Canadian SMEs in the Wealth Management Industry can Harness Technology Solutions to Access Healthcare Data & Cost Analytics for Financial Plans
Tom Burmeister is Vice President of Financial Planning for Advicent, the financial planning technology provider of choice for more than 140,000 financial professionals across over 3,000 firms worldwide.
The COVID-19 pandemic has reminded us in a big way that life is precious, and unpredictable. Our families and communities shouldn’t be taken for granted, and neither should our health. We need to be prepared for extraordinary circumstances like the present crisis. Independent financial advisors have the opportunity to help Canadian families plan ahead and ensure they have enough saved to cover healthcare expenses now and in the future.
Too many Canadians are under the impression that most or all of their healthcare expenses will be covered by their tax dollars—but that is not the case. The Sun Life Canadian Health Index finds that 44% of Canadians expect that they won’t have to pay anything for prescription drugs during retirement, but unless they have private health insurance, this is an unrealistic scenario. The BMO Wealth Institute estimates that the average Canadian can expect to spend $5,391 on out-of-pocket medical expenses every year after age 65.
Small and medium-sized wealth management practices can differentiate themselves, and demonstrate significant value, by incorporating out-of-pocket healthcare costs into clients’ financial plans. Fortunately for advisors, modern financial planning technology solutions can enable integrations with providers of healthcare data and analysis, allowing them to estimate a client’s likely healthcare expenses over time.
Some financial planning software options offer self-directed workflows, whereby clients can securely enter healthcare, family, and location details on their platforms, and then utilize smart healthcare data and analytics to generate more precise projections of a client’s life expectancy and their estimated annual medical costs before and after retirement. Modern planning technology solutions can also enable advisors to work remotely with clients to show them the impact out-of-pocket medical costs will have on their overall financial picture and long-term goals.
For Canadians, most out-of-pocket healthcare expenses are tax-deductible. Advisors can educate clients on which out-of-pocket costs can be deducted from taxes—and utilize analytics tools and run scenarios in financial planning software to show clients how these benefits can be harvested in ways that can increase their retirement savings or income, or help pay other expenses.
Furthermore, government healthcare programs often cover only a small portion of the costs for nursing homes or specialized residential care facilities. Depending on the circumstances, government programs may not cover any of these long-term care expenses. Independent Canadian advisors can utilize planning technology and smart healthcare data/analytics to estimate how much clients would need to set aside for long-term care and devise strategies for how to save enough to cover potential long-term care as well as accomplish what they want in retirement.
Crucially, independent advisors can utilize financial planning strategies to help clients create a reserve for emergency healthcare expenses that they can use whenever necessary—and run scenarios in planning technology solutions to show clients how they can ensure they have enough to pay for healthcare in situations where, for example, they are furloughed or laid off.
The COVID-19 pandemic has hit the people of every country hard, including Canada. In a world where individuals and families want peace of mind more than ever, independent advisors and wealth managers can make use of holistic financial planning technology to help investors accurately predict how much they would need to cover healthcare costs today and in retirement—and devise strategies for how to get there.
