I wouldn't be the first to suggest that people with disabilities or special needs require a greater degree of attention-at least when it comes to financial planning for them and their families. But disabled or not, every client has "special" needs. I offer you a story-a kind of cautionary tale-to illustrate this truth. I hope the experience of one family will inform-and broaden-your definition of financial planning and the ways you craft your approach with clients and prospects, whether or not they are dealing with disability.
A CAUTIONARY TALE
My wife and I enjoy volunteering at the Perkins School for the Blind in Watertown, Mass., just west of Boston. Since our son is visually impaired, I often get involved in conversations with school families regarding disability planning. This past summer, we met a family who told a story of financial miscues that will almost certainly cost their legally blind son a lifetime of financial hardship. The story has weighed on my mind, and I wish there were some way to alter the ending.
The family, working with an investment professional, had done what they believed was in their son's best interest. They had invested money for him, which had been given to them by his grandparents. They had even employed their son in the family business, encouraging him to save money and acquire some confidence-building independence. So far, so good, right?
Not quite. When the young man reached the age of majority, he applied for Medicaid and Social Security disability insurance. But, even though he met the state's definition of an individual with a disability, his savings and earned income disqualified him from receiving benefits. In the ensuing months, his family spent significant time and money to appeal the decision-pleading for an exception-to no avail.
What an unfortunate irony. Helping the son earn several thousand dollars to fund his future actually deprived him of hundreds of thousands of dollars of financial support over his lifetime.
I can only imagine the finger pointing that went on in the household and among their financial professionals. While perhaps everyone shares some responsibility, we can all learn from this example.
THE CHALLENGE
If you probe your own client or prospect base, you will likely discover that quite a few of them have someone with a disability to consider-if not a child, then an aging family member. But do you include a question about special needs or disabilities on your client intake form? Do you ask whether a new client may become guardian to a special-needs parent or child? When you do uncover a need, do you know what further questions to ask? Or do you assume that all you have to do is refer the client to an attorney to draft a special-needs trust?
Let me back up a little and share some facts about special needs. According to U.S. Census Bureau statistics from 2005, 35 million Americans have been diagnosed with a severe disability. That means one in nine Americans-a group roughly the size of the combined populations of California and Florida-has or has had a serious physical impairment.
Sheer probability tells you that you have or will have clients affected by disability. And as our population ages, instances of disability will only increase. As a financial planner, how will you address the needs of this growing client segment? Do you have a plan in place?
THE QUESTIONNAIRE
Although some advisors believe that too much information can be counterproductive in initial client meetings, asking enough of the right questions at the start can serve as the foundation for a client's entire financial plan. With the benefit of hindsight, we can see how the chain of events unfolded in this specific story. But what exactly went wrong?
Did the clients mention to the advisors that their goal was to accept government aid for their son? Is it the advisor's responsibility to know all the types of public and private resources available? Was the advisor made aware of the son's employment in the family business? Was it the advisor's responsibility to ask? Imagine the difference that sharing more information might have made to the outcome.
Advisors can serve clients with special-needs concerns by offering a framework from which to proceed, including the range of choices and resources available to them. Regardless of how many disabled clients you may work with today, I encourage you to craft a questionnaire to assist you in understanding the whole situation from the start, should such a client appear.
I've created my list of questions from multiple sources and personal experience, segmenting it into six categories. Like all questionnaires and intake forms, this one aims ultimately to foster the continual flow of information and discussion.
* Nature of the issues. Briefly describe the nature, extent and prognosis of the disability or disabilities. What is the disabled person's long-term prognosis? To what degree can or will the individual be able to function without a parent? Also ask if the individual has independent decision-making capacity? If not, who will handle routine affairs? Has a guardian been named in the event of the client's incapacity or death? Finally, what are the client's main concerns about this individual's personal care, lifestyle or future needs?
* Goals and finances of the individual. Determine the short- and long-term goals for this individual. Is the individual able and willing to be employed? If yes, what is the estimated earning potential? Does the individual have independent assets? If yes, what type and amount? Ask whether the individual is the beneficiary of any trust, IRA, life insurance policy or other asset. Is additional financial assistance being provided by family or other sources? If yes, in what amount and frequency?
* The client's financial picture. Ask the client to briefly describe the assets he or she has saved to support this individual. What has the client done to invest and protect those assets? Try to determine the total annual costs for providing adequate care for this individual. Is residential care needed, and if so, what will the annual cost be? Is the client expecting to pay for lifetime support? Medical care? Room and board? Finally, ask who else the client is or will be supporting. What are the monthly or annual dollar needs for those people?
* Continuation of care. Find out what backup plans the client has for custodial care. Does he or she have an additional backup person (or people) to step in should the original choice die, become disabled, move, suffer financial problems or for any other reason become unable to serve as backup? Ask whether the family or guardian has executed estate planning documents to ensure uninterrupted and ongoing guardianship and stewardship of the person's care and assets? Has the family or guardian designated successors who can assume responsibility for care? How will guardianship affect the finances of the person the client has named in his or her will?
* Family dynamics. Determine whether the family has discussed the financial-and emotional-impact of caring for a disabled individual. If the client is caring for children, how challenging will it be to take financial resources away from those children to fund another disabled individual, like a parent? Does the client anticipate difficult conversations? Has he or she already discussed these issues with the family? Determine what distinct resources any other (able) children have, either their own or set aside by the client. Finally, ask whether your client has a supportive family member or other people to help him or her shoulder the challenges of providing care.
* Government and local support. Is your client aware of all the resources available through the government or local agencies? Which resources have he or she used or anticipates using? Is one of your client's goals to maximize the receipt of government and local benefits for the disabled individual? If yes, what are the monetary expectations for benefits? Also, ask your client whether he or she is aware of any local support groups catering to people who are caring for a disabled individual. Is your client involved in any of these groups? Finally, make sure there aren't any other issues or concerns that remain unaddressed.
BEYOND DISABILITY
Financial planning is not about creating a plan on paper and then directing clients about what to do to pursue success within the plan. Financial planning is about maximizing choice for the client on an ongoing basis. This is true for any client, with or without a disability in the picture.
The current economic environment is diminishing the options, opportunities and chances of success for many different types of families. Social and family dynamics are becoming more complex-and with them, your role in clients' financial and personal decisions. Indeed, you may be the only individual who can help your clients achieve the best results. That help begins with information. It's important to be sure that nothing falls through the cracks.
Although this may sound like basic information, the takeaway here is to review how you extract information from clients and use it as the basis for avoiding serious financial mistakes as you steer toward goals together. You should feel comfortable suggesting that clients invest their time and resources to acquire the information you need to pull together a comprehensive plan. Encourage them to truly engage in the process.
I have observed over the years that advisors position themselves as masters of providing solutions-with products or concepts. As many of you prepare for year-end client reviews, spend some time mastering the questions that will help you learn as much as you can about your clients. That way you can provide a variety of effective solutions for their unique circumstances.
Scott Schutte is the vice president of financial planning and risk management at Commonwealth Financial Network, a registered investment advisor, in Waltham, Mass. He can be reached at sschutte@commonwealth.
