A Fiduciary Approach for Clients Who Need Long-Term Services and Supports

Journal of Financial Planning: November 2017


The rising financial cost of long-term care in the United States is widely understood. The enormous personal challenge for family caregivers is also well documented. More than two-thirds of 65-year-olds will need assistance planning for a possible period of care at some point, according to a 2013 Congressional Budget Office report.

Although most financial planners know that families will need help, many do not explore long-term services and supports (LTSS) planning beyond an analysis of long-term care insurance needs. Furthermore, many planners have little or no training in advising families through a current period of care. Clearly, this is a gap in productive areas of financial advice, especially given that, after Medicaid, the largest payer of LTSS costs is out-of-pocket spending from household financial resources, according to 2012 data reported by the National Health Policy Forum. This reality demands a higher standard of financial advice.

This article builds on research and knowledge from the medical, caregiving, and financial professions to provide guidance on working with clients navigating periods of care. Middle- and upper-middle-class seniors who do not qualify for Medicaid and must pay for LTSS out of pocket are a viable market for financial advisory services. A fiduciary approach is introduced to help planners become more adaptive, sensitive, and effective in providing expert financial advice and planning for families during a particularly vulnerable stage of life.

Defining LTSS

Terminology for caregiving services has changed in recent years. For some, long-term care is associated only with insurance; others see a more general application. The acronym LTSS has gained wider use, particularly after the Affordable Care Act in 2010, and it is used here to avoid confusing caregiving and insurance concepts.

Need for LTSS is generally measured by an individual’s need for assistance with specific activities of daily living (ADLs), including bathing, going to the bathroom, dressing, eating, and transferring (moving in or out of a bed or a wheelchair). A person who is cognitively impaired may also need LTSS. Many long-term care insurance policies provide benefits if an individual needs help with two ADLs. According to IRS Publication 502, care expenses are deductible for people who require substantial supervision and/or need help with at least two ADLs for at least 90 days.

However, before qualifying for medical care, individuals may need both financial and practical assistance. To successfully live independently a person should also be able to accomplish instrumental activities of daily living (IADLs), which include managing finances, handling transportation, shopping, preparing meals, using the telephone, managing medications, and doing basic housework. Difficulty with IADLs commonly appears in the early stages of dementia.1 Paying to get some of these tasks done creates an additional financial burden. A doctor or other care professional should assess a client’s ability to carry out ADLs and IADLs, and this information should be used in preparing the financial plan.

Estimating Costs

Costs for broad categories of LTSS are shown in the Table on this page. Unfortunately, the assumptions in the table are incomplete, because costs vary widely across the United States.

As Howard Gleckman, senior fellow at the Urban Institute and author of Caring for Our Parents, pointed out in a personal communication earlier this year: “Often, estimates of duration and cost of care reflect expenses only after a care recipient reaches a HIPAA level of need [level defined in the Health Insurance Portability and Accountability Act of 1996]. In reality, however, families often incur significant costs for many years prior to that. In addition, calculating only out-of-pocket costs for paid assistance ignores the high economic, physical, and financial burden on family caregivers, who provide an estimated 80 percent of the care for their parents, siblings, or spouses.”

The difficulty of estimating costs is compounded by the impossibility of knowing before a diagnosis (and sometimes after) how much help will be needed. However, basic information about the average duration of services can inform financial planning. According to the U.S. Department of Health and Human Services, on average, a person may use any type of service for three years. Home care may be needed for two years, and assisted living or nursing care for approximately one year each. Nearly 20 percent of people age 65 and older may need some type of long-term support for five years or more.2

When Can Planners Help?

Financial planners working with clients who are facing or are already in the midst of a period of care should advise these clients to get diagnoses and clinical and therapeutic treatments from informed professionals in the medical and caregiving fields as soon as possible. Planners should not recommend LTSS until this information is available.

Because the quantity and complexity of medical information can be overwhelming, best practices in the medical community now recommend that patients turn to “patient navigators” or coaches who can help them make good decisions in the face of sometimes conflicting priorities. For example, coaches at the Patient Support Corps at the University of California–San Francisco make sure patients understand their available options, have explicitly stated the personal and medical goals guiding their decisions, and are involved in determining how to pay for their care plan.3 Medical organizations are discovering that patients who are coached make better medical choices.

Health care coaching has a twofold benefit for financial planners: (1) the resultant informed cost projections are critical input to a family’s decision-making process during difficult and uncertain periods of care; and (2) elements of this approach are transferable to financial planning.

A professional care manager can also help clients determine what assistance they need and help them find a provider. Patients and their families can be paralyzed by diagnoses of acute or chronic medical conditions and unable to make decisions in the face of unknowns. Because the long-term prognosis is often unclear at the outset of a period of care, families cannot confidently lock in a financial plan.

Clients who understand their care options are better able to work with a financial planner to establish priorities. Educated clients are also less likely to fall prey to unscrupulous salespeople who price and sell LTSS to take advantage of a family’s desire to do the best for their loved one regardless of affordability. With informed medical views on a client’s diagnosis and possible treatments in hand, the financial planner is well positioned to advise the client on an appropriate investment strategy.

A Fiduciary Process

The global ISO 9000 Quality Management Principles indicate that results are achieved more efficiently when activities and resources are managed as a process. CFP Board’s definition of a fiduciary is “one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.” And the Uniform Prudent Investor Act requires investment decisions be made considering “needs for liquidity [and] regularity of income … [and] the tax consequences of investment decisions or strategies.”

The fiduciary processes envisioned by Fi360 and CFP Board incorporate at least four broad steps: (1) gather information; (2) formalize recommendations; (3) implement; and (4) monitor progress and repeat.

Even before an acute need arises, potential LTSS costs are a major financial risk for all clients. Planning for LTSS should be incorporated in the monitoring process (step 4), because the cost of these services can significantly affect income needs, as well as investment and tax planning.

While gathering information from prospective or current clients (step 1), planners should ask clients about their values, preferences, and any plans they have already made for LTSS. To help start the conversation about the financial repercussions of a new diagnosis, Carolyn McClanahan, M.D., CFP®, recommends asking: “What do you understand about your prognosis?”4

Using this understanding as a starting point, the planner should review with the client the known options for plans of care that are clinically and therapeutically appropriate. It is critically important that clients get this information from their medical and caregiving teams. This information should be documented as part of formal recommendations (step 2) for the client. This documentation may prove useful if a family member becomes involved later. And, these questions can nudge clients to spell out their care preferences. In our professional experience, families who discuss care preferences and financial values often disagree less if a health-related emergency arises.

A plan of action fails if there is no action: once recommendations are formalized and a to-do list is established, the implementation plan (step 3) is essential. Planners are responsible for helping clients implement parts of the plan that require their attention and follow-through. Although this step is seemingly self-evident, procrastination and denial associated with care needs can regularly derail the best intended plans. Inaction is too often the default. Communication skills for guiding clients under stress, with compromised executive function, or with diminished ability are critical for supporting clients through difficult changes.

New information from clients, such as a medical diagnosis and financial recommendations, should be reviewed, formally updated, and then monitored (step 4). New circumstances can require revisions of strategies and goals. Adaptive and dynamic financial planning can actually give the client’s health a boost: “Studies show that patients with their affairs in order respond better to treatment.”5

Financial planners should employ this supportive process with confidence; this approach mirrors the SCOPED checklist (scoped.com) used by many medical practitioners to facilitate decision-making in uncertain situations and is based on a “decision quality” conceptual framework developed at Stanford University and the Strategic Decisions Group.

SCOPED is shorthand for clarifying the following:

Situation: Known facts about the patient’s condition

Choices: Available options

Objectives: Patient’s goals and priorities

People: Roles and responsibilities of all parties involved

Evaluation: How patients’ choices affect their objectives

Decisions: Determining which choice is best and next steps

Clients can quickly shed existing retirement priorities after a diagnosis requiring care, particularly if they must act immediately to safeguard their loved one’s independence, safety, and dignity. Retirement goals for leisure pursuits, legacy plans, charitable giving, and a standard of living are often dramatically reshuffled if physical or cognitive independence is reduced. “I’ll never go to that old person’s home,” can suddenly become, “I just don’t want to be separated from my spouse,” and then just as quickly, “I need to get my final affairs in order.” Accounting for a client’s sometimes fluid goals requires that planners following a fiduciary standard adapt their financial strategies to address more than just the anodyne factors of risk tolerance and investment time frame.


A period of care can be financially, emotionally, and practically challenging for clients and their families. As a result, many planners and their clients fail to take valuable financial steps. Planners can help clients requiring LTSS make better financial decisions with appropriate communication, relationship management, and technical skills. With strong relationships in place, a good financial planner can guide clients through the fiduciary process as patient navigators do in the health care arena. In both situations, the goal is to help clients gather information, determine priorities, make choices, and take action in their best interests. A professional care manager can be a valuable professional ally for planners and their clients.

Further research on clients’ LTSS experiences should produce findings that will enable planners to make more accurate financial planning assumptions for their clients during a period of LTSS. And continued cross-pollination of ideas between care management, medical, and financial professionals should lead to even better client services.

Thomas C. West, CLU®, ChFC®, AIF®, is a partner with Signature Estate and Investment Advisors in Tysons Corner, Virginia. He holds an MBA from the University of Pittsburgh’s Katz Graduate School of Business.

Steven A. Starnes, CFP®, is a principal with Grand Wealth Management in Grand Rapids, Michigan. He holds an MBA from the University of Virginia’s Darden School of Business.


  1. See “Activities of Daily Living: What are ADLs and IADLs?” by Leslie Kernisan at caring.com/articles/activities-of-daily-living-what-are-adls-and-iadls.
  2. See “How Much Care Will You Need?” at longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html.
  3. See “Patients Make Better Medical Choices with Coaching” by Jeff Belkora in Harvard Business Review at hbr.org/2016/11/patients-make-better-medical-choices-with-coaching.
  4. See “Why End-of-Life Planning Has Great Value” by Dan Moisand in Financial Advisor at fa-mag.com/news/why-end-of-life-planning-has-great-value-21981.html?section=40.
  5. ibid.
Healthcare Planning
Risk Management & Insurance Planning