Wednesday, October 21, 2015

Long Term Care Insurance Discussion Avoided by Advisers

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Long term care is considered as a pressing need nowadays. Despite the urgency to prepare for this, advisers opt to divert their attention to other components of retirement planning. This is perplexing and at the same time alarming since the number of people who need long term care is growing.

According to a study called “Managing Long-Term Care Risk,” conducted by Lincoln Financial Group, 40% of consumers have talked about long term care with their advisers but only 10% has recommended getting long term care insurance or other long term care products.

So what’s the reason behind the behavior of advisers?

I will quote Mr. Bucklee in order to answer this. According to him, “There’s a bit of disconnect between the adviser and the client.” And he goes on saying, “You’ve got a client who has concern about it and an adviser who’s scared of talking about it.”

The fear of advisers is rooted in their confusion when deciding the best course of action for their client’s long term care plan, including choosing between a traditional long term care insurance policy and hybrid long term care policy. This is still Mr. Bucklee’s opinion.

Jesse Slome, the executive director of AALTCI has something to say too. According to him, advisers are more comfortable discussing hybrid policies because the conversation is much simpler and easier to present to clients. And because of this favoritism, the market for hybrid policies flourished. The gross premiums swelled from $632 million of gross premiums in 2008 to $2.41 billion as of the last quarter of 2014.

But for Peter Gaines, a financial planner at Integrated Financial Partners, complexity shouldn’t be used an excuse. He said that, “Compared to other products we offer our clients, in my opinion, long-term care is a lot easier to understand once you get into it than some of the other products we sell. I don't accept [complexity] as a good reason why advisers aren't recommending it to their clients.” He continues by saying, “To me that doesn’t hold any whatsoever.”

His argument continues by stating an example, that selling variable annuities is more complex than ltc insurance. They will need insurance license and securities in order to sell the former while the latter only requires insurance license.


He also said something about “highly unprofessional” practice of advisers paid on AUM. This is another reason why advisers shy away from discussing long term care because long term care contracts don’t boost AUM. If this is true, then this is really unprofessional and unfair practice.

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