The Problem with the Financial Planning Profession by David Disraeli

 

 

 

David Disraeli founder of The Personal CFO takes issue with traditional financial planning.  Consider for a moment the construction of a typical financial plan.  We, as financial planners assemble a great deal of information and documents, make a list of assets, sources of income, future expenses and risk tolerance.  Once this information is gathered it is entered into a software program along with several variables.  In order to project future retirement income we assume rates of return on investment, future social security and pension benefits, inflation, taxes and other inputs specific to the client (i.e., future inheritances, large expenses etc.).  Suppose that we are right on the money with regard to all our financial assumptions but one of the two individual’s needs in-home care or nursing care.  An unexpected drain of $40,000 per year, after tax, will cause our picture- perfect financial plan to go up in flames.  Even if we underestimated the investment returns the plan becomes worthless.  In 20 years, I have never seen nor heard of a financial plan, or process which includes the client’s current and future health as a variable, yet it is the one thing which could wreck the best of plans.  I’ve written a book titled “What to Do With your Aging Parents” which addresses many problem faced by adult children of aging relatives.

 

This book was created based on a six-step process to help make the aging process go more smoothly, with less stress and hopefully less financial drain.  More specifically I address:

 

•  How to anticipate the consequences of having an older family member
• How to avoid a court appointed guardianship
• How to safeguard assets against devastation from long term care expenses
• What documents must an older person have
•  How to evaluate the living options for a senior who needs some level of care
• How to prevent disputes among siblings during a crises
•  How to stay independent longer and “age in place”
• What “Living Trusts” are and why you do or don’t want them

What  Medicaid is and how it differs from Medicare

The financial, emotional, and legal issues are inexorably intertwined when dealing with seniors.  For this reason I purpose a paradigm shift involving two processes (woven together in my six step plan):

1. Plan ahead and anticipate, instead of ignoring the inevitable
2. Create an actionable plan involving all family members and advisors

It sounds simple yet do you know what would happen if you had a stroke?  Where are your important documents, insurance policies?  Who besides your doctor knows what drugs you are taking?  Who is your primary “go-to person”.  Where will you live if you can’t stay in your home?  Are your adult children all in agreement about these issues? 

The last thing in the world a senior wants is to be dependent on their children financially.  If you’ve ever been inside a Medicaid nursing home you will understand why family members will do everything in their power to prevent their loved one from that fate.  Yet Medicaid pays for 50% of all nursing beds in the

United States.  In other words, we can deduce that 50% of all nursing home residents are financially destitute and have no other options.  If you wind up in a Medicaid facility, you go where you can find a bed, not necessarily near your loved ones, or even in the same state. Growing older has its moments.  Those of us who are called “baby boomers” will have to look after our parents, educate our children and plan our retirement, all at the same time.  This book was written to provide a road-map for both the adult children and the seniors to use in planning for an uncertain future.  The road-map I’m referring to was developed based on my own experiences and hours of discussion with
social workers, attorneys, and physicians.  For an older person, financial, emotional, and legal issues are intertwined.  How many people, if they were being completely honest, could answer the following questions in a definitive fashion?

Who is going to take care of you in your later years?
How long will your money last if you need long term care?
What if your go-to-person lives out of state?
Are all your legal documents up to date and easy to locate?
Who knows what drugs you’re taking and the names of all your physicians?
Will you have to move out of your house if you have an impairment?

Our six step plan answers these questions and many more, but most importantly it makes sure your entire family is on the same page – before a crises hits.  These six steps can be done in any order, as long as they are all done. 

1. Retirement Income Projection and Stress Test
2. Family Dynamics Survey
3. Personal Information Inventory
4. Estate Plan Review
5. Health Risk Assessment
6. Aging Strategy Design

Questions or Comments?

or email us at david@lifepln.com or use the form below

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