Suggesting that long term care insurance is dead if not dying, Jeremy Davies puts forward care fees planning as the rising phoenix in the industry.
In 1992, pre-funded long term care (LTC) insurance products were launched into an unready world. The products, as straight protection-based insurance, were unregulated and, for the most part - within the IFA world at least - treated with complacency and derision.
It is not surprising to learn that fewer than 50,000 policies were sold, with the majority occurring via the direct sales force route.
Some 15 years later, sales forces have been disbanded, and with the exception of one lone company, the products no longer exist and very few advisers show any interest in the subject. Learning from this is paramount, the phrase long term care is dead, and should, quite frankly, be treated as such.
The new phoenix has risen; the more cosmopolitan care fees planning has grown up and the sooner people realise this the better. It is a serious issue and it needs serious people to tackle it. There is nothing akin to standard insurance or protection about it. Dignity and care in old age is not just about health.
Far too many advisers are motivated purely by commission, and sometimes it gets in the way of true development and potential product innovation. For as long as there have been specialist advisers, colleagues have striven for a greater parity with the legal profession and, while the industry continues to be seen as commission-hungry, this coveted comparison will never exist. Advisers should do what they do best and advise, and there does not have to be a product at the end of the process.
So, what can advisers do to highlight the need for LTC? Although less than 10% of the adviser community have sat and achieved CF8 (or an equivalent), advisers have an ideal opportunity to discuss the situation with their clients, of any age.
Companies should change their questionnaires and their general fact-finding processes, tackling the subject with a much more positive approach, at every review. Products do not need to be sold for a client and their family to be made aware of the legislation and how this would affect them.
The taboo and reluctance to raise the matter has to be broken, granted it is not a glamorous area of planning, but as over 30% of the pop-ulation will need some sort of care, at some stage of their lives, the seriousness cannot be ignored, and all advisers should have a duty of care to at least broach the subject with their clients.
Comfort zone
But the question remains, why are advisers shunning this sector? Everyone likes to work within their comfort zones and advisers are no different, with the subject being shunned for two main reasons. Firstly, it is not the most pleasant of topics; no one ever wants to think about a time when they are unable to look after themselves, or imagine the impossible, and contemplate a future where they have no mental capacity to make decisions. Secondly, advisers do not understand the need for, or the nature of, care, and very few (unless family circumstances dictate) have ever been to a care home, let alone spent the day with a domiciliary care worker. Fundamentally, care of the elderly has very little to do with financial advice and the selling of protection products, and everything to do with promoting prolonged independence and ensuring dignity and pride.
How can an adviser hope to understand a subject area without gaining an understanding of how it is delivered, structured and funded? Advisers should visit at least one care home. Most people hold the belief that care homes are terrible places where people go to die, but this is simply not true. Yes, the residents are poorly and possibly frail, but modern care homes have amenities many hotels would desire.
For instance, there is a new home that has two dining rooms more akin to upmarket brassieres, several cosy lounges, all with books and games, the main sitting room houses the home computer (accessible by all residents), each en-suite bedroom has a walk-in wet room, flat-screen TV with integral DVD, telephones and fast ISDN internet connections.
By seeking to understand what people need to fund, advisers will be able to embrace the topic with much more passion.
So, are there any opportunities for advisers here? Enormous scope exists for advisers to revolutionise, not just the delivery of financial advice, but also the perception of the market place in general. People facing retirement should be able to plan effectively for every eventuality that may or may not befall them.
No one expects advisers to work in a field that makes them uncomfortable and, looking at the statistics, this represents 90%. If only advisers could adopt the same culture used by the medical profession - in other words, if every non-CF8 qualified adviser teamed up with their local qualified LTC adviser, a true synergistic partnership would benefit not just the two advisers but the clients as well and the referring adviser would earn a 'passive' income if the business comes to fruition.
The non-specialist adviser could cover the subject in a general way, placing specific questions in the fact-find and well-chosen paragraphs in suitability reports, but refer the client to their 'partner' adviser for in-depth and dedicated advice.
The demand for advisers to treat the subject of LTC with the respect and reverence it deserves will grow over the next few years. The population is ageing and, as it does, the elderly are growing more demanding and expectant of better choice, improved facilities and value for money. The baby-boomer generation, for example, is well versed in consumerism.
Fact of the matter
The statistics alone show the market potential. At any one time there are over 500,000 elderly people in care homes. It is estimated that around 100,000 people each year enter a care home for the first time. It is believed that a further two million people are cared for in their own homes.
Care fees planning is not just about products. Predominantly, the process is advice-led. Financial products such as immediate needs plans can be ideal ways to fund current and continued private care fees, but they are not universal panaceas and not suitable for every resident. That said, every single family should at least be given the opportunity to explore the feasibility of such a product - which can only be done by qualified advisers.
To be fair, a gamut of other products such as bank and building society accounts, national savings, various investment bonds, ISAs, unit trusts and shares can also be used to fund private care fees.
Lifetime mortgages are becoming ideal tools for funding LTC and are proving extremely practical in the purchase of immediate care plans for people staying at home. More and more people are able to receive care in their own homes and, while their existing capital is being utilised, accessing the money tied up in their houses is an ideal way to fund expensive home care.
Thousands of people face retirement for the first time each year. There may not be a perfect product to offer to everyone, but every person approaching retirement should be given the opportunity to discuss "what if".
Estate and Inheritance Tax planning cannot be done properly without clients considering the effect and impact that paying for private care will have on their perceived future wealth. n
Jeremy Davies is managing director at Symponia
