Journal of Financial Planning: February 2011
Lewis J. Walker, CFP®, CRC®, is president of Walker Capital Management Corporation and Life Transitions Advisors LLC in Norcross, Georgia. You may contact Lewis at lewis@lifetransitionsadvisors.com.
The theme of this issue is post-mortem planning. The key to effective post-mortem planning is pre-mortem planning: engaging your client’s family in deep, holistic, and substantive conversations about life transitions and challenges to be faced as time marches on, well before one is called to the great beyond.
There are only three possibilities when it comes to being: you are okay, you are not okay, or you are dead. Often the financial planning conversation is triggered by a life transition such as retirement, where the image is “more than okay.” Clients picture themselves in sync with media impressions—the happy couple on the veranda of a cruise ship on a blue ocean, riding in a golf cart across an impossibly bucolic course, or laughing with grandchildren in front of Cinderella’s Castle at Disney World. Who can forget the television ad showing the mature woman looking approvingly, with a hint of affection, at the man next to her on the beach? No, not her husband, but the wirehouse adviser who made it all possible through shrewd planning!
When you are dead, that’s final. Whatever plans have been made or not made, c’est fini! It is the “not okay” situations that most people have not thought through. The “not okay” conversation is a strong starting point for a family dialogue that spans generations and connects the dots. Demographic data tell us that the family care conversation1 is the planning opportunity for the next 25 years!
Consider: 34 million Americans provide care for family members or friends 50 years-of-age or older. Given the baby boom tsunami, the number of people needing care before they die will explode. It is not just elder care; 10.6 million Americans care for someone between ages 18 and 49. Of caregivers, 57 percent care for a parent or parent-in-law; 21 percent take care of a spouse; and 22 percent aid siblings, grandparents, other relatives, or friends.
A study by Evercare2 finds that, of those cared for, 45 percent live with the caregiver, 44 percent live nearby, but 11 percent live more than two hours away. Hours dedicated to caregiving exceeds 35 hours a week, and most caregivers, 75 percent of whom are female, are not paid.
What do you think is the financial, emotional, and health impact on the caregiver? The implications for families are enormous, yet this is an area of planning largely untouched by advisers. This may be because conversations about such matters are difficult and often emotional, calling for right-brained empathy that may elude left-brained, quant-oriented advisers.
The CARE Conversation
Detailing his six-year battle with his dad’s Alzheimer’s disease, Dan Taylor wrote a conversational guide for boomers, The Parent Care Conversation: Six Strategies for Dealing with the Emotional and Financial Challenges of Aging Parents. Aimed at getting boomers to initiate conversations with their parents, advisers can use it as a guide to get parents to talk to their grown children. The book can help set the stage for effective pre- and post-mortem planning.
Try the following question as a thought-provoking conversation starter. You are meeting with Joe and Mary Client. Long-married, they are planning retirement or are retired. They have three adult children. They came to you for investment advice, but in going over their data and papers it is clear that they have not thought much about the “what if” questions. Their will is old (we continue to be amazed at the numbers of people with no will) and the powers of attorney for assets and health care (if they have them) are boilerplate with few details.
“Joe, imagine this,” you say as you open the conversation. “It is 3 a.m. You are having a stroke or a heart attack. Frantically, Mary is on the phone calling 911. You have three adult children. Who will get the second call?”
The husband and wife may look at each other, hem and haw, and then name a child, usually a daughter. “I guess we would call Susan,” says Mary. Looking at Joe and Mary, you ask, “Have you ever talked to Susan about your wishes, about what you would want?”
Sometimes the answer is yes, but more often the answer is no. At that point we hand them four copies of Taylor’s book, one for them to read and a copy for each of their children. “After everyone has read the book, we would like to have a family meeting, especially with both of you and Susan if she will have the primary responsibility to step in, but ideally with all of your children.”
Even before you ask the 3 a.m. scenario question, you may wish to frame the planning situation using the CARE conversation outlined in Taylor’s book.3 Early in your quest to formulate effective pre-mortem planning, you want to discover any health problems or other impairments that may not be obvious. This is a delicate matter. The CARE conversation (explained below) will give you the level of appreciative inquiry needed.
Challenges. Looking out over the next 10 years, and 10 years beyond that, what challenges do you see? Encourage the client(s) to, “Focus on your future, not just in terms of what could go awry, but in terms of what you want to happen! Apply this line of thought to all aspects of your future—the big picture, your family, your health, career, money, real estate, business assets, personal property, fun and recreation, meaning and purpose, spiritual pursuits, and your legacy. Focus not just on challenges that have negative implications but more so on opportunities with positive possibilities!”
Alternatives. Given the challenges, what alternatives are available to deal with the challenges and opportunities?
Resources. Focusing on the best alternative for any given challenge or opportunity, what resources can you command to power the selected alternative?
Expectations and Experience. Given the challenges and opportunities that you foresee, and the alternatives and resources at your command, what are your expectations? What do you wish to experience?
To start a conversation asking about problems evokes a negative context. However, in explaining challenges, the client and his or her spouse or partner will tell you rather quickly what worries them. It may be a current health problem or caregiving difficulty. The concern may be based on a recent diagnosis and caregiving needs and, possibly, end-of-life decisions that must be made. It may be rooted in family genetic history or something that happened to a parent or other family member. Whatever the challenge is, they will explain it.
You can see how the CARE conversational track will lead you to deeper discussions involving the entire family. In planning for “what if” or “when,” the conversations will take you into the realm of pre-mortem planning and on to matters involving legacy, philanthropy, overall estate and tax planning, and creative and traditional matters involved in post-mortem planning.
Recognize other planning points in the process. Most estate planning is deficient—no wills, obsolete wills, unfunded or underfunded trusts, and no powers of attorney for assets or health care. “Special needs planning” is deficient or non-existent. Life insurance is not positioned correctly, is inadequate in amount, or ownership will trigger estate-tax problems. With today’s low interest rates and chaotic performance in stock and bond markets, universal life and variable life policies may be underfunded and likely to “blow up.”
Family Care Team
Maria C. Forbes, a Kolbe Certified™ consultant in Johns Creek, Georgia, and creator of the FIREPOWER™ Success Catalyst4, has worked with financial advisers in forming effective family teams to meet the caregiving challenge. Take our sample family, Joe and Mary. Susan has been designated as the child getting “the first call” and the one likely to step in to help mom and dad. She has a sister, Janet, and a brother, George. In a typical situation, Susan is overwhelmed, shoulders most of the responsibility, and ultimately, begins to resent her siblings for not caring and not helping. Family conflict is the result.
Perhaps Janet and George want to help, but they do not know what to do. It may be that mom and dad do not ask, preferring to rely on Susan. What Susan seeks is relief from the stress of managing the special needs of her loved ones. She wants Janet and George to participate in the ongoing challenges of managing health care, transportation, housing, sustenance, finances, and relationships for her parents. Using Kolbe tools and her own experience as a wife, mother, and daughter, Maria has developed a decision-making framework to engage the natural problem solving strengths of the family.
Advisers who have completed a Kolbe A™ Index5 with interpretation by a trained consultant know that only 5 percent of the population is likely to be just like you in terms of innate strengths and abilities. Susan has a distinct way of handling challenge, a specific modality for processing information, arranging things, and completing tasks. Janet and George have differing problem-solving strengths. A consultant can work with advisers and families to recognize and arrange strengths and abilities and then match caregiving activities with each family team member’s individual instinctive method of operation. Advisers are turning to outside consultants in the behavioral sciences to bring order and harmony as a value-added service in answering a family crisis and challenge.
Expert Resource Team
Fiduciary ethos requires an adviser to know what he or she does not know, and to seek the counsel of allied professionals when appropriate. In effective pre- and post-mortem planning, a network of outside professionals, an expert resource team (ERT), is required. Key members of your team could include any combination of the following professionals.
An elder care attorney focuses on the legal needs of the aging, Medicare and Medicaid planning, long-term care options, probate and estate administration, special needs planning, pet trusts, veteran’s benefits, and advanced estate planning. Top elder care attorneys are a source of referrals to other professionals with whom they have experience.
The strain of dealing with challenged seniors or special needs children and adults can lead to family conflict. A family law attorney can assist in seeking amicable resolutions to problems affecting the needs of family members, especially children. Alternative dispute resolution (ADR) or mediation services may be a solution. Other matters may include contested or uncontested divorce, visitation, custody, child support, spousal support and alimony, pre-nuptial agreements, and adoptions.
You may also need a tax attorney skilled in trust and tax law, incentive trusts, and business succession planning.
Your network should include: a gerontologist, geriatric care manager, professional trustee or conservator, CPA, nutrition therapist and food coach, primary care and specialist physicians, personal trainers and fitness coaches, personal and family life coaches, and a travel agent. Insurance specialists covering health, disability, life, long-term care, and property and casualty insurance should be part of the network as well. As needs arise in families, you may add other professionals, such as a veterinarian, bill-paying services, funeral director, and members of the clergy, or others, to your network.
Beyond just formulating the plan, you become a family resource that spans generations—a family office of sorts.
The Succession Issue
Many younger planners entering the profession have not had the sales training that the veterans who founded our profession experienced. In fact, “sales” may be a dirty word. Yet, everyone has to sell. You have to sell your ideas and your value proposition. Sales and marketing skills are required to build a business and a profession. For those planners who disdain sales and marketing, we must ask, where will the new clients come from?
Clients appreciate the wisdom and experience of the elders in our profession. Yet clients look at the gray hair and wonder, will you be around when the children need you after we are gone?
The family care culture is a way to reach across generations, to be a family resource manager, and to get the younger family members working with the younger planners and potential successors in your office. When clients die, 70 percent of their assets under management leave the practice because the adviser did not have a relationship with the children and heirs. The family care conversation may be a part of your succession strategy.
Deep, holistic pre- and post-mortem planning goes well beyond money, tax minimization, and the normal precepts of estate planning. It is about life transitions, peace and love in families, meaning and purpose, dignity, teamwork, legacy, and preservation of what matters. Family care capabilities will be in increasing demand as the age wave rolls on. Dealing with the challenges of aging and special needs at all ages may be our highest calling as caring advisers!
Endnotes
- The Family Care Culture and The Family Care Conversation are trademarks of Life Transitions Advisors LLC, 2010. All rights reserved.
- Evercare® Study, in collaboration with National Alliance for Caregiving, 2007. Family Caregivers—What They Spend, What They Sacrifice: The Personal Financial Toll of Caring for a Loved One (November).
- Adopted from Taylor, Dan. 2006. The Parent Care Conversation: Six Strategies for Dealing with the Emotional and Financial Challenges of Aging Parents. New York: Penguin Books. Used with permission; all rights reserved.
- www.firepowerteams.com.
- www.kolbe.com.