Private Wealth Manager – Planning for Wealth and Health

What is the Connection Between Wealth and Health?

This article will discuss why a private wealth manager should get involved in the health of his clients. We will also discuss what a private wealth manager should look for in a strategic health partner. The relationship between wealth and health is on a gradient: at every level of the economic ladder, health status shifts. The greater one’s income, the lower their likelihood is of disease or premature death. The lower one’s income, the higher the likelihood is of medical problems.

Apart from income, one’s overall wealth status including their net worth and assets also affects health. The relationship between health and wealth shifts according to the income scale. While middle-class American’s and even wealthy Americans might be very healthy, they will still be less healthy than people with higher incomes.

This relationship operates in a cycle: the more money you have, the better the health services you can afford, and the healthier you will be. The healthier you are, the more you will be able to seek out further income opportunities, and the more income you will be able to make.

The Disparity in Health Outcomes

Research shows that low-income adults are five times as likely to report being in fair or poor health.1 They are three times as likely to be limited in their activity due to chronic illness, and have higher rates of heart disease, diabetes, stroke, and other chronic disorders, than wealthier Americans.¹

The National Center for Health Statistics (NCHS) and the Center for Disease Control and Prevention (CDC) conducted a National Health Interview Survey in 2018.² This survey provides valuable information about the relationship between income and health status.

Family Incomes and Health

$35,000 Per Year	Over $100,000 Per Year
28% described being in good health	45% described being in excellent health
13% described being in fair health	35% described being in very good health
5% described being in poor health	0.7% described being in poor health

Between these two extremes, the health status reflects the gradient. The higher your income, the more likely you are to have excellent or very good health.²

Delaying Medical Care Because of Costs

The National Health Interview Survey also identified the number of people who did not receive medical care due to cost or delayed seeking medical care due to cost. Amongst those making less than $35,000 a year, 23.1% reported not receiving or delaying seeking medical care due to cost. Only 4.3% of those making $100,000 or more reported not receiving or delaying seeking medical care due to cost.²

Rising Costs are Thrusting the Private Wealth Manager into Health Care

Health care costs are rising in the U.S. and people at all income levels are concerned. The Centers for Medicare and Medicaid Services (CMS) has projected that overall health care costs will grow from $3.5 trillion in 2017 to $6 trillion in 2027.³

The CMS predicted that health care spending will grow faster than the economy, increasing from 17.9% of the gross domestic product in 2017 to 19.4% of GDP in 2027.³

The Costs of Aging

There are two reasons that health care costs are increasing: the first is the aging population and the second is the increase in health care prices. While annual income growth grew by 1.3% from 2012-2017, CMS predicted that health care prices would grow at an average annual rate of 2.5%.² This means that health care prices are steadily growing and as they grow, individuals have to take on a bigger responsibility for health care costs, particularly those who have retired and no longer receive health benefits from their employer.

Baby Boomer Health Care

Baby boomers are particularly concerned as they are going to be entering retirement and old age soon and will likely need increasing health services. Data shows that individuals over the age of 65 spend on average three times as much on health care than the average working-age individual.³ According to the U.S. Department of Health and Human Services, approximately 70% of people turning 65 will need some form of long-term care services in their remaining years.⁴ Additionally, the average cost of one year in a private room in a nursing home is $100,000 and is projected to reach over $176,000 in the next 20 years.⁴

80% are Concerned with Health Care Costs

According to the Royal Bank of Canada (RBC) Wealth Management division in the U.S., 80% of people are concerned about funding the cost of health care.⁵ Only 56% of people have factored the cost of care into their wealth management plan and 50% of those with a health care and wealth management plan are likely underestimating costs.⁵

According to Morgan Stanley, 53% of affluent, older Americans aren’t accurately estimating their future annual health care costs and 65% can’t estimate what their long-term care costs in retirement will be.⁴ This is why it is imperative for wealth management planning to include health care planning and retirement planning that accurately reflects the reality of health care costs.

Predicting Health Care Costs

According to experts at RBC, at age 65 and older, the annual amount that a healthy person will spend on health care is $5,700 ($11,400 for a married couple).⁵ An average retired couple aged 65 in 2018 will need approximately $280,000 in after-tax savings to cover health-care costs throughout retirement.⁵ Should either of them encounter serious health issues, the cost will be even higher.⁴ So how does one budget for the unknown? It is extremely difficult, and that is where private wealth managers come in, and which is why integrating wealth management and health care is so important. Even amongst the wealthy, about two-thirds of high-net-worth individuals are concerned about the costs of health care and how this will negatively affect their retirement.⁶

How Can a Private Wealth Manager Integrate Health Care Planning?

Because health care is a large expense for so many people, it is important to factor in health care when managing your wealth and planning your future. For many people, planning for retirement and the potential of unforeseen health expenses can be difficult. Once you’ve left the workforce and no longer have health benefits provided by your employer, it can be hard to make informed decisions about your future and integrate health planning into your financial planning.

Paying for Nursing Home Costs

While the integration of health care planning and wealth management is still fairly new, both industries are recognizing a need for addressing health care in wealth management strategies. Examples of this include reverse mortgages to finance nursing-home costs, agreements that allow individuals to borrow money from their life insurance policies to cover medical costs or generating income from annuities.

Fewer Employers Provide Comprehensive Health Care Plans

While traditionally, health care has been the responsibility of your employer, there is an increasing need for employees to take on more responsibility for their health needs, particularly for retirement. Some options that integrate health care and financial planning include:⁷

Debit cards for out-of-pocket medical payments that include rewards programs
Credit cards that have health records electronically embedded to make the process of seeking medical care and paying for it or submitting an insurance claim much easier
Health plan credit-cards with health-related reward programs
Tax-advantaged savings plans designed specifically for unplanned medical expenses such as heart transplant or emergency surgery
Specific loans to cover out-of-pocket medical expenses and elective procedures
Health benefit packages for retirement
Life insurance that is flexible and can be used as health insurance, long-term insurance, and a death benefit
Tools that help provide consumers with health advice, calculate costs, ensure the quality of the provider and the procedures, etc.

The Alliance Between a Private Wealth Manager and a Health Care Provider

Many large and influential brokerages such as Morgan Stanley, Merrill Lynch, Suntrust, Northern Trust, and Wells Fargo offer some type of health care advisory services.6 Typically, when these services are offered, your brokerage or private wealth manager will partner with a health care provider or health care advisory firm to offer their clients the best services possible.

Real-World Example

So how does this work? Let’s take John Waldron, a financial advisor and CEO of Waldron Private Wealth, a boutique financial advisory firm, as an example.⁶

Holistic Wellbeing

For Waldron, when he works with clients he takes a holistic approach to their financial wellbeing. If his client has medical issues or foresees having medical issues, Waldron forms strategic alliances with health care providers that allow his clients to have a third-party that is focusing on their health and their health only. From gathering medical records to identifying the best specialists and best care in the area, the health advisory service has the clients personalized needs as a top priority.

Advantages of Wealth Management and Health Care Integration

There are many advantages to a private wealth manager taking an active role in their client’s health care. For starters, the benefits to the client themselves are fairly obvious: with the help of their private wealth manager, clients gain access to a bespoke service health care partner. In other words, the client receives a third-party team that advocates for their health, finds the best specialists in the field and in the area, consolidates records, helps them to navigate their health options, and provides them with quick access to health care services that they might not otherwise have had and more.

Creating a Realistic Wealth Management Plan

For a private wealth manager, there are also benefits to creating strategic partnerships with health care services. First, understanding that health and rising health care costs are a growing concern for Americans will help a private wealth manager to create a realistic wealth management plan and retirement plan for a client. To ensure complete coverage, it is important to factor health care into any form of wealth management strategy.

Additionally, while financial advisory firms will typically approach health advisors, health advisors will help to educate financial advisors on the benefits of a well-established health care plan. All in all, it’s a win-win situation for the client, the private wealth manager, and the health care advisory service.

Mutually Beneficial Partnership

The client receives individualized, bespoke-style health care, and private wealth managers and health care advisories benefit from their partnership. On an even grander scale, when people plan for their future health needs and are proactive about their health, they are more likely to remain healthy and therefore the health care costs of the country go down. In other words, the healthier you are, the less health care you require, and the lower the demands on the health care system will be. Healthier people are also able to contribute more to the economy and preventative health care can ensure more people stay healthy for longer.

What Should a Private Wealth Manager Look for in a Health Care Partner?

A private wealth manager should look for a health care advisory service that offers the highest quality of medical care and advice. Based on the services that are offered by health care service companies such as J. Flowers Health Institute and other top health care partners, these are some of the qualities that a private wealth manager should look for in a health care partner:

Bespoke services
Comprehensive evaluations
Luxury facilities
Care coordinations services
Clinical integration
Partnership developing
Policy advisory
Fast access to medical services
Access to top specialists/fast referrals
Access to expert medical opinions
Universal medical records