Experts recently discussed the important issue of how clients' health affect their wealth, and how advisors can help bring up the important issues surrounding this.

Issues around healthcare – one of the fastest-growing retirement costs in the US – have bubbled up high on the wealth management industry's agenda as Baby Boomers edge closer to retirement and increasing longevity expands family inter-dependencies.

Studies have shown that, beyond the basics, there is a major opportunity for financial advisors to serve as a resource on healthcare issues. US Trust said earlier this year, for example, that the wealthy regard investing in their health as important as investing to build wealth, and that health is the number one element required for “a life well-lived.” However, emotional barriers often prevent families from talking openly about health and wealth issues, which in some cases are overlooked entirely.

The third and final panel of the Family Wealth Report Summit last month was focused on what advisors can do to facilitate sensitive health-related conversations with and between family members, and also touched on industry recruitment and training issues surrounding this.

Chaired by Bruce Weatherill, chairman of Family Wealth Report, the panel featured: Paul Cummings, regional managing director at Abbot Downing; Kemp Stickney chief fiduciary officer and head of family wealth at Wilmington Trust; and Michael Zeuner, managing partner at WE Family Offices.

The first question from Weatherill was to Cummings, who was asked whether he agrees that the subject of health has become a much bigger component of “holistic” wealth management. Cummings agreed wholeheartedly, saying that this has in fact been driven by many (although not all) clients at Abbot Downing – Wells Fargo's ultra high net worth business. Importantly, health-related concerns are increasingly being brought up by younger family members, who are thinking about these issues through a much deeper, multi-generational financial planning lens, he said.

The topic of health in a wealth management framework used to be centered primarily on issues affecting older individuals, but this is changing, Cummings said. “People are now starting to view it as something that really warrants disciplined management and advocacy.”

Zeuner emphasized the importance of viewing and addressing healthcare as a crucial aspect of clients' overall wealth management picture, rather than in a silo. One way of rationalizing what is sometimes perceived by people as a scary topic involves transferring the personal element of health to a more strategic one – and early on in the client relationship – Zeuner noted.

“If you think about managing your wealth like a well-run company, then you get into things like what is your strategy, your leadership team, what is your succession plan and how do you choose vendors,” he said. “Health fits in with leadership, succession and talent development. It's an integrated issue around the entire wealth enterprise. It requires identifying all the different risks that exist to that enterprise, and what is being done to address them.”

Weatherill then asked Stickney of Wilmington Trust: “As an advisor, what are your main concerns about attempting to incorporate a client's health particulars when thinking about their financial future?” Agreeing with all of the points made thus far during the session, he highlighted that “you have to be brave to raise your hand as an advisor, because...you're not going to get high marks if the initial reaction [from clients] is negative.”

Stickney went on to say that advisors should make decisions as a team in order to ascertain when is the appropriate time to interject and raise issues that might be quite thorny. Conversations about a client's health have to be approached in a holistic, and not an inquisitive way, Cummings added. “There needs to be a purpose behind having this discussion.”

Zeuner then made the point that while there is a lot of room for technical expertise in the wealth management space, the role of an advisor is equally about courage, sensitivity and being process-driven. “Really thoughtful advisors, in my experience, focus on what processes they need to put in place with a family to ensure that particular issues are addressed,” he said. Zeuner added that the role of an advisor is also to identify when there is something “lurking” that is affecting how an issue is currently being viewed, and to then be able to put it “safely and comfortably” on the table.

But ultimately, clients will only feel comfortable “opening up” when they are confident that their advisors have the caring gene, it was said. “The business is evolving and is as personal a business as you can be in,” Stickney said. It's also as much about knowing when to stop talking, for example, and just keep listening, he said.

Another issue raised was around how to keep sensitive conversations alive at a time when younger advisors are moving around the job market whilst many of the sector's older, most seasoned advisors are retiring. Zeuner said the key here is to ensure that no single decision is ever dependent on either one family member or a particular advisor, linking this back to the importance of having formalized processes in place, as a company would.

A delegate asked what all this means in terms of hiring professionals and training, the business economics around paying for professionals with the “softer” skills that are increasingly sought after today, and how to charge clients for these capabilities. Cummings gave the example of how Abbot Downing's family dynamics and education practice includes a team of PhD and advanced degree specialists with backgrounds in psychology and education, and that they don't just work with clients, but also with advisors. As not all advisors have deep expertise in every single facet of wealth management, his firm's approach is to have specialists in-house who are available to the advisor to help their clients. The firm doesn't charge explicitly for these types of services, he said, as they are “embedded.”

The consensus was that when dealing with clients' health issues in a wealth management context, a strong, integrated advisory culture is required. “You can learn about investments and taxes, etc,” Zeuner said, “but these kind of skills, I think, are learned over time and through coaching.” He added that it is generally advantageous to have multiple generations of advisors on the scene to facilitate the best training and development strategies, and ultimately instill the human and technical qualities that all wealth management clients today want and expect.