenditures, approximately 23 percent was paid out of pocket. The SCAN Foundation is an organization dedicated to creating a society in which seniors receive medical treatment and human services that are integrated in the setting most appropriate to their needs. ³

"Advisors should be counseling their clients on ways to reduce the financial risks associated with the unanticipated costs of long-term care," said Spickler. "People insure cars, homes and other valuable items hoping to never make a claim.  So too should people be looking to protect their assets. Preparing for unanticipated events during retirement is the prudent thing to do. That's where long-term care insurance products can play a very important role," she said.

"What differentiates long-term care insurance from life insurance is that the long-term care insurance needs cannot be calculated or analyzed, since we don't know if the client will incur long-term nursing costs, and if so when those costs might start or how long they might last," said Bruyette.  "As a result, it tends to be more of an emotional discussion and an emotional purchase by the client, as the protection against nursing costs either makes the client more comfortable or it doesn't."

In 2010, Lincoln's "Financial Life Stage Survey" showed 65 percent of the participants agreed it was important to plan for long-term care. However, only 44 percent actually had plans." ⁴

"Financial advisors have a central role in educating clients about the potential impact of not being prepared for a long-term care event," said Spickler. "It is especially valuable for advisors to walk clients through the various long-term care funding options, such as hybrids which may offer a return of principal if a long-term event does not occur."

Bruyette highlighted four key rules he recommends advisors take into consideration when starting the long-term care conversation with clients:

1. The optimal age to begin thinking about purchasing long-term care coverage is generally after age 55.
2. If a client's net worth is less than $1.5 million - $2 million, then in many cases they can't afford the amount of long-term care coverage needed.
3. If a client's net worth is more than $3.5 million - $4 million, then long-term care coverage should be viewed as estate planning in an effort to help protect estates from depleting later in life.
4. The average nursing stay is 3-4 years or less, and coverage should generally be obtained for this time period.

"People need to be educated and understand that planning for long term-care is becoming more difficult," said Nash. "There are many products and assistance programs to choose from in today's marketplace, both government and private. It's never been more critical to ensure consumers are properly educated, that they understand the risks they face, and the sense of urgency needed to properly prepare for possible long-term care issues and the options available to mitigate those risks."

According to AARP, by 2015, unmarried boomers will account for 21 million households, or 46 percent of all boomer households. ⁵

"Our industry has been challenged with making the connection to the next generation of our clients," said Nash.  "The topic of long-term care can be an emotional one and is as much a family issue as it is an individual issue, in many cases highlighting the need to engage clients' children in the discussion. It drives the need for planning strategies that protect the retirement portfolio from risk."

"People really need to be in the right frame of mind to have this type of conversation," Spickler said. "It can be very emotional and often times it takes a trusted financial professional to help their clients realize the risks associated with not preparing in time."

About Barron's
Barron's (www.barrons.com) is America's premier financial publishing brand, renowned for its market-moving stories. Published by Dow Jones & Company since 1921, it reaches an influential audience of senior corporate decision-makers, powerful institutional investors, affluent individual investors, top financial advisors and leading financial professionals. With new content available every week in print and every business day online, Barron's provides readers with a comprehensive review of the market's recent activity, coupled with in-depth, sophisticated reports on what's likely to happen in the market in the days and weeks to come.

About Lincoln Financial Group
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE: LNC) and its affiliates. With headquarters in the Philadelphia region, the companies of Lincoln Financial Group had assets under management of $186 billion as of March 31, 2013. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life, disability and dental insurance; employer-sponsored retirement plans; savings plans; and comprehensive financial planning and advisory services. For more information, including a copy of our most recent SEC reports containing our balance sheets, please visit www.LincolnFinancial.com.

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SOURCE Lincoln Financial Group