Why don’t we design financial services for the elderly with dementia in mind?
The needs and capabilities of those in their eighties and nineties can be quite different from those in their sixties and seventies. We would not treat a twenty year old as we would someone past fifty, but that’s what the services we design for the elderly try to do.
I worry that “financial inclusion” is a term that excludes the cognitively frail, those whose mental faculties are not suited to making complex financial decisions. These people grow out of the products they buy when in mental supremacy but for them their can be little or no financial planning.
The info graphic at the top of the page describes the life events (as HSBC see them). It only excludes the upsetting issues of later life, cogitative decline, the need for social care and physical incapacity.
I mention HSBC as Francesca McDonagh (head of retail banking) was on “wake up to money” this morning talking about the need to do more for the dementing.
It is good that HSBC are taking a lead in this; I will be finding out more about their 3 year project with Age Concern today.
Learning about it
There is a lot of research into old age. Organisations like the International Longevity Centre, the Kings Fund and more widely the OECD have grabbed data (especially in the UK) so we know the scale and shape of the problem.
I am being asked by my firm to help our staff better understand the financial needs of those in old age and what we can do to help those acutely in need of help and those of us who are preparing ourselves.
I’ve found that many of the staff I’m told to help are much more aware and advanced than I am. I spoke with two colleagues on Monday one of whom has power of attorney for her parent and another is managing the complexities of having one parent dementing while the other has incapacity issues.
Their work for their parents is making a huge difference not just to their parents quality of life, but to the cohesion of the family as a whole.
I’ve decided that whatever academic study I do, must take second place to better understanding the needs of those who are experiencing decline and those who care for them.
Doing something about it
The pension freedoms which so resonate with those of us in the middle part of our lives can become a burden as we grow older.
I struggle with Ros Altmann’s argument that exchanging income for capital in your sixties, makes for financial security in later life dependency. The management of “wealth” as a means to meet care costs is fraught with risk, it needs an acceleration of the drawdown to meet an uncertain liability. The chances of converting capital to the income needed to meet long-term care successfully are slim.
But we continue to consider the possession of “wealth” in the form of a capital reservoir, as the best insurance against the cost of residential or nursing home care.
I would like to place a moratorium on the transfer from income producing pensions to capital rich/income poor drawdown policies. I’d like those advisers who currently ponder critical yields to consider what plan B looks like.
Such a plan would need to consider the questions posed by Lennon and Mcartney
Give me your answer, fill in a form
Mine for evermore
Will you still need me, will you still feed me
When I’m sixty-four?
Fifty years on and sixty has become eighty, but how many of us are planning for a time when we can’t tie up our shoelaces, let alone manage sequential risk?
An inequality of opportunity?
I worry too about who will benefit from benefits. Speaking with my friend Dr Rob Buckle (chief scientist at the MRC), he pointed out that my work in helping our staff become aware of how to plan for extreme old age, was part of a process that ensures that the well-educated and affluent can jump to the front of the queue.
His point was that super-vulnerability occurs with people who suffer physical or mental incapacity but have not had the awareness to pre-plan and do not have the support networks to have others help them out.
Ironically, the financial awareness I am promoting, may be extending social inequality and consigning the most vulnerable to the back of the queue.
An insurable event?
Not everyone loses their marbles and people run marathons in their nineties. We do not know our financial needs in later life. This uncertainty makes insurance an option. The simplest insurance is to put your finances in a state that they can easily be managed by you in all but extreme dementia, this argues for keeping financial planning simple, focussing on products that have clear outcomes and need little management.
The second insurance is to create a social network of family and friends who are likely to survive you. To turn this around, a simple insurance for someone with parents in retirement is to start talking early about matters such as power of attorney, the provision of duplicate bank statements and the “what ifs” that go with losing physical or mental capacity.
Fraud prevention
The vulnerability of the old to financial fraud is a huge worry. A third of those dementing live alone, the telephone is their link to the outside world but it is a friend to the scammers.
The incidence of financial crime perpetrated against the elderly is appalling. It is low-profile crime but it causes immense anguish.
We need to pursue the scammers, but we also need to find ways to make those who live alone, or who are on their own for long periods, less vulnerable.
A change of mind set
Spending time with elderly parents, talking with people actively engaged in managing dementia, reading about the subject, makes me aware that I am still too distant from the realities of later retirement.
I am sure I am not alone. We idealise retirement as a string of dream holidays, days on the golf-course and the whimsy of “when I’m 64”.
But the darker, lonelier side of retirement is ignored. That info graphic of our life events typifies how we exclude the possibility of needing care, possibilities that turn to likelihood as we grow into extreme old age.
While I don’t agree with her “fetish for freedom”, I applaud Ros Altmann for promoting the problems in her work as a politician , in her speeches and in her writing. She is adept at grasping the agenda of ordinary people. She is right to be talking about this difficult subject.
However, the hard miles on understanding old age (gerontology) are being put in by such dedicated academics as Dr Debora Price, who has helped me with a reading list I am ploughing through!
These are links to the documents I have found particularly useful so far
Further reading
For a broad overview of the issues, this OECD report is a good start: http://www.oecd.org/els/health-systems/help-wanted-9789264097759-en.htm .
You can see all the OECD publications on long term care here: http://www.oecd.org/els/health-systems/long-term-care.htm.
For the UK perspective, the best report to read is the now 5-year old Dilnot Commission: (Fairer Care Funding)
The Local Government Association 2016 State of the Nation report on social care funding: http://www.local.gov.uk/documents/10180/7632544/1+24+ASCF+state+of+the+nation+2016_WEB.pdf/e5943f2d-4dbd-41a8-b73e-da0c7209ec12
The King’s Fund is a highly (probably the most) credible think-tank commentator on the issue: https://www.kingsfund.org.uk/topics/social-care – for their publications see: https://www.kingsfund.org.uk/publications/?f%5B0%5D=im_field_health_topic%3A27 . The King’s Fund have a ‘reading list’ facility on their website us a very useful and up to date resource on the future of funding social care, here it is: http://kingsfund.koha-ptfs.eu/cgi-bin/koha/opac-shelves.pl?op=view&shelfnumber=104&sortfield=copyrightdate&direction=desc&_ga=1.152591609.1199701175.1490893892
The PSSRU is the leading academic consortium that investigates social care and has produced some excellent research: http://www.pssru.ac.uk/
Henry, I was very glad to read this piece as you have touched upon a matter that causes me grave (no pun intended) concern, particularly in the context of flexi-access drawdown, but in many areas of financial advice. Like all IFA’s, I understand that I have a duty of care under the Mental Capacity Act 2005 in that if I believe that a client, new or old, no longer has a grasp of the particular issue under inspection, I can no longer act for them; solicitors and accountants and other professional advisers are in the same position, I believe.
Now, I have never been a “flog it and run” IFA, and, thankfully, most of those have now left the industry, much preferring a long-term ongoing relationship where that is appropriate. As you say, it is all well and good setting up mortgages, life cover, income protection insurance, etc. for the young, but older clients (those over, say, 55) usually need rather more “bespoke” advice and, indeed, “product solutions”. I remember that Lincoln/Sun Life Financial used to have a long-term care option on their whole of life policy (long gone from the marketplace) and you and I are old enough to remember Commercial Union’s “Third Age Initiative” suite of LTC products from the mid-1990s – they didn’t sell.
Concentrating on FAD, for now, I simply won’t entertain the idea that a client with, say, a SIPP with £500,000+ in it can even think about setting up drawdown without arranging an LPA at the same time. If they “lose the plot”, from whom do trustees take instructions from if there is no attorney? Who directs death benefits if a nomination is challenged? Do elderly clients still want to be in the risk markets in their 80s and 90s? Is the “inheritability” under FAD a mirage except for the rich?
Clearly, should the fund be annuitized at outset or later, the problem is pretty much solved and the “grandkids inheritance” could be funded from a whole of life policy, even though this is an expensive option. But, I fear, FAD has very many “unforeseen consequences” not the least of which is the fact that those with substantial pension pots ten to live much longer than they think!
These points also apply to advisers and I sent my LPA up in 2016 and wave it under the noses of reluctant clients if needs be.
This is an incredibly complex area, so I wish you the best of luck with your research – heaven knows what the situation will be after I have long gone when all those little AE pots reach maturity!
a very pertinent article. However, the real problem with long term care is the need for us to fund good quality care for our needy often elderly relatives, or in time ourselves. The real social issue is how do we as a society judge the importance of care and dignity in old age? Should we continue to chase higher earnings and lower taxes when in reality, the nation cannot afford to give us the quality and standard of long term care we need unless we all vote to pay for it.