Recently, I stumbled upon a post on LinkedIn by a CFP who was advocating for self-funding and bypassing an insured long term care plan.
As you would expect, long term care insurance professionals reacted loudly to the statement. And, I wholeheartedly agree. An insured long term care plan is the prudent thing to do – every time. It provides leverage and a semblance of control during a difficult time for the client and their family.
Let’s just say that the author suggested that his client with $2.5 million in assets had more than enough money to accept a self-funding strategy.
There are a million reasons why the self-funding strategy is flawed. And, frankly, arguing with the advisor does nothing to change his mind. For one reason or another, he believes that a leveraged strategy is not necessary.
So, let’s assume that any argument that we might make about how foolish the self-funding strategy my be will fall on deaf ears. How can we help improve the situation for his client.
Here is a path that I would think might be beneficial. Let’s ask the following questions:
Assuming one of your clients need care, who would take care of them?
This would lead to a string of questions. Ultimately, we want to know what their (the clients) plan is.
Of course, the follow-up will be and how will they pay for that?
This would ultimately lead to the question – “what order of liquidation would you follow?” and “do you have written instructions?”
My point isn’t to persecute someone for their bias against a leveraged (insured) plan. My objective is to help them understand the consequences of their recommendations. So, I will continue to ask the questions about how the self-funding strategy will play out.
OneAmerica Financial has developed a simple planning worksheet to help lead this discussion – check it out.
The advisor’s optimism about managing the assets and securing solid returns are likely flawed, but that is my opinion.
What happened to assets under management in 2008 or when the market corrected in 2020?
The answer is found in this article that I grabbed online.
How long did that take to recover?
In 2008, the recovery took 2 years to recover. In 2020, the recovery was a bit quicker.
What would happen if there was an extended care event that happened during a down cycle like we had in 2020 or 2008?
We all know the answer. A downturn would disrupt everything, when coupled with an unplanned and forced liquidation of assets to pay for a care event, there may be no recovery.
Can I show you a way to insulate a small portion of the income producing assets?
There are several paths of leverage. Since the advisor is anti-insurance / anti-leverage and has indicated that he is pro-market performance, I might suggest leveraging a portion (if there is annuity money available) into a base-only Indexed Annuity Care where the underwriting is 5 simple questions on the application.
If they’re will to undergo a bit more underwriting, repositioning money into either Asset Care or an Annuity Care II solution might be an alternative.
You see, there are a million ways to fund a solution. We need to know more information about what is at play.
So, rather than pounding on the foolishness of self-funding – considering the consequences and finding an available asset might be a good path.
Learn more strategies? Contact one of my internal sales partners Justin Fox at (844) 658-3725 or justinfox.isp@oneamerica.com or Nick Angelov at (844) 623-4251 or nick.angelov.isp@oneamerica.com
Fridays with Fisher 