Melissa Spickler, a financial advisor with Merrill Lynch in Bloomfield Hills, Mich., knew something was wrong as soon as she heard that her client, “Beth,” had called. It was just two hours after their last conversation, and she was calling with the same exact question. She called a third time the same day, with the same question. Spickler did what she had done with other clients, and called a family member that her client had on record as a trusted contact—Beth’s son—and let him know what had happened and what it could mean. “I know my clients really well,” Spickler says. “I know when something’s changed, and I know the difference between forgetfulness and signs of dementia.”
Beth’s son brushed off Spickler’s concerns, but it wasn’t long before he called to apologize: His mother had gotten confused driving, pulled into a parking lot, didn’t know where she was, and knew only how to ask Siri to call her son.
Financial advisors are often the first to spot the signs of dementia, for two reasons: They’re less likely to be in denial about the symptoms, and trouble with finances is often one of the first problems. “Managing your finances is a big frontal-lobe thing,” says Carolyn McClanahan, a financial advisor in Jacksonville, Fla., who is also a physician. “It requires a lot of brain flexibility, and it slips the easiest.”
Because of the unique nature of the disease, the first line of defense is, unfortunately, financial rather than medical. Alzheimer’s disease is typically diagnosed when people are age 75 or older, but the disease often begins some 20 years before signs of dementia manifest themselves—and that is when planning should begin. Since there is virtually no medical treatment, Alzheimer’s expenses are largely caretaking-related, and not covered by insurance or Medicare—meaning costs for a family, on average, are more than $350,000, according to the Alzheimer’s Association, twice as much as what’s incurred by caregivers of people with other conditions.
Even if you aren’t worried about Alzheimer’s in particular, McClanahan warns that 70% of people will need some sort of long-term care: “Rarely do people die quickly.” Those who lead the healthiest lives are often the ones most likely to need long-term care. By living longer, their chances of getting dementia increase, and their physical bodies can stay healthy for years, even decades, after their minds begin to fail. “You can easily blow through $500,000 in five years” on long-term care, McClanahan says. According to the 2020 Genworth Cost of Care survey, a semiprivate room in a nursing home costs $93,075 a year; a private room is $105,850 annually, on average. As pricey as that is, if you need more than 10 to 15 hours of home care per day, McClanahan says, moving to a facility is usually more cost-effective.
This, of course, requires planning well ahead of a diagnosis. Many advisors recommend long-term care insurance; Spickler believes so strongly in it that she asks clients who decide against it to sign a document acknowledging it was discussed multiple times and rejected. Even for the very wealthy, long-term care insurance can protect a spouse, ensure an inheritance, and generally mitigate the financial destruction this disease can wreak.
Pam Smith, an advisor at 6 Meridian in Wichita, Kan., is among the many advisors who recommend hybrid policies. These have a single, large premium (rather than annual), which you can either withdraw yourself or leave as a death benefit if you don’t end up needing long-term care. Some policies give you five or 10 years to pay the premium, offering a longer runway, without risking the annual increases that often come with traditional policies. Smith starts talking to her clients about them at age 58. “Too much past age 65 and the cost of policies go up dramatically,” she says.
Pricing is specific to any given situation, but Spickler offers an example: A 52-year-old woman can pay $20,000 a year for five years to buy a $100,000 hybrid policy. When this woman is 78, assuming the policy has a 3% inflation rider, it will cover $10,000 a month for six years. “That might be just 50% of the cost of care,” Spickler says, “but it’s a lot better than nothing.”
For people who don’t have, or want, long-term care insurance, the focus needs to be on ensuring caretaking costs don’t decimate the portfolio. Purchasing an income annuity, for instance, Smith says, can guard against a spouse running out of money. Spouses or other family caretakers may require some money for additional help with housekeeping, cooking, child care, or other tasks they have less time or energy for—not to mention some extra caretaking needs of their own, like a day at the spa.
It’s also worth discussing how much caretaking a spouse is willing to do, says Geri Eiseman Pell, an advisor with Ameriprise in Rye Brook, N.Y. One couple, for instance, was financially equipped to deal with the husband’s diagnosis, but his wife wanted to make sure she could continue to spend as much as she wanted on her own care. “She knew that to get through it, and be there for her kids afterward, she needed to take care of herself,” Pell says. “They had $4 million and they were going to spend it. And they did.” They didn’t need to worry about leaving their kids an inheritance because they had already purchased a $3 million second-to-die life insurance policy—which factored into their decision not to buy long-term care insurance. Pell says a second-to-die policy, which pays out after the surviving spouse dies, is a strategy she often uses when clients don’t qualify for long-term care insurance and want to ensure they leave something for their heirs.
Alzheimer’s disease is such a big destroyer of wealth that advisory firms are starting to get involved. Edward Jones began an alliance with the Alzheimer’s Association in 2016, says Ken Cella, who leads Edward Jones’ client strategies group and works with the nonprofit. The firm has made two $25 million donations, and 75,000 of its associates, clients, and friends have taken part in more than 600 charity walks. Its advisors have also held local seminars with representatives from the Alzheimer’s Association. “They’ve helped us create a channel to put more Alzheimer’s education into communities,” says Beth Kallmyer, vice president of Care and Support for the Alzheimer’s Association.
The Alzheimer’s Association is hoping to work with more firms. It has developing a financial-literacy program for caregivers with the help of a steering committee that includes TIAA, Raymond James, Wells Fargo, and Edward Jones, along with AARP, the Consumer Financial Protection Bureau, and others. Some firms are creating internal resources: Merrill Lynch, for instance, has a gerontologist on staff, and provides its advisors with education and tools to work with clients, such as a “family album” they can use with clients to document not only vital account and legal information, but also their hopes about retirement, thoughts about health care, and end-of-life planning.
Regulators have started to create some protections for advisors. In 2018, the Financial Industry Regulatory Authority, or Finra, implemented two provisions: One requires broker-dealers to ask a customer for a trusted contact who can be called if an advisor suspects dementia; the other allows brokers to place a temporary hold on funds if there is reason to believe the client is being exploited.
Ultimately, though, it’s up to the individual advisor to help families navigate Alzheimer’s. For those looking for an advisor, Pell suggests asking lots of open-ended questions to get at how often they’ve helped other families in this situation and what they’ve done; whether they’ve run family meetings; how they manage intergenerational wealth; and their approach to family conflict. Most experts stress that, ideally, the advisor should have some relationship with children or other close relatives. At the very least, clients need to provide their advisor with a trusted contact who can be called if there’s a health emergency, and contact information for the other professionals the client works with, such as an accountant or attorney.
Smith emphasizes the importance of keeping clients engaged, even after a diagnosis of dementia or Alzheimer’s. “I want them to feel a part of the meeting, and hear their voices for as long as they have them.” She makes the meetings as consistent as possible, keeping the environment the same so they know where they are when they come into the room. The client’s financial reports look the same, and she goes through them in the same way, in the same order, every time.
This is also the time to revisit the crucial conversation around end-of-life care. Get specific, says McClanahan. “The last couple of years of life can be a lot of rehab, hospitals, and nursing homes,” she says. “If you have trouble swallowing, you get a feeding tube. If you get a urinary tract infection, you end up in the hospital. Most people want to be kept comfortable, but not go through all that.” Decide at what point, for instance, a bout of pneumonia results in a call to hospice instead of a trip to the emergency room. Have the hard, frank conversations now, and you’ll be better prepared to be emotionally present when the end eventually comes.
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