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As health care costs continue to rise, financial advisors are increasingly building health care consulting services into their value proposition to clients. The issue is material to wealth management — health care costs in retirement are estimated at $275,000 for a couple retiring this year, according to Fidelity Benefits Consulting.
More financial advisors are recognizing that strategically evaluating health care and insurance costs is key to an effective retirement strategy. But most financial planners and wealth managers aren’t insurance experts themselves, which has led to a partnership between two industries — health care and benefits advisors and wealth management experts.
Health care advisors, often insurance brokers or consulting firms, bring health care experience to the financial advisor’s practice and allow clients to feel confident that they have the most cost-effective health care strategy in retirement, or for their small business, or in any other area where health care could have a material impact on their finances.
There are a few different ways financial advisors can integrate health care advising into their suite of services, but how can they be sure they are selecting the right partner?
Here are three questions financial advisors should ask potential health care advisors.
1. How are you paid?
There are two main compensation models for health care advisors working with financial planners. Some are paid commissions by carriers, and others are paid by the financial planning firm directly.
The advantage of working with a commission-based advisor is that the financial planning firm doesn’t have to pay to offer health care advising services to their clients. The downside is that the health care advisor is financially incentivized to sell products to your clients, and some advisors find their clients have health care needs outside of buying an insurance product.
Alternatively, paying the health care advisor directly requires an investment by the financial planning practice. For that investment, the practice feels confident the health care advisor does not have any misaligned incentives to advise clients in a way that compromises fiduciary standards.
2. Do you consider all available options for my clients?
Some health care advisors work only with one or a handful of carriers. For example, they may work exclusively with Medicare insurance products in your area. This can be a good fit for financial advisors who want to offer focused, more narrow health care advice, but it may not address the needs of all clients.
In other words, how broad is the health care advisor’s scope of insurance services? Can they advise individuals not eligible for Medicare, as well as those nearing retirement age? Can they make insurance recommendations for self-employed clients? Are they familiar with plans both on and off the Affordable Care Act marketplaces and HealthCare.gov? Sometimes, a non-compliant health care plan can be the best strategy for certain clients. Can they provide effective advice around this and other issues?
3. Do you provide services beyond signing up for coverage?
If your clients already have insurance, can the health care advisor help with other health care needs? We find that clients of financial advisors typically have health care questions in the following categories.
Coverage needs: This encompasses helping your clients compare and sign up for coverage for themselves and their family members. It’s worth asking whether the advisor will conduct a comparison of the client’s multiple options, as well as if they can help find coverage for the whole family, as opposed to focusing exclusively on a client eligible for Medicare.
Health care recommendations: Is the advisor familiar with the provider networks in your area? Many consumers want confirmation that their preferred providers and prescriptions will be accessible through their health plan, which can be a costly decision to get wrong.
Health care advocacy: This refers to services such as medical bill review and auditing, patient advocacy and advice around advanced care directives and other needs.
Ultimately, there are options to help your clients find insurance and make cost-effective choices. The question for advisors is how broad the partner’s scope of services are, and if they match the needs of your clients.