Planning for caregiving is becoming a core concern for many advisors.Rudzhan Nagiev/iStockPhoto / Getty Images
With the costs of care rising and many Canadians caring for family members, advisors have a crucial role to play in ensuring the financial, emotional and practical responsibilities of caregiving don’t catch clients and their loved ones off guard.
One in four Canadians is a caregiver, according to a report released in May from the Canadian Centre for Caregiving Excellence, including one-third of the workforce. At least half of the population is expected to take on caregiving responsibilities at some point in their lives, driven by aging demographics, increasingly complex care needs and the significant financial demands of care.
Indeed, just less than half of caregivers report financial strain, with one in five spending more than $12,000 a year out of pocket and about the same proportion saying they’ve had to stop saving entirely.
Nancy Grouni, a certified financial planner with Objective Financial Partners Inc. in Markham, Ont., has always factored a client’s future elder care needs into financial plans.
Lately, she says supporting family members – whether aging parents, siblings, spouses or adult children with special needs – is becoming a larger part of the conversation.
“Caregiving can result in reduced work hours, career interruptions, delayed retirement, certainly an increase in household expenses, so sometimes higher debt,” she says. “And a fallout from all of this would be reduced savings and investment contributions.”
Neela White, senior portfolio manager with Blue Wing Advisory Group at Raymond James Ltd. in Toronto, says demographics, combined with more caregivers working and larger health care gaps, mean planning for caregiving is now a core concern affecting almost every segment of the population.
“[T]his is not just affecting seniors who are going to need care … This is also affecting retirees who have to care for each other or care for a spouse because a diagnosis came in,” she says. “This is adult children who are working, having to take care of their aging parents.”
But since caregiving touches on frailty and mortality, she adds, conversations haven’t always been at the forefront of planning discussions.
Rhona Konnelly, principal of Konnelly Consulting in Parksville, B.C., says advisors have a unique opportunity – and a responsibility – to integrate caregiving discussions into the financial planning process.
“If we’re helping clients already to prepare for risk, this is a vulnerable, foreseeable situation that should not be alarming to clients,” says Ms. Konnelly, who focuses on elder care planning advocacy and advisor coaching.
Every time advisors talk to a client, she says, “there are triggers, door openers, to expand a conversation.”
Advisors don’t need to become experts in caregiving, she says, but the topic needs to be addressed early so families can begin the conversation without feeling overwhelmed and before a crisis occurs.
Ms. White advocates having an intergenerational discussion as early as possible, moving beyond the lifestyle components of retirement to address who in the family would be willing to provide care for the client or their spouse, whether the client is planning to age in place, and outlining the differences between each model of care and the costs, as these can vary significantly.
The solutions available to help clients prepare depend on when planning starts, she says. “Long-term care insurance is a good one, but the older you are when you get it, the more expensive it becomes, so this has to be a topic or solution talked about early on.”
Clients looking to age in place may be able to purchase an in-home care insurance plan, Ms. Konnelly adds, and annuities can also be used to fund monthly costs for care.
Another financial strategy that has worked well, Ms. Grouni says, is to build dedicated caregiving reserves into emergency funds or a budget for paid support services into the client’s plan.
For sandwich-generation clients, she says, it’s important that caregiving planning strikes a balance between the client’s responsibilities to family members and their own long-term financial security.
Discovery questions should focus on who may require care in the next five to 20 years, how caregiving would affect household income, whether powers of attorney and legal decision-makers have been identified, whether sufficient assets are available to fund future care needs and what resources are available if caregiving costs rise significantly.
Ms. Grouni also stress-tests scenarios that involve costs for home care, assisted living, long-term care facilities and early retirement caused by caregiving responsibilities.
If clients are uncomfortable with the topic, advisors can share personal experiences or stories to help encourage the discussion, Ms. White says.
“Let’s help facilitate a conversation between everyone to get to a point at which everyone’s comfortable so nobody’s left with chaos.”