Michael Olman is hardly a stranger to the human side of financial planning. Having watched clients affected by chronic illness — especially Alzheimer's disease — the senior vice president and wealth management specialist at Raymond James & Associates knows these sensitive times require both a deft touch and a firm handle on financial matters so that resources are protected for whatever path lies ahead for his clients.
"Family illness and life's curveballs involve a tremendous amount of emotion that must be taken into account," says Olman, who is based in Bradenton, Fla. "And in those times, financial planning transitions from science to art because it's no longer solely plugging numbers into a calculator and coming up with an answer."
Olman had a husband-and-wife client where the wife developed bone cancer and thought she was going to die. She wanted to spend some of the funds they had saved to enjoy her life. Ultimately she went into remission, but the experience taught Olman a lesson. "They both would have been walking a delicate tightrope if what they wanted conflicted with each other," he says. "In that case we might as well have put on a striped shirt and become a referee, because everything in a family case is personal."
When clients confide about a newly diagnosed condition, plans must be adjusted not just financially, but to also ensure that the client's wishes and dignity are protected — while they are still able to voice them.
Chronic illnesses, in particular, can befall any client at any time in their life and they are the cause of 70% of all deaths in the U.S., according to the Centers for Disease Control and Prevention. Nearly one out of every two adults had at least one chronic illness in 2005.
From multiple sclerosis to heart disease, early onset Alzheimer's to diabetes, a chronic illness is a medical condition or disease that is long lasting or recurrent. Clients can often live a long time with such an illness without a major alteration to their life. But eventually those affected by a chronic illness will find themselves progressively worsening, changing not just their quality of life, but also their financial needs. And many in the financial community say it's crucial for advisers to know what to do if this potential change occurs in a client's life. "As health circumstances change, we will look at how that affects the target number of what they had originally wanted for their retirement years, and also what's left at the end," Olman says. "There's often a disconnect between what you have financially and what you want it to do for you now."
But there is not necessarily an industry standard for modifying a financial plan for chronic illness. Some advisers adjust plans once an illness is diagnosed. But a complaint raised by financial and legal specialists who work with chronically ill clients is that too often an adviser will create a blanket solution without addressing the specific needs than can appear with each specific illness. "Any investment plan should start with a financial planning budget at its core, but you need to address the chronic illness that they have," says Martin Shenkman, a lawyer and estate planning expert based in Paramus, N.J.
Shenkman's wife was diagnosed with multiple sclerosis about four years ago, which sent him into overdrive to find the best way to financially prepare their lives. In doing so, Shenkman began to travel the country giving seminars to advisers through a program he called RV4TheCause, to help educate them for these trying times. "You need to know what types of expenses might come up for that illness, if you need to make home adjustments and what that would cost. Do you need to pay for that from savings or set aside extra funds?" he says. "We've brought in specialists that meet with clients, talk with physicians and create a health plan, which can help create parameters on where costs could come in the future. Even if it's an estimate, you can at least home in on where they need to be."
But as Shenkman notes, clients are not always forthcoming. People react differently to being told they have a chronic illness. Some feel that their health condition doesn't affect their financial situation. And some just feel a diagnosis is too private to share with their adviser.
"It's usually something people won't reveal until you get to know them better and sit with them face-to-face," says Brian A. Magnan, a certified financial planner with Wells Fargo Financial Advisers for the past 17 years. He says about 20% of the clients in his practice are affected by a chronic illness. "People will tell me where all their millions of dollars are, but not that they had prostate cancer."
Yet a client's health is crucial for an adviser to know. While clients may feel a reluctance, or even fear, in sharing health issues, most advisers who work with clients facing a chronic illness said they believe they have a duty to glean these crucial details, so they can financially protect their client. "A lot of people feel you're prying. But you're not prying. You're helping," Shenkman says.
Those who feel an annual questionnaire asking if anything has changed in a client's life in the past 12 months is sufficient are wrong. A personal connection, a sensitive touch and a direct question asked during a meeting, are likely going to produce a more honest assessment. "There's an increasing awareness about asking clients questions that are not directly financially related. That allows and encourages advisers to ask these questions not just about investments but about quality-of-life issues," says Rich Behrendt, a senior estate planner and an attorney with Baird Financial Advisers in Milwaukee.
Still, planning in the face of a chronic illness and disability, or preparing for the possibility of these occurrences, can require a more nuanced and multilayered approach. Advisers already do this to some extent with a client's investments. After all, each investor has their own comfort zone with risk levels, income needs at retirement and even how much they can afford to save while working. But in that same way, a specific chronic illness also requires individual tinkering.
For example, a client with multiple sclerosis may be facing just a few years before he can no longer care for himself alone, and has a 5 year old child that needs to be cared for as well.
"I can't imagine any adviser who doesn't have clients dealing with chronic illness. And yet, when a professional finds out a client has a chronic illness, those illnesses get lumped together and the planning can be kind of standard for someone disabled," says Marilyn Capelli, a CFP and president of Capelli Financial Services in Bloomfield Hills, Mich.
Frequently, the first thing an adviser will reach for is an insurance product to cover health care costs. While medical care for a chronically ill client is crucial, a blanket policy is one option that advisers who specialize in this area find inadequate. "So many look at this as only an insurance issue, and that's not the entire package," says Scott MacDonald, first vice president and certified special needs adviser for Bank of America Merrill Lynch in Modesto, Calif.
"It's so beyond insurance and investment management. Our model is compassionate trusteeship. Parents should be loving parents, and brothers should be loving brothers, and we do the hard work."
With an autistic nephew, MacDonald knows first hand how crucial it is for families to feel they can care for a loved one affected by a chronic illness or special need, and yet be able to have them retain a sense of autonomy and dignity. MacDonald and his team of seven advisers — part of Merrill Lynch's Special Needs Financial Services group of 1,830 advisers — bring in outside experts, from benefit counselors to caregivers, special needs trust attorneys and even actuaries who can help determine life expectancy and then assess the investment risk for each of the hundreds of clients that MacDonald advises in this category.
Understanding the need for elasticity in a financial plan and the personal feelings involved, are the specialty of Peter Strauss, senior counsel with the New York law firm Epstein Becker & Green P.C. and founder of the Elder Law Clinic at New York Law School. "You're healthy now, but what happens in 20 years if you become incapacitated with a chronic illness," Strauss says. "So we want to look at how we might structure your plan differently in either scenario. We might be looking at some loss of control for the person with long-term illness, and you may want to give up some loss of control, or you may be able to defer."
To Strauss, these conversations should be happening with all clients, whether they're 30 or swiftly approaching retirement.
Strauss finds it more common that clients are referred to him for legal assistance in the face of a chronic illness, but have never broached these issues with their long-term financial adviser. "I have people come in for estate planning, and they bring their two-inch-thick binder with 190 pages and color charts from their financial planner, with all the plans of what they think they need to live," he says. "I would say in 99% of these cases there is no page 191, which lays out how long-term chronic care will affect the first 190 pages. This needs more attention from the [legal] bar and from the financial planning community."
In the end, the best measure of how well an adviser has done his or her job with a chronically ill or special-needs patient is when he or she's no longer needed; when the financial plan has been put into place; and when it's been executed and the client and his family have had their needs met, and hopefully, respectfully carried through.
"It's one of the paradoxes of estate planning," Olman says. "Sometimes you have to lose a friend to understand how good of a job you've done."
