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Old Money: Advisers Serving the Elderly

Working with elderly clients can be challenging, but by networking with the right contacts and involving clients' heirs, some advisers are developing a lucrative and self-feeding business-and fund companies that can provide them with retirement income products that rely on capital preservation rather than aggressive investments will come out the winners.

Jo Crumpacker, an Invest Financial Corp. representative at Boone County National Bank in Columbia, Mo., said that elderly people's needs typically include long-term care, income management and estate planning. While everyone has such needs, for the elderly, it's often different.

For example, when someone is over 75 and they don't have long-term-care insurance, it's tough to obtain-if they can even qualify. "Paying $30,000 per year in premiums is just too much for most people," said Drew Henrickson, a Primevest rep at Columbia State Bank in Tacoma. "Even if you can make the numbers work on paper, life gets in the way. If someone has $500,000 in home equity, that's their long-term-care policy."

Providing a lifetime income stream is also a challenge. Annuities might be an obvious-and suitable-solution for a younger client, but "after 70, we're looking pretty hard at the fit for a variable annuity," Crumpacker said. Financial Industry Regulatory Authority rules are strict about selling annuities that may not pay out for many years to elderly clients.

Advisers must meet financial goals with a judicious asset allocation. "They're not looking for big returns, but rather safety," Henrickson said. "If you do it right, your client won't need guaranteed products to survive down markets. Once a client is in her 80s, if she's hit hard by the economy, you really have to look yourself in the mirror as her adviser." He said advisers must err on the side of capital preservation over growth.

Perhaps the most striking difference in working with people over 75 is just how much more involved the relationship can be. "You're not just dealing with a financial need," said Neil Piper, an Invest rep at Sun National Bank in Vineland, N.J. "Advisers must understand seniors' social and health issues, too."

To better understand these issues, Piper, who works on the retiree-rich Jersey Shore, studied for certification from the Society of Certified Senior Advisors in Denver, which included a three-day training session and exam.

Advisers need to realize that there are plenty of people better qualified to provide social and healthcare support, said Ray Ferrara, president and CEO of ProVise Management Group in Clearwater, Fla. "The best thing to do is to find community organizations that help elderly people stay on top of bills, fill in Medicare forms and drive them to the store. It takes time and commitment to build relationships with these organizations, but since most advisers don't bother, it's an opportunity to become someone who gets people connected, and that's always a great referral source."

Alzheimer's disease can be a huge problem, putting advisers at risk of losing assets or lawsuits from heirs if they don't ensure every client decision is documented. "I had a client in the other day asking repetitive questions, and I have to ask whether he can truly, actively engage in a financial relationship," Piper said. "It's hard to call his wife and say her husband may have Alzheimer's, but you can't ignore it."

Preparation makes things easier on everybody. "My discussion with clients involves preparing for the unexpected," Ferrara said.

Henrickson said, "As their friends start having hearts attacks and strokes, they're more open to that kind of conversation. You say, 'You're healthy now, but it's better to plan ahead because when your memory goes, it goes very quickly.' Then you mention the need for a co-trustee, who could be a trustworthy relative or an attorney. Start this before your client starts to lose their memory."

Ferrara said it can be important to arrange for a son or a daughter to come to a client's next appointment. After that meeting, ask the client to write or at least sign a letter authorizing to contact the children independently and to copy the child on documents and statements. "You have to ease clients into this," he said. "But if you ignore it, it's soon too late."

Advisers also must talk to clients about consolidating assets and other services.

"I always warn people at a certain age that it's important to get all their assets in one place, whether it's with me or not," Henrickson said. "It's very complicated to sort out otherwise for whomever is the executor. I also advise clients to turn over paying bills to someone else. It gets confusing for an older person to pay 10 or 15 bills per month, and there's no reason to when we have a private banking office."

The three must-haves of estate planning for an adviser are to make sure clients sign the power of attorney authorizing a third party to act on behalf of a person in case he or she becomes incapacitated; a healthcare proxy appointing a person to make healthcare decisions if the client cannot; and a living will stating what healthcare decisions you want made if you are incapacitated.

A majority of people over 65 are women, according to the U.S. Census Bureau. Ferrara recommends that reps meet with both spouses. This can also help keep children as clients.

Including children in estate planning conversations can help retain clients as well. But what truly differentiates advisers working with older people is their willingness to go the extra mile.

Working with older clients is more time-consuming than working with people at retirement age, but advisers who do it say that the rewards outweigh the burdens. And older customers served well will tell their friends, Henrickson said.


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