The dawning of a new age

Financial planners familiar with the old “80-20 rule”, which holds that 80 per cent of practice income is generated from 20 per cent of clients, might also want to get familiar with a second one: the “40-70 rule”.

Home Instead Senior Care says the 40-70 rule describes the scenario in which a client reaches age 40 or a client’s parents reach age 70 – and that signals it’s time to start seriously discussing aged care options.

These are not always easy discussions, either for clients or financial planners. A conversation about aged care inevitably means thinking about what will happen when a client is unable to take care of an ageing parent, or when a parent needs more specialised care.

Anna Lawton, senior manager of Equity Trustees’ Aged Care Services, says it’s an area that will be potentially fertile for financial planners as greater numbers of people reach the age where care services are needed.

“There’s more people going into care, and I think the baby boomers will really test the system,” Lawton says.

“Not everyone in their 80s needs age care, of course. But as the population ages, and because there’s such a large number of baby boomers, it’s just going to be a very big field to advise in.

“On the other side of things, people in their 40s, 50s 60s, when they seek advice now, they do have parents who need age care and it’s more of a thing that people are outsourcing – it’s too hard to leave work for six months to care for a parent.”

Lawton says financial planners need to be familiar with the Aged Care Act, the Social Security Act, the Veterans’ Entitlements Act and tax law, as a bare minimum – and next year there will be some key rule changes.

“People who are trying to get into this space now need to get up to speed ASAP, and then learn a new system,” Lawton says.

A frank and honest discussion early on can save a lot of conflict, distress and financial problems later, says Derek McMillan, chief executive officer of retirement living at Australian Unity.

McMillan says the best preparation is for children to discuss with parents early on “what their preferences are and what plans may need to be made as they get older”.

“These discussions should take into account what parents want to do with the family home when they are no longer able to live in it alone, what kind of facility they would like to live in, what they want to do if they can no longer drive, and even what kind of medical care they would like,” he says.

McMillan says the financial structures needed to ensure adequate aged care often require careful planning.

“The significant gap between the amount of funding provided by the government to aged care and healthcare services, and the ever-increasing demand for such services resulting in potential difficulty in getting aged-care accommodation, needs to be understood and planned for.

“Consequently, families will need to talk about how they will fund the care needed by ageing family members as well as how and where that care should be provided.” Lawton says that responsibility for looking after an aged parent almost always falls to just one sibling. She says any discussions about how to structure aged care should be as inclusive as possible and share both the emotional and financial burden.