Planning for aged care

Nobody needs reminding about our ageing population. The baby boomers are hitting retirement age and as we all live to increasingly ripe ages, people are staying in that stage of life for longer.

A natural consequence of this is that more people will be needing aged care.

It’s also a contentious issue in terms of the quality of care received and the underlying structure of the system. The Federal Opposition Leader Bill Shorten promised scrutiny of the industry should he win Government.

There’s a plethora of decisions that financial planners advise on that go into aged care; what care should I get? How can I pay for it? How will that impact my income?

Why, then, are financial planning offerings in this area so limited? And why aren’t people turning to them for help?

Can we help?

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To start, what can planners actually offer clients in this area?

Louise Biti, co-founder and director of Aged Care Steps, a provider of aged care support to advisers, says there are three key areas in which planners could help.

Firstly, they can offer assistance with the initial care decision, giving “advice on manoeuvring through the system to get the right care offer”.

Advisers could help negotiate better deals with the aged care providers, Biti says.

They could, according to Challenger technical services manager, Sean Howard, work out ways of payment that mean that better rooms are available even to those on smaller incomes.

As lump sum payments of aged care costs are not calculated in Centrelink assessments, he says, expensive rooms may actually end up costing less than they seem as a higher lump sum payment could lead to higher rates of the Aged Pension.

Secondly, Biti says that planners can help manage cash flow, as “the most important issue is how do people going into aged care, through their own resources as much as possible, fund that care and that cash flow”.

A lot of this revolves around maximising Centrelink eligibility.

A financial adviser at Adelaide Aged Care Financial Advisers, Carmela La Starza, says the simplest way to get Centrelink if you have assets that take you over the pension limit is by paying the refundable accommodation deposit (RAD) or lump sum payment for aged care rather than daily fees.

There are also products that can help maximise Centrelink, such as Challenger’s CarePlus annuity. According to La Starza, this market is small, with Challenger’s being “really the only one I know of on the market that’s treated well from a Centrelink perspective and has a flow-on effect for aged care fees”.

Howard says that using the CarePlus annuity usually at least halves the investor’s assessable income from the product for Centrelink purposes as it has a deductible amount.

It’s worth noting that aged care advice should not be as product-focused as most other financial planning. As Australian Unity Trustees national manager of estate planning, Anna Hacker, observes, the end result “is not a product but more like a lifestyle”.

“The problem is to date planners have focused way too much on product solutions, and so they don’t realise that all the rest of the strategy,” Biti warns. “Whereas with aged care, there [are] very few opportunities for product, it’s all strategy and then occasionally some product comes up that may help to factor in for the clients.”

Part of managing cash flow could involve making a decision about selling (or not) the family home, which Howard says could underscore capacity both for aged care funding and other investments.

Thirdly, Biti believes that planners should be helping clients look at the implications of aged care.

“So, what else can we do to maximise the estate and minimise the costs associated with the aged care contribution?” she says.

Planning for the unknown

A problem inherent to planning for aged care is that it is just so unknown when and even if a client will need it.

As Howard observes, you both don’t know how far away the point at which you will need that investment ability is or how much rules and regulations will have changed by then.

The challenge for advisers then, is balancing the need to prepare for the possibility of aged care with maintaining flexibility in the overall financial plan.

“Retirement is something that people can plan for a long time, [but] aged care often comes along quite suddenly,” Hacker says.

“People [often] have not planned for it. They are in hospital, they’ve had a fall or something, and they need to get into care straight away.”

Advisers for clients of a certain age need to be factoring this in and anticipating what that plan would look like, “because you’d hate to set something up that would then impact on someone’s ability to enter an aged care facility, because it’s often an urgent thing”.

As time is of the essence – data from the Department of Health shows that the median elapsed time from approval to admission for aged care was 105 days – having a plan made in advance is also useful.

Part of advance planning for the unknown should involve getting people’s children, or other trusted carers, involved in the planning process.

As people may have lost capacity for a while before going into aged care, planners could be dealing with those who have been assigned power of attorney rather than the client themselves, Hacker says.

If they already know the people that is likely to be, that could help ensure that a plan which is in the client’s best interests is followed, which Hacker warns sadly doesn’t always happen when attorneys are making decisions.

She says that good planning for aged care is about not just structuring assets, but also making sure people are in place who the client thinks will act in her or his best interests.

Back to school

For those wanting to offer quality aged care advice, some further training or education may be necessary.

“You need that specialist aged care training,” La Starza said, pointing to the need for deep knowledge of Centrelink and the Department of Veterans’ Affairs (DVA) as proof.

She says that while advisers could just look at the Government’s My Aged Care website for information, it wouldn’t help in more complicated cases such as with low means or partially supported clients.

Some of this knowledge could come from paraplanners, which Biti believes could play a substantial role in the provision of specialist aged care advice.

“Insourcing the support services such as paraplanners who specialise in aged care or bringing resources into your business such as marketing support, plan writing support, [means] that you can give advice to those clients without needing to be a specialist,” she says.

More than just book-learning is needed too.

“If I was a newbie and all I wanted to do was aged care, and you didn’t know anything else, I think you may miss out on some strategy and overlook some stuff, and that’s experience as well,” La Starza said.

Biti believes that there needs to be more emphasis on these soft skills in aged care, especially considering the inherently emotional quality of much of the work.

“With all the education that’s out there, there’s not enough around the skills,” she says. “When you’re doing strategy, you’re helping families in crisis make sensible choices. A lot of skills as a planner are those soft skills, the ability to empathise and understand and [apply] ethics.”

Getting the word out

Of course, it doesn’t matter whether planners can offer aged care advice if clients aren’t turning to them for it.

This is partially because not enough people are thinking about it.

According to Investment Trends’ 2017 Retirement Income Report, only one third of Australians have looked for aged care information or intend to in the future. Of that third, just 10 per cent look to planners for help, with most instead turning to government services, doctors or family.

While older Australians are much more concerned – the report found it was one of the top advice needs for retirees – they still only often show concern once it is too late.

It’s also due to limited aged care services offerings by planners.

Investment Trends’ 2017 Retirement Planner Report showed that over the last few years 60 per cent of planners could and did provide aged care advice, while 80 per cent wanted to.

While only six per cent of clients got aged care advice from their planners last year, planners would like to be talking to 15 per cent of clients about it in three years.

Investment Trends research director, Recep Peker, says, however, that “for planners, aged care is an area where they’ve been intending to increase their provision of advice for a long time, but they haven’t gotten there”.

Part of what planners can do to improve their aged care advice provision is just talk about it with clients to get that awareness up.

La Starza says that these conversations can occur at review meetings, noting that pre-retiree clients tend to talk about the Aged Pension already.

She also focuses the extra conversations on goals. Planners could talk about investing in terms of setting aside money for immediate and ongoing needs, then “another bucket of funds” for if aged care is needed.

Peker suggests talking to clients about their parents’ aged care needs; as about 50 per cent of people say they will turn to their children or grandchildren for help with living activities as they age, it makes sense to be talking to them about their parents’ plans.

Biti cites writing about aged care in business’ newsletters as a further way of promoting capacity in that area, while La Starza says her own firm talks about it in market updates.

Even little things can help get the word out. La Starza has her aged care specialisation qualification hanging in her office.

“People see it in the room and then ask about that service,” she says.