Janet Davies highlights the need for the industry to talk more about long term care fee planning
Care fees planning, long term care, call it what you will, but it has been considered the Cinderella of financial services for far too long.
The perception used to be that no one understood it properly, and to be honest that is still the case for generalist IFAs.
However, the reason most appropriately qualified advisers are so frustrated is not that they don't get it, they just can't sell it.
What is the 'it' they can't sell? Well, unlike the majority of financial planning the it, is advice, pure and simple, products are often incidental, and may or may not form part of the tailored solution.
Back in the mid to late 90s a plethora of pre-funded products existed and those interested advisers managed to overcome the non-regulation demon and help their clients achieve a workable answer. Sadly, the subject yielded little interest, and quoting supply and demand issues all but one of the major product providers withdrew from the marketplace.
Media stories heralded the death knell for long term care and disinterested advisers believed that the absence of any viable 'one-size-fits-all' product meant they had given an absolution and as such stopped discussing the matter with all their existing clients almost immediately.
The effect? Nothing visible straightaway, but the lasting legacy of ignoring a subject is that a lot more families are left to their own devices and may make uninformed decisions along the way as a result.
As advisers we can't open a publication or attend educational seminars without the subject of inheritance tax, estate or succession planning being mentioned. Advisers have for a long time earned significant remuneration from mitigating the direct effect payment IHT can have on expected bequests. However, the same advisers fall short of mentioning the implications the need for formal care can have on such meticulous planning.
Focus on long term care planning
Advisers are not alone. Recent Personal Finance Society (PFS) retirement seminars have focused on annuities, open market options, tax free lump sums and feature a range of key industry and provider speakers. Unfortunately none of them seem to be at all interested in the subject or the financial consequences of funding private care fees.
The faculty of Retirement and Care separate the two subjects into distinctly different categories. Is this a flawed decision? The answer can only be yes considering that the two areas are inextricably linked. Only when our own professional bodies start to think outside the box and apply logical thoughts to the process will the adviser community realise the huge error of judgement made by failing to include the subject in their holistic financial planning exercises.
Our product providers also have a part to play, the number of companies that are 'months away' from launching a long term care product grows by the day. We need action now, we are asking for, and quite frankly our clients should be able to expect, a much more pioneering approach.
The reality of the situation is out there. Clients' families (not aware of a specialist adviser) are unnecessarily eroding huge amounts of their capital to fund something they didn't have the opportunity to face beforehand, responsibility for broaching the subject with every client must lie with the IFA.
What can advisers do?
Granted, it is far from being a pleasant subject, but ignoring it won't make it go away. What can advisers do? Adapting fact finds and suitability reports to include not just the client's concerns but the associated legislation, appropriate non-means tested state benefits, local authority contributions and the personal implications on that particular client, can go a long way to change perceptions and help clients plan a stepped 'what if' action plan.
The plan might never be needed (and most hope that it is not), but for the 25% who will need care it will avoid upset and empower clients to plan ahead with peace of mind.
Advisers working in the immediate needs sector have known for a while that the vast majority of families wish they had had the opportunity to sit down as a family and plan for the eventuality. Acting on behalf of someone else, be it a close friend or family member can be a daunting proposition, a cautious approach to our finances is one thing, spending someone else's money just compounds the problem.
Having laid blame at the door of advisers, industry bodies and the providers, it's time to point judgement at our own IFA firms. Over the past few months it has become obvious that some firms actively seek to discourage their advisers from even mentioning the subject, no doubt borne out of ignorance and a fear of unknown territory.
Compliance departments also have areas of weakness that adequate interaction with more experienced organisations can overcome; as existing specialist advisers become more experienced, the gap between their skill sets and knowledge levels and those of compliance are increasingly noticeable.
Whichever way you cut it, care fees planning has a rosy future. That said, it is not a subject every IFA feels comfortable with. If an adviser really does go cold and glaze over at the thought of broaching the subject with their healthy clients, then they should form an allegiance with their nearest local, suitably qualified adviser. Following the similar referral model to that of the medical profession, most advisers will be willing to enter in no-cross selling agreements, this simple change of approach allows, and of course echoes, the internal departmental divisions at the majority of solicitor firms.
The winners of this change are the advisers, but ultimately it is our clients who benefit of course.
Advisers can start the conversation
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