An executive at Merrill Lynch spoke about what trends the firm is seeing in terms of helping clients address issues around planning for possible healthcare costs later in life.

In light of Medicare's 50th anniversary last week, Family Wealth Report spoke to Merrill Lynch about some of the issues associated with long-term financial planning and the hot topic of healthcare in a wealth management context.

US Trust recently said the wealthy regard investing in their health as important as investing to build wealth, and that health is the number one element required for “a life well-lived.” This is indeed true across the age spectrum, but particularly so among retired individuals or those edging closer to retirement.

However, there appears to be a disconnect in terms of the extent to which individuals are worried about planning for potential healthcare costs later in life and the degree to which they are proactively addressing these concerns, said Joseph Lamberti, senior vice president of wealth management at Merrill Lynch.

“Oftentimes, they want to talk about it, but they're not talking about it,” Lamberti said. “Without a doubt, healthcare is one of the fastest-growing retirement costs and, because of that, is most on the minds of clients. Many clients are unprepared to understand the complexity of Medicare, including what it can and cannot cover, but we find more and more they are willing and motivated to want to understand it.”

Half of the respondents to Merrill Lynch's 2014 Health and Retirement: Planning for the Great Unknown study said selecting a Medicare plan was where they needed guidance the most. Perhaps most telling, however, was that 75 per cent of pre-retirees said they haven't had in-depth discussions with their spouse regarding Medicare and supplemental plan choices. The industry trend is increasingly around the role of advisors in facilitating this.

“I think this is very much a behavioral function,” Lamberti said. “People value the decisions they make today and their actions and consequences today – much more so than 10 or 25 years down the road.”

With that said, recent insights have pointed to a stronger shift towards family wealth planning involving all family members, with today’s “modern family” having more financial inter-dependencies and being increasingly geographically dispersed.

“We are deeply involved in multi-generational wealth planning, particularly as it pertains to healthcare and long-term financial planning,” Lamberti continued. “The first thing we identify with clients when we're talking about retiring/retirement is cost, which actually has a lot to do with geography: Long-term care costs in Iowa are a lot different than long-term care costs in San Francisco.”

He noted that wealthy individuals are more likely to reside in places such as Florida and California, but added that there is a “definite shortage” of geriatricians and high-quality healthcare providers in those areas.

“Even the high net worth are concerned about the rising cost, and availability of, high-quality healthcare services,” he said. “We also look at issues around the next-gen potentially having to step in to fund some of their parents' long-term/healthcare costs.”

The bottom line is, as Merrill Lynch has previously said, that there exists a major opportunity for financial advisors to serve as a resource on healthcare issues in retirement – from providing information to facilitating discussions between spouses and family members on topics such as how to pay for long-term care.

In the words of the firm in the above-mentioned study: “For many, health can be the difference between a retirement of opportunity, independence, and financial security – or of worry and financial challenges.”
Increasingly, addressing issues around healthcare is regarded as a fundamental aspect of an advisor's value proposition, and an integral part of goals-based wealth management.