If you’ve ever tried to address client end-of-life planning issues with traditional planning software, you’ll appreciate the Whealthcare Planning toolkit.
It’s becoming increasingly clear that there’s something missing from the traditional financial planning software program. You can model accumulation for retirement and other goals, but there’s nothing that helps you identify and organize the documents required to address the possibility of dementia and decreasing capacity among aging clients. Financial planning programs will allow you to input a number for future healthcare costs, but where do you get the appropriate number? And how and when do you start incorporating planning tasks like getting a health care proxy form completed, and changes to the home so it’s more aging-friendly, and involving family members because the client’s cognitive capabilities are declining?
Meanwhile, is there a reliable way to assess your clients’ mental capacity and their vulnerability to financial/elder abuse as they get older? What kind of plans do you make to address skilled care for aging clients? For that matter, how healthy are your clients now, and how do you customize your longevity projections?
Carolyn McClanahan, the peripatetic physician/planner/Forbes columnist, has pioneered the idea of extending planning into healthcare and end-of-life planning areas. Over the past ten years, she has been giving talks around the country that exposed a variety of issues that clients need to have addressed, that traditional software and planning processes have so far ignored. The problem, of course, is how much of a one-hour speech will the audience implement.
Now, for the first time, McClanahan has put her own practice methodologies for end-of-life planning in an online software suite that you can buy at a reasonable price. It’s the first healthcare/cognitive assessment/healthcare cost analysis tool for professional financial planners.
The tool is called Whealthcare Planning (https://www.whealthcareplan.com/), a website that comes with assessment and planning instruments that should be in every financial planner’s toolbox. McClanahan created Whealthcare Planning in collaboration with, among others, Dr. Anthony Weiner, director of outpatient geriatric psychiatry at Massachusetts General Hospital; and psychologist and author Ned Hallowell.
“These are all things that I’ve been doing in my own practice for the last decade,” she says. “I’ve been building on it over the years, but until now I didn’t really have an organized way to share my processes.”
The toolbox can be divided into three parts: the Financial Caretaking Plan, a Whealthcare Risk Profile, and a planning exercise that creates a long-term care plan.
We can start with the Financial Caretaking assessment, which is built around a questionnaire that you and your client can fill out in about ten minutes. It asks questions like: Who currently manages your bill paying? Who reconciles your checking and savings accounts? Do you have a legal power of attorney document? It asks you to list the names of the client’s current financial caretakers, and who could help make financial decisions in the event that the client becomes physically or mentally disabled.
“It makes sure the client knows where everything is located, and that everybody knows the big picture on how your assets are going to be handled,” says McClanahan.
Once the questionnaire is completed, the application will create a customized Financial Caretaking Plan in PDF and/or MS Word. This gives you access to the names and contact information of the client’s financial caretakers, and also action steps.
No power of attorney? The plan lists that as a “to-do” item. Is there a “financial caretaking agreement” that outlines how the client’s financial affairs will be handled during times of incapacity? The client is prompted to make a list of personal property that will be left to heirs—all those less valuable, but potentially high-sentiment-value possessions that don’t really belong in the will.
One of the biggest benefits of this part of the tool is that it prompts the client to give the advisor a signed document, giving the advisor permission to contact children or other family members if the advisor becomes concerned about the clients’ cognitive ability to manage their affairs. Without this agreement, advisors are prohibited from raising the issue due to privacy laws.
“There’s also a pet caretaker agreement, which has become very popular,” adds McClanahan. “And it prompts you to get family support agreements in place. If there are people—typically adult children—that the client is still supporting or helping out, it helps to have written agreements that spell out the arrangement. Otherwise,” she adds, “as the parents age, it becomes easier for the family members to take advantage of them.”
The second part of the instrument is a 24-question Risk Profile questionnaire that helps evaluate clients’ cognitive abilities and how they go about making financial decisions. (Sample question: How often do you buy “as seen on TV” products; i.e., those that you see advertised on TV and available for only a limited time?) This information is crucial to determining whether the client is at risk for financial exploitation, and whether it would be helpful to have one or more co-decision-makers involved in his/her financial life.
The instrument also generates a “Financial Literacy Profile” that helps measure the client’s overall financial sophistication, on the theory that even a person with zero cognitive impairment might fall prey to a sophisticated financial scam. (Sample questions:
Agree or disagree: If you’re smart, it’s easy to pick individual company stocks that will generate higher-than-average returns.
Which of these typically provides the best financial returns in the long run?
- a) cash b)bonds c)stocks d) don’t know e) not sure.)
Once all questions are answered, the Risk Profile tool generates a score indicating the level of risk for financial exploitation, and a report that also contains a personalized “wealth protection plan.”
Some clients are advised not to take unsolicited telephone calls or open regular mail from people they don’t know—and throw away all solicitations for money from organizations they are not familiar with.
Is the client going through a major life change, which can generate temporary confusion and depression? The plan recommends taking a time out from making major financial decisions. Is the client prone to risk taking? The plan addresses the concept of avoiding risky financial behaviors.
Automated health expense planning
McClanahan says that the third Whealthcare component, the Long-Term Care Plan tool, has stimulated the most conversation between her and her own clients. “It goes through healthcare usage, healthcare costs, long-term care costs and living transitions,” she says. “And then it creates a plan that the client can give all family members, so they know exactly what is wanted. You want your clients to be thinking about these things, so it’s in their muscle memory when the time comes.”
The Long-Term Care Plan Tool starts with a 60-question questionnaire that asks clients about their expected living choices as they age, some questions about their current living arrangements (How close do you live to the nearest grocery stores and restaurants? What is the availability for interaction with others in your current living situation?), and what types of changes could or should be made to the existing home to make it more “aging-friendly.”
There are a few questions that assess the client’s overall lifestyle and health, and clients can accept the software’s estimate of expected lifespan or pick their own. There are questions about how often a client accesses the healthcare system: is this somebody who runs to the doctor at the first sign of a problem, or does this person have minimal contact with the healthcare resources?
Also: has the client has designated a health care surrogate and discussed wishes with that person? What are the client’s end-of life preferences? (Sample question:
As you age, what living choice is most appealing to you
I want to live in a traditional home or apartment until I die
I want to live in my current home as long as possible, and move to an assisted living facility or skilled care when it is no longer safe for me to live independently
I want to move to a community that provides for the needs of older individuals as they move through the aging process.)
The questionnaire creates a task list customized to the client. If the client wants to retire in a nursing facility or continuing care unit, then it’s time to explore which facilities would be ideal and what those costs will be. What kind of transportation services will be needed? How would the home need to be modified? What upkeep will you begin to outsource, and who will you hire to maintain the home in the future? What will the cost be?
Then the tool provides each client with a chart showing the future costs above age 65, year-by-year, in present and future dollars for health insurance and out-of-pocket expenses—based, in part, on the client’s current health and body mass index and a customized assessment of the client’s utilization of medical facilities.
This is more complicated than it sounds. The outputs are built around lifetime health expenditure statistics collected by EBRI—the Employee Benefit Research Institute. EBRI provides fairly limited data on individual healthcare costs, but McClanahan has been granted access to the full spectrum of the organization’s much more extensive database. Clients who appear, from the questionnaire, to be relatively healthy, and who report being low users of medical care (you know the type: the people who avoid going to the doctor or hospitals at all costs) will be given a total future healthcare cost that falls on the lower end of the EBRI spectrum.
If clients are unhealthy but avoid medical facilities, or if they’re healthy but run to the doctor with every complaint, then the instrument would estimate a future cost somewhere in the median EBRI range.
Unhealthy clients who are high users of medical care would get an estimated cost based on the 90th percentile of the EBRI data.
There’s a similar tactic behind Whealthcare’s long-term care cost calculation. “If they’re very healthy, then the calculator is going to give them the cost of five years of long-term care, because that’s the average need if somebody has dementia,” McClanahan explains. “If you’re in average health, it’s going to assume you need three years.” If you’re in poor health, the cost estimate will reflect two years in an LTC facility.
Of course, two or five years of long-term care will cost less in Topeka, Kansas than San Francisco, California. “We actually pull cost data from each region,” says McClanahan. “The instrument asks you where you plan to retire—what city and state—and pulls the numbers from that region.”
McClanahan says that the advisors who are currently using Whealthcare are realizing that their current plans don’t have a good estimate for future healthcare and long-term care expenses. “It really opens peoples’ eyes to how much these things cost,” she says. “And it opens up the planning conversation to, okay, let’s figure out: how are we going to pay for this?”
Interestingly, there is no analysis of long-term care insurance policies in the Whealthcare tool—and that, says McClanahan, was deliberate. “This is about creating the plan,” she says. “We leave it to the advisor and the client to come up with how to pay for it.”
Perhaps the biggest future healthcare cost savings come, interestingly, from an advanced directive document that Whealthcare produces based on clients’ answers to a series of end-of-life quality-of-life questions. The questionnaire asks clients whether, when they’re in a terminal stage of their lives, they want doctors to intercede and keep them alive at all costs if, for instance, they cannot communicate with others around them, or they can’t eat on their own, or are not aware of their surroundings.
“The biggest healthcare expenses in a person’s life come right at the end, when someone no longer has the quality of life they want, but the medical profession still drags it out, because everybody feels guilty doing otherwise,” explains McClanahan. “This document very clearly lays out the end of life wishes. If I have dementia and I no longer know who’s around me, or if I can’t swallow, or if I can’t communicate with others,” she says, “then if I develop even something as minor as pneumonia or a urinary tract infection, don’t treat me. Just make me as comfortable as possible and let me die in peace.”
Is that what people typically want? “I have not had a client yet who has said anything other than: When I get to the stage where I can’t do this or that basic thing, then let me die as peacefully as possible,” says McClanahan—which, of course, is exactly the opposite of what the medical profession does as a matter of default routine.
The Whealthcare tools take a truly overwhelming array of topics, in areas where financial planners have received zero training, and automate the data collection and analysis. But perhaps more importantly, they start conversations in topics that are extremely sensitive, where most advisors and clients fear to tread.
“The package has all the conversation starters on how to talk about these important issues,” says McClanahan. “We include email scripts and sample emails to introduce the topics to clients, and suggestions on how to talk about each section. Plus we make available my sample family agreements, incapacity letters and other documents, along with online training.”
And each output—each assessment that is shared with the client—includes links to a documents area which explains, for instance, the purpose of a living will or an explanation on giving up control over their finances.
How does this work in the real world? McClanahan tells the story of a client who has been managing his family finances for years. “One day, he called twice and asked me the same question,” she says. “We had already gone through the whole financial caretaking plan, so that was all in place,” she adds, “but now I had just developed the risk profile instrument. So I asked him to help me test the software.”
The cognitive assessment and potential for elder abuse module is color-coded: green means the client shows no sign of cognitive decline and seems to be astute enough not to be a victim of the Nigerian prince wanting to relocate his money in the U.S. or the kids needing to upgrade to a new Tesla.
Yellow means the advisor should probably do an in-person assessment and watch the money movements more closely, and red indicates real danger, when surrogate decision-makers should start taking over the finances.
“This particular client had yellows across the board,” says McClanahan. “So I talked with him and his wife, and I could see that it was a relief to him that we could tell and knew that he was struggling, and that we were going to help.”
McClanahan and the clients began implementing the plan that had already been put in place. The wife had never handled the finances, so during a transition period, the husband would continue to write the checks and pay the bills, but the wife would check them before they were sent out. She would balance the checkbook and read the credit card statements every month.”
“This way, he still maintains some control, and a sense of independence, but now the wife is looking over his shoulder,” says McClanahan. “They’ve decided, for now, that they’re not going to share their financial information with their children, because the wife’s profile is totally green right now. But we did meet with the family to tell them that we’re not sharing anything right now, but we are keeping a close eye on the situation. The husband and wife have given me permission,” McClanahan adds, “that if I get worried, I can talk to the children. So far, everything seems to be working as planned.”
The goal of Whealthcare is to take a major gray area of financial planning—planning for the final years of a client’s life—and make it as bright and clear as retirement planning. The package comes with administrative tools that help the advisor keep track of which clients have progressed through the analysis. Advisors can see their clients on a dashboard, which displays which clients have been sent links to which assessments, and which has or has not completed different parts of the plan. The system allows you to hit a button to send a link, and it asks which client or prompts you to create a new client.
Cost? You use all three tools for 50 clients for $995 a year, with enterprise pricing available. I recommend Whealthcare Planning as an adjunct to the traditional planning program for any advisor whose clients happen to be getting older.