Why advisors should put health at the heart of planning conversations

Executive vice president at Investment Planning Counsel highlights medical concerns and health as a key area of concern

Why advisors should put health at the heart of planning conversations

As Canadians and the rest of the world struggle under the weight of the global pandemic, it’s no surprise that health and medical issues have become top-of-mind concerns. And according to a recent survey from Investment Planning Counsel, it’s something advisors and financial planners will want to pay more attention to.

In its survey of Canadian investors, IPC found medical and health issues were the area of greatest concern, with around 40% citing it as their primary source of worry. That trumped inflation, which was identified by 30% of Canadians, and market fluctuations, which was named by 29% of the survey respondents.

“I think the COVID pandemic has certainly placed us on higher alert,” said Sam Febbraro, executive vice president at Investment Planning Counsel. “If you turn on the TV, or you read the newspapers, case counts, hospitalizations, and death rates due to the pandemic are consistently being [reported] on the news, and has increased our awareness. And with more people seeing their friends and family members becoming ill, it brings overall health and well-being concerns a little bit closer to home.”

More broadly, Febbraro says the demographic trend of people living longer is also pushing health and medical issues to the forefront. Given Canada’s aging population, longevity risk is becoming a more material element in financial planning conversations. Bringing that up might be a challenge for some advisors who are sensitive about their age; in those cases, Febbraro recommends that conversations be framed around the idea of biological age rather than chronological age.

“That could help advisors talk about these concerns in conversation without alienating their clients,” he says. “The fact is that Canadians living longer may unravel more medical ailments compared to previous generations who, quite frankly, lived shorter lives and had more limited lifespans.”

So which types of clients should advisors be talking to about health the most? Febbraro suggests those from the Baby Boomer generation, defined as people borne between 1946 and 1964, are one important segment.

As trailblazers of the new retirement, he says Baby Boomers have rewritten societal rules at every stage of their lives. Many have broken the mold, he said, by deciding to have an active lifestyle or travelling in retirement, or perhaps continue to work even as they persist well into their golden years. Others may also be facing pressure to support both their adult children and their own aging parents, he adds.

“Small business owners are another segment of clients advisors should discuss health issues with, especially if they have no proper business continuity or succession and ultimately, no formal exit plan,” Febbraro says.

The urgency is clear from a financial planning perspective. As Febbraro points out, small business owners typically will have a sizable amount of their net worth or personal capital invested in the business. And depending on the size and type of business, there are many cases where if the principal owner falls ill or is managing health issues, then the business suffers as well.

In a 2018 poll, the Canadian Federation of Independent Business (CFIB) found 72% of small-business owners were planning to exit the business in the next 10 years, putting $1.5 trillion in business assets in play. But among the respondents, only 49% had a succession plan, and just 8% had established a formal written plan.

As the world approaches the second anniversary of the COVID pandemic, Febbraro says advisors should be prepared to guide their clients in two areas. From a financial standpoint, they should address concerns such as income replacement, legacy planning, and having insurance to protect against critical illness, disability, and the possible need for long-term care, just to name some.

“During the pandemic, people in some industries were laid off and others changed careers, which highlights the need for short-term or emergency cash reserves,” he said. “In the longer term, clients need assurance that they won’t outlive their money, which means having a consistent and diversified monthly income stream.”

Aside from that, Febbraro says advisors have to offer security from a social or emotional standpoint. That means ensuring wills are in place, for example, or that an executor has been appointed. Having a will companion or estate directory, knowing the location of bank accounts and safety deposit boxes, and having the login details to digital assets, he adds, are all items to be considered.

“Another consideration is downsizing needs: if they were to move, what kind of healthcare access will they have? How close will they be to family and friends? And in our post-pandemic world, a lot of people are worried about caregiving for aging parents, or possibly being a burden, or isolation,” Febbraro says. “Those are all things that need to be considered, and I think advisors are at the forefront to be that sounding board for a number of these clients.”