Financial advisor Eric Aanes refers clients to yoga, water aerobics and his practice’s health insurance, but he says he struggles to show them exactly how much they could save if they make healthy choices.
“It would be tremendously useful. It would be part of every appointment. I just don’t know where to get that data,” says Aanes, the founder of Northern California-based Titus Wealth Management.
A joint venture between HealthView Services, a data provider for financial firms, and Mercy, a major hospital network, might fill that void. The firms launched HealthyCapital this week, and the new firm released a report tracking savings from behavior such as exercise, treatment compliance and nutrition.
Experts like Carolyn McClanahan, a CFP and physician, point out the need to include health care in clients’ financial plans, but that's easier said than done. According to The Centers for Medicare & Medicaid Services, health spending is on pace to grow at an average rate of 5.6% per year.
HealthyCapital’s data comes from HealthView’s database of 70 million patient cases and other sources, says CEO Ron Mastrogiovanni, who started in the financial services as an asset manager at an RIA. The new firm will work with individual advisors of all kinds, 401(k) managers and broker-dealers.
“If I’m a financial advisor, I’m not going to want to compete on a money management basis. It’s worth the additional fee over having a robot manage your assets,” Mastrogiovanni says. “We’re going to provide advisors with a tool that increases the value of their practice.”
Advisors who buy the tool will gain access to health care spending projections for any of their clients by entering the specific health profile into HealthyCapital’s website. Advisors can then show clients how much they’re on pace to spend before and after their retirement, along with the potential savings.
Clients can cut tens of thousands of dollars in costs and invest them for the long haul if they live up to what HealthyCapital refers to as “well-managed care.” The practices include stopping smoking, taking prescribed medication, limiting salt in diets and exercising for a half-hour, five days a week.
If a 45-year-old man who has had high blood pressure for five years adopts such behavior, he’ll save $1,192 per year that year and $6,592 per year by the time he’s 64, according to HealthyCapital. Between pre-retirement and in-retirement, he could amass total savings of more than $89,000, the firm says.
Taking the U.S. diabetes rate of roughly 9%, HealthyCapital predicts that a company with 10,000 workers could see annual savings of $1.9 million. Such forecasts, however, often fail to take into account a dysfunctional system, along with geography, individual conditions and prices, McClanahan says.
“Providing information on how people can be better patients and take better care of themselves is useful,” says McClanahan, a Financial Planning contributing writer and the director of planning for Life Planning Partners in Jacksonville, Florida. “To me, the whole financial planning industry is doing it wrong in that they’re trying to predict a future that can’t be predicted.”
Mastrogiovanni didn’t dispute that the firm’s modeling could be off down the line. Since the health care inflation rate usually remains about two times the overall rate, though, the predictions should turn out to be conservative, he says.
“If we’re wrong, we’re going to be wrong on the low side,” Mastrogiovanni says. He also notes an ongoing trend making clients more responsible for the costs of health care and health insurance.
The latter represents a major factor in income between the ages 60 and 65, Aanes notes. He operates out of a Marin County, California, office across the street from a yoga studio, where he often sends clients. For obese clients, he recommends starting out with less strenuous exercise like water aerobics.
His firms’ health insurance services do not make the practice very much profit, but they do help with providing comprehensive planning to clients, according to Aanes. Advisors, though, sometimes struggle to discuss clients’ medical history with them, he says.
“You have to be cautious about how you broach the subject to clients and make sure that they’re comfortable and that you’re not asking too many questions,” Aanes says.
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