The retirement of the Baby Boomer generation is upon us, and it might be wise for wealth managers to ensure they are addressing the challenges of health and aging with client families as much as possible.

The retirement of the baby boom generation is upon us, presenting massive financial challenges just as the West struggles with huge budget deficits. At such a time, it might be wise for wealth managers to address the challenges of health and aging with client families as proactively as possible.

“Traditional long-term health care alternatives must be replaced with early planning, goal setting and new ways to manage health care costs,” the Financial Planning Association (FPA) has recommended.

As well as longer life expectancies, modern day society is characterized by a high prevalence of long and degenerative diseases. For example, an estimated 5.4 million Americans have Alzheimer’s disease, according to the Alzheimer’s Association. “[This] number will escalate rapidly in coming years as the baby boom generation ages,” the Association says.

The mix of these issues (life expectancy, degenerative diseases) presents a huge fiscal problem for the US, with a government budget creaking under the weight of an aging population. At a micro level, it entails terrifying issues for families like making assets last for longer and stretch to large, unexpected costs, as well as facing challenges like a member losing mental or physical capabilities. This last brings difficult decisions and issues of power of attorney.

A specialist team

For some banks, this has meant introducing a specific eldercare offering. Most recently US Trust introduced this in May, creating an eldercare services division. Wells Fargo Private Bank formalized this service in 1997 and expanded it to cover the East Coast in 2010.

It is often said that aging “creeps up” on us. Likewise, realizing there was a need to provide eldercare services crept up on Wells Fargo.

“In 1996 and 1997, the bank noticed that its trust officers were engaging in behavior, that while good for clients, was potentially risky. We were taking clients to doctor appointments, pets to the vet…Not all clients, however, received similar service,” says Keith Klovee-Smith, Wells Fargo Private Bank’s national manager for elder services.

Of course, the bank was also aware of the alarming statistics.

The Health Insurance Association of America estimates by 2020 one out of six Americans will be 65 or older and the number of seniors 85 and older will double to seven million, according to the FPA.

According to Klovee-Smith, 10,000 citizens are “turning 65 years of age each and every day in the US…The 60+ population will double in the US in the next 20 to 30 years.” 

In 1997 the bank undertook a client survey that cemented its plans to introduce eldercare services. It asked customers their top five wealth concerns, in order of priority, and the top four all related to “life management” as opposed to purely financial concerns. These were worries like remaining independent, staying in their own homes, and their health.

“This was an ‘aha’ moment for the bank,” says Klovee-Smith. 

Similarly, a recent survey from Spectrem Group on wealthy divorced and retired women showed that healthcare costs and costs incurred from the death of a spouse were among the main drivers of debt worries among this group. US Trust, on its decision to launch an edlercare unit, said clients’ biggest fears were: outliving their financial assets, becoming a burden to their loved ones, losing independence and control, and a lack of understanding or ability to access and assess care options.

According to Klovee-Smith, Wells Fargo realized it needed to “meld” life and wealth management services.

Aging as a “risk”

Aging also taps into another trend in the wealth management – and particularly family office – space. A recent study by FOX proposed that the family office’s central role is as a “risk manager” and that this idea needs to be formalized in the minds of client and staff. As health and aging form major risks to clients, eldercare services are a natural extension of wealth management services. This is a work in progress, however, and Klovee-Smith says the bank gets “both delight and surprise” from customers about this service. On the other hand, he thinks the model is well suited to a trust business.

The “soft side”

Aging also relates to another growing industry trend: that of "soft side" services, such as family dynamics. Family relations come under a huge strain at difficult times like dealing with aging, illness and death. Suddenly family members are loaded with responsibilities they never asked for and have to come to terms with difficult decisions - about what “duty” they have, for example - while dealing with complex emotions. At the same time, the costs involved can created chasms in relationships.

“Families are coping with numerous issues surrounding wealth, planning, estate issues, health and welfare issues with aging siblings, parents and the like. They do not always know what to do. They are trying to maintain their own careers, family relationships,” says Klovee-Smith.

The key, according to prevailing wisdom, is planning for these issues proactively and transparently. These are, however, incredibly difficult issues to discuss. Like wills, planning for ill health and old age are topics people find hard to open up about. With family members, it may seem mercenary even to ask parents: what financial plans are in place in case you get ill? But addressing these practicalities beforehand can not only be the difference between a family managing to cope financially, but can prevent arguments and familial breakdown. This potentially provides a role for a trusted advisor or facilitator.

“Simply, clients want to remain independent for as long as possible. They don’t want to be a burden on anyone in most situations. They want to participate in decisions that impact their lives. While these are recognizable goals, the achievement of them can be difficult,” says Klovee-Smith.

The nuts and bolts

Wells Fargo charges for its elder care service on a “separate fee schedule.” It currently has a team of 250 people trained in this area within its wealth group, and 120 specialists.

Klovee-Smith says it is a “complex” service to roll out in many ways, as specialists need to be “skilled fiduciaries with extra training in vetting vendors, community resources, communication, coordination of services, financial fraud, and general life management issues.”

Furthermore, certain personal qualities are a must: “As a rule, each is excellent in communication, identification of issues, and they display a great deal of caring and empathy.

“Each pays attention to the goals and wishes of the clients and do not impose their own values.  They work well with extended family members and those families that may present in dysfunctional ways,” he adds.

Despite the complexities though, he says the rewards have been great: “I am tremendously proud of our group. Day in and day out they face extremely challenging situations with our clients with grace, patience, skill, professionalism, and overall kindness.”