Advisors still sitting on the fence about the benefits of long-term care insurance now have two incentives to increase their savvy: The launch of free, accredited online training from the Financial Planning Association and pending above-the-line tax breaks, which have cleared the House of Representatives.
How beneficial will online training be? "The value of this site is to strategically give advisors and others one place where they can go and navigate the comprehensive world of long-term care information, tools and resources," FPA President Robert Barry told reporters at the Washington, D.C., press conference to unveil the training package and resource center (www.fpanet.org). The program‚s co-sponsors include the American Council of Life Insurers, New York Life and The Northwestern Mutual Life Insurance Co.
Barry, who started his career as a life insurance agent with The Guardian before founding his own advisory firm, admitted that too many advisors still believe their clients can self-insure against the costs of long-term care. But a host of changing market factors could alter that mindset. "With the Dow around 7500, it may add a new impetus to valuing the costs of insurance versus self-insuring," Barry told Financial Advisor magazine.
In fact, 70 million Americans are set to retire in the next 20 years as the average annual cost for institutional care hits the $200,000 mark. Even a very wealthy client may prefer to buy long-term care insurance if a lifetime of premiums cost $40,000 to $50,000, rather than risk self-insuring at a cost of $200,000 for one year of care.
That‚s a central financial planning question, says Gail Hunt, executive director of the National Alliance for Caregivers, which provides education and assistance to family caregivers and is another co-sponsor of the LTC training program. "This cost can be the single largest drain on anyone‚s financial security and the federal government will not be able to handle the burden," Hunt predicts. That means that the care options for those planning to tap Medicaid will become slimmer and probably less desirable.
Lawmakers, too, see the writing on the wall. To encourage the purchase of LTC insurance, the House of Representatives passed a bill (HR 4946) July 25 that would provide above-the-line federal tax deductions to Americans who buy LTC insurance. Currently pending in the Senate, the bill would be phased in over 10 years and currently applies to individuals with adjusted gross incomes of $20,000 to $40,000 and couples, with AGI of $40,000 to $80,000.
ACLI lobbyist and senior counsel Angela Arnett says the group is working overtime to broaden the legislation so that all taxpayers get the LTC premium tax break.
Schwab, Advent Bury Hatchets
Charles Schwab & Co. and Advent Software have settled a lawsuit that threatened to make life difficult for Schwab client advisors who use Advent‚s portfolio management software. Schwab last year filed the lawsuit accusing Advent of coercing Schwab Institutional customers into switching to Advent‚s Custodial Data (ACD) system.
ACD acts as a bridge between advisors and custodians by downloading portfolio data from multiple custodians for advisors who use the system. In its lawsuit, Schwab contended that the ACD marketing push was in violation of a longstanding agreement it has with Advent. Under that agreement, Schwab says, Schwab advisors who use Advent‚s Axys portfolio management software download their data directly from Schwab through a "point-to-point" interface that was developed by both companies.