A client's health status touches many components of their financial plan, from retirement goals to healthcare costs and other expenses. Yet many advisors leave health-related questions out of planning conversations entirely.
New research suggests that could be a mistake.
"Physical inactivity, once treated as a personal preference, is increasingly understood as a modifiable financial risk," wrote Joseph Coughlin, director of the Massachusetts Institute of Technology AgeLab, in a research paper set to be published in October in the Retirement Management Journal. "The behavioral investments individuals make in their bodies today are among the most consequential financial decisions they will make for their older self tomorrow."
A 'health portfolio' as part of planning
Coughlin suggested advisors introduce this topic as a "health portfolio" including preventive, performance and protective measures. Together, these focus on maintaining wellness 20 or 30 years into the future, optimizing fitness and preparing financially for potential serious illnesses later in life.
"Just as a financial portfolio is rebalanced over the investment horizon as objectives, time horizons, and risk profiles change, a health portfolio requires ongoing attention across each life stage," he wrote in the paper. "The advisor who understands this lifecycle framework can help clients view health investment not as a collection of retirement costs to be funded but as a portfolio that needs active management."
Many clients might tell their advisors they haven't thought ahead to their health during retirement, yet they actually make monthly health investments, such as fitness classes, gym memberships or nutrition supplements. With this in mind, advisors could ask clients to list their health-related spending and designate items as preventive, performance or protective.
How to broach health with clients
If an advisor asks to talk about health, the "client's going to look at them kind of cross-eyed," Coughlin said in an interview. Instead, the advisor could ask whether a client belongs to a gym, does preventive screenings or tracks their sleep quality.
"The big word of the day is not just 'longevity' — it's 'health span,'" Coughlin added. "Preventative investment in the portfolio is basically trying to extend the health span."
Some advisors are already implementing these conversations about health with clients.
"I have a lot of clients who talk about, 'Once I retire, I'm going to do this,'" said Bradford Houchins, a senior vice president at Camp Hill, Pennsylvania-based River Wealth Advisors. "They're waiting until the best time of their lives to then get healthier instead of getting healthier for the best time of their life."
Although health can be a sensitive and personal topic, advisors can bring it up within the context of a client's goals and other planning.
"It's not really a suggestion," Houchins said. It's "talking about what they want to accomplish and how they're going to do it."
He gave an example of a retired couple who know they want to travel to Europe. But to get the most out of the trip, they plan to have cataract and knee replacement surgeries first. Advisors could discuss how they will manage the costs, what the recovery time will be and whether they're doing "prehab instead of just rehab" to be strong before surgeries and speed up recovery.
"Using some of those assets that they have to prepare for these things that are going to happen instead of just dealing with the outcome is something that creates a better result for them monetarily and emotionally," Houchins said.
One tool he says is "fantastic" for saving and preparing for health expenses is health savings accounts (HSAs).
"They're probably one of the best options out there for all saving for retirement," he added.
