There is no doubt aged care will become a focal point in the future, as Baby Boomers retire to the likelihood of a longer life, which may require some form of care in their final years.
Among aged-care experts, there is broad consensus that planners are well positioned to help clients navigate the technical and emotional complexities of the transition with dignity.
The planning industry still faces a number of challenges, however, in relation to this. Pervasive scandals – including the financial exploitation of residents in retirement villages – have made aged care a difficult concept to sell. Advisers also need more education about strategies and how to communicate them.
These were among the observations made at a roundtable on aged care, hosted by Professional Planner along with partners Aged Care Steps and Swiss Re.
In order for aged care to be delivered in a professional manner, the industry must push for regulators to recognise strategy – and not
just product – as a component of advice that needs surveillance and guidelines, Aged Care Steps director Louise Biti says.
Licensees can play a role in educating advisers, but planners have raised concerns that larger dealer groups may not be well equipped to provide that support, given their concerns about compliance and the lack of product attached to aged care.
Name your price
Aged Care Steps and reinsurance company Swiss Re have performed research that shows more than half of advisers provide some form of aged-care advice to their clients. However, almost 33 per cent say it’s not a simple fit with their business; it’s expensive to deliver and many do not know how much to charge. In fact, as many as 5 per cent charge nothing at all for the advice, the research showed.
Both failing to have conversations about aged-care advice and under-charging are persistent problems, industry stakeholders agreed.
“Pricing is an interesting thing because we’ve created this fear around charging a fee for our expertise,” Madison Financial Group chief executive Annick Donat said. “I’ve been in this industry for 30 years and over that time I’ve realised advisers still don’t charge what they’re worth in any strategy, and when they do charge appropriately, they cop that, too.”
Donat said the licensee has a role in providing guidance on how to charge for aged-care advice.
“As a licensee, it’s incumbent upon us to say ‘You are valuable and you are worth this amount of money,’” she said. “If there is a cost of care analysis done, we should be sharing it more broadly.”
Aged Care Steps and Swiss Re found almost half (47 per cent) of their surveyed advisers charge between $1500 and $3000 for aged-care advice and 29 per cent charge between $3000 and $5000. Another 17 per cent charge less than $1500.
For Kate Golder, senior financial adviser and aged-care specialist at Affinity Wealth, price isn’t something clients question much, but part of that is because of how the firm presents the advice.
“We have worked backwards and said we know how much it costs to provide the service, so that’s the fee and if a client doesn’t want it, that’s their decision, but we know how much it costs,” she said. “You’ve got to make sure you’re charging adequately for your time.”
In the product-free advice world, Golder sees her role as giving clients strategy choices.
“We give the client options, we don’t make recommendations,” she said. “If they want to keep the house, we will try to show them ways that they can. It’s not for us to say this is the best option, it’s to show them what the options are and if one of the main criteria is to keep the house, we will do everything we can to show them how they can consider it.”
Golder said part of the reason the aged-care advice industry has had problems is because some advisers don’t realise it’s no place for product.
“The reason a lot of aged-care facilities don’t want to deal with advisers is because advisers have gone in there in the past and said, ‘Hey, you should sell your house and I’ve got this great managed fund for you.’ Then suddenly the aged-care facility hears that and realises the client didn’t really want to sell the home but that’s the only option they [were presented],” she explained. “We want to feel that the aged-care advice is the best for the client and part of that is removing the conflict by separating out the regular advice business and the aged-care business.”
…by any other name
Aged care, as a concept, is difficult to sell, planners say. Clients have a tendency to believe it won’t be necessary for them and they’ve also been scarred by media stories of financial and emotional exploitation.
RetireInvest chief executive Peter Ornsby said aged care may need re-branding, and that starts with how the planner positions it.
“One of the struggles for us is how do we turn the conversation on its head and move away from the negative,” he said. “When people think about aged care, it’s normally as a negative, it’s normally at a place in time where something does happen and they need to go into a facility, but those conversations have to start” when clients are in their 50s.
Ornsby said there is much confusion around the role of financial planners in aged care; for example, they can arrange home care.
“A lot of families don’t want to have those conversations and I think a really critical role of a financial planner is facilitating them at the earliest stage,” he said.
Planners agreed that advisers need to have the conversations earlier and give the client control over their options. But planners also need to be clear about where they can add value.
“I think the financial planning industry for too long has had to justify its whole value proposition,” Aged Care Steps’ Biti said. “When your value proposition is around an experience they haven’t seen before, which is emotional, and you can be a voice of reason around the options, that’s a very different proposition. It has to be around that guidance counselling and that’s worth paying for.”
The dealer group dilemma
As licensees continue to face pressure to justify their fees, there are increasing expectations from advisers that they will provide guidance and support around aged care, Aged Care Steps found.
Advisers do understand, however, that some of the larger dealer groups have shied away from helping advisers navigate aged-care advice, due to compliance fears.
“From an industry perspective, I do think it’s going to be a challenge for large dealer groups to get their head around the aged-care model,” Affinity Wealth’s Golder said. “Most of the big dealer groups put their level of compliance over aged care as if it is product advice. I think that probably puts off a lot of advisers in the big dealer groups.”
Education is key
In order for both advisers and licensees to move the dial on aged-care advice, there has to be a commitment to education, stakeholders agreed.
Derek Armstrong, founding director of Aged Care Financial Advisers, said those with expertise in aged-care advice should be registered and recognised as specialists.
Madison Financial’s Donat agreed. “There has to be a certification,” she said.
Education is something that needs to be developed for both advisers and consumers if the take-up of aged care is to increase, they said.
On the client front, Golder said when she ran a seminar inviting clients in their 50s and 60s to learn about aged care, they were insulted by it because they thought they were too young. That has to change, she said. Advisers must take over the conversation and empower their clients.
While there is no clear path to changing perceptions, it is the responsibility of advisers and licensees to keep discussing solutions, Donat said.
“Not enough people get advice and too many things are going wrong; we need to find a different way,” she said. “If we believe all Australians deserve a good financial life and dignity in retirement, then it’s incumbent upon us as a profession to lead that charge by finding a different way.”