Reap what you sow

Specialism is a way of life in so many areas today. Bank managers have been replaced by specialist advisers and, as intermediaries, we choose specialist providers to meet clients' needs, rather than trying to place all our business with one provider. When it comes to giving advice, though, the temptation is to try to be all things to all clients.

As a business strategy, generalisation has worked well for many IFAs in the past, but as financial services becomes ever more complex, so the danger is that we end up being a Jack of all trades and master of none. Potential clients might then beat a path to those specialists who appear better placed to meet their specific needs. That will not happen overnight ' fortunately, most clients still believe in loyalty to their advisers ' but it will happen. One of the areas where clients have very specific needs is the long term care insurance (LTCI) market.

Targeting the grey market

Grey clients ' those in their late 50s and older ' will already have made their way in life, are probably entering or in their period of greatest spendable wealth, face uncertainties on the horizon and are likely to value loyalty and professionalism, rather than be easily lured by the prospect of a discount elsewhere.

Many advisers already specialise in dealing with older clients ' providing pre and post-retirement financial advice, help with inheritance tax mitigation and estate planning, managing their investments, sorting out the best annuity options and so on. Important as those are, LTC fees planning probably requires the most specialist advice of all.

Recent data from National Statistics shows we can expect, on average, more than 68 years of healthy life expectancy (HLE). But, overall, life expectancy is now around 75 years for men and 80 for women, so it is clear many of us can expect some years of poor health before we die.

Until a decade ago, there was little financial advisers could do to help clients plan for LTC. Now, we have a range of LTCI policies in our armoury offering single or regular premium pre-funded protection, investment-linked insurance and enhanced annuities that are only taken out when the client already needs care. For the growing number of elderly homeowners, equity release can open up funding opportunities even to those who are income poor.

Even so, to date, sales of LTCI policies have been poor, with little more than 30,000 policies in force. That may partly reflect some clients' view that LTC funding worries will go away if we do not think about them. It may also reflect that relatively few IFAs have invested the time to become knowledgeable about LTCI.

That could be about to change. From 2004, LTCI will be regulated by the FSA and, from discussions with the Treasury, it is clear regulation is likely to reflect the view that LTCI clients may be vulnerable consumers ' certainly if they are in care when advice is sought. That means LTCI will be regulated more as an investment product than an insurance product.

The right advice

It will not be possible to avoid giving LTCI advice either. The regulator will require fact-finds to ask the appropriate questions and that IFAs are geared up to giving the appropriate advice ' or passing the client on to someone who can. Regulation should therefore mean that we see more IFAs become LTCI specialists in the future.

The good news is that there will be incentives that will encourage this trend. We have an ageing population. In 1996, there were just over six million people of retirement age in the UK. By 2021, that will have grown to 7.6 million and more than four million of those will be over 75.

The older you are, the more likely you are to need LTC. HLE is growing less quickly than life expectancy and, by age 80, seven in 10 people have some form of long-standing disability. Already over half a million people live in care homes and many more receive care at home.

Although not everyone will need care, if you do, it can be very expensive. Financially, the worst case is often dementia such as Alzheimer's disease. This could require care 24-hours a day, but life expectancy may not be affected. Fees of up to £20,000 a year can quickly eat into most people's savings.

Across the Channel

For those who believe that LTCI is too expensive, there is a growing view that doing something is better than nothing. This is what has happened in France ' where now more than a million people have LTCI. Insurance is rarely needed to cover the full cost of care ' attendance allowance, free nursing care contributions (introduced last October in England, but rules vary in each part of the UK), State and other pensions and investment income, all help reduce the need for protection. As a rule of thumb, LTCI typically covers a third to a half of the £17,000 a year plus people can expect to pay for full-time care.

Professionals such as lawyers and accountants and businesses such as nursing homes value LTCI for their clients but do not have the expertise to be able to advise people.

There are other reasons to invest in becoming an LTC specialist. First, a straw poll of IFACare members recently showed that LTCI sales are only part of the story. In many cases, clients need advice to ensure their portfolio can meet their care costs and so LTCI is not needed at all.

Second, one of the great and largely unpublicised benefits of LTCI is the care counselling that most insurers offer as part of their product proposition. People entering care are often frightened, confused and ignorant of their options. They, and their families, may need specialist help in finding the right care package, filling in forms to get State benefits, or simply reassurance as they enter an uncertain period in their lives. That is precisely the kind of help that care counsellors offer and is usually offered free as part of the LTCI policy. For the adviser, too, this service is invaluable, as few of us will have the detailed knowledge clients may need.

Even so, to become an LTC adviser requires making a commitment. Since 1995, joining IFACare has been the first step for many advisers and it now has more than 250 members across the UK. As an organisation for LTC advisers it offers advice and help as well as being a forum and, importantly, encourages high standards in giving LTC advice.

Specialist training

IFACare members must undertake regular continuing professional development and abide by a code of practice. As well as benefiting its members, these standards help reassure clients and their families. The training and education director, Tish Hanifan, is a barrister who specialises in elderly client issues, and her workshops are a key element of the organisation's appeal. It also works with leading charities, regulators and others involved in this area. The organisation's website includes a members' forum for them to post questions. Invariably, another member will have come across a similar situation before and developed a solution to it.

IFACare also encourages members to sit the Chartered Institute of Insurer's (CII) G80 examination, which increasingly includes LTCI ' although it also covers other protection insurance ' and help with that is available via IFACare or from the CII direct. Many insurers now offer specialist masterclasses and other training, and commercial training organisations may also help.

The trade press ' such as COVER ' will help you keep up to date with latest developments, while there is now a range of books on subjects such as choosing a care home or the State benefit system.

Giving advice to older people is rewarding in itself, especially when you can offer peace of mind as clients enter the autumn of their lives. After a lifetime of work, paying for care is the last thing that people want to worry about. With your help, they need not have to.

Graham Fidoe is chairman of IFACare