Before being diagnosed with a disease, clients may have been saving funds for retirement, but suddenly they need to focus on asset preservation.ipopba/iStockPhoto / Getty Images
Few things can derail someone’s financial plan faster than a critical illness (CI) diagnosis, but financial advisors who help clients navigate through this scary ordeal can display their true value as trusted professionals.
After learning about a diagnosis, people are scared and overwhelmed and need help making sense of what to do. When a client breaks the news, Mark Halpern, chief executive officer and advisor at WEALTHinsurance.com Inc. in Markham, Ont., starts by simply asking the open-ended question, “How can I help?”
“Our job is to lead the process, ask the right questions and provide unbiased advice,” he says.
Julia Chung, partner, CEO and senior financial planner at Spring Planning Inc., also focuses first on helping clients process their unsettling news. She says many haven’t yet notified all family members or employers when they come to see her. For example, they haven’t figured out their options for taking time off work.
After dealing with those softer issues, she takes an inventory of clients’ assets and employer benefits. She also looks at whether clients can access extra financial assistance. For example, some clients may be eligible for the Canada Pension Plan disability benefit, which pays out up to $1,387 a month to those who have a long-term or terminal illness and cannot work.
Mr. Halpern does the same, noting that sometimes workplace benefits include small CI insurance policies. “The amount is usually around $25,000, but something is better than nothing,” he says.
He looks at the client’s credit cards and things like affinity or university plans as they sometimes have a CI benefit. “I want to ensure they aren’t missing out on any opportunities,” he says.
Ideally, the clients would have a CI insurance policy, which pays a tax-free lump sum within 30 days of a diagnosis, says Kevin Spence, owner and a certified financial planner at Spence Insurance Consultants Ltd. in Vancouver.
One of Mr. Spence’s clients, an executive in his 30s, purchased a six-figure CI policy and, two years later, ended up filing a claim after receiving a lymphoma diagnosis. Mr. Spence says the client was able to concentrate on getting healthy instead of worrying about the financial implications of taking time off work thanks to the extra funds from the CI insurance policy.
A surge of CI insurance policy sales is expected between now and 2025, according to HTF Market Intelligence’s recent “Global Critical Illness Market Study Forecast.” That doesn’t surprise Mr. Spence, who says that one in three Canadians will be diagnosed with a CI in their lifetime.
As having a CI will affect a client’s finances adversely, advisors need to alter the focus of these clients’ financial plans. Before being diagnosed with a disease, clients may have been saving funds for retirement, but suddenly they need to focus on asset preservation, Mr. Halpern says.
“The difference between investing and planning requires a different mindset,” he says. “The mindset is no longer, ‘How much can I make?’ Rather, it’s, ‘How much can I keep?’”
He discusses with clients how long their savings will last if they’re not working, how much money they need and whether they have to borrow funds or perhaps ask family for assistance.
Mr. Halpern also concentrates on estate planning reviews. He notes that this is the time to ensure that wills and powers of attorney are updated and executors know where to find the client’s important documents.
Although a client may no longer be insurable after receiving a CI diagnosis, Mr. Halpern says he’s placed life insurance policies from specialty insurers for clients with histories of stroke, cancer and heart attacks.
Mr. Halpern says there may also be opportunities to convert existing term life insurance policies clients already own to permanent insurance at any time before age 65 without any medical evidence. Some policies may even allow a conversion up to age 75.
“It’s very important for clients to know that,” he says.
When clients recover from their illnesses, Ms. Chung finds they immediately want to discuss their changing goals and priorities and make further adjustments to their financial plans.
“They’ve been through this life-threatening illness and they want to concentrate on different things and so, we dive in to learn what’s important to them now,” she says.
“A lot of time in our industry, we can be kind of prescriptive to people about what their goals should be and we need to pay more attention to what are the things that are important to them now that are going to make it a life worth living for them,” Ms. Chung adds. “People who have had a critical illness are more focused on that than they were before.”