The Case For Special Needs
Posted by DAI Life Brokerage Services on July 17, 2012 · Comments Off on The Case For Special Needs
Planning for the disabled can be a tricky—yet rewarding—practice area for advisors.
|There are more Americans with disabilities than you’d probably think. One commonly quoted number says one in six American families is touched by a disability, which can range from disorders such as autism to a physical disability to Alzheimer’s disease.
And by some measures, the problem could be getting worse. At one end of the life cycle are the attendant physical and mental problems associated with the nation’s growing senior population. At the other end comes a recent federal report showing that autism spectrum disorders now affect one in 88 U.S. children, up from one in 110 three years ago.
Not all disabilities qualify as special needs cases from a financial planning perspective, but advocates say special needs should be an area of greater focus among financial advisors. That said, it’s not a hot-button issue for a lot of advisors.
“One reason for that is that it takes a certain level of compassion, purpose and vision for this market,” says Scott MacDonald, a senior vice president at Merrill Lynch Wealth Management in Modesto, Calif. “There’s also a high barrier to entry because it requires a deeper knowledge of that market than most advisors can afford to invest the time in.”
During his 25 years at Merrill, MacDonald has played a leading role in creating the firm’s Fiduciary and Special Needs Group, as well as in developing the Certified Special Needs Advisor designation for Merrill reps who want to serve this market.
Special needs can be a tricky area with a lot of moving parts due to overlapping benefits programs and changing regulations. Well-intentioned mistakes, such as a grandparent giving a special needs grandchild too much money or lawyers setting up the wrong trust, can result in forfeited benefits and other headaches.
People with disabilities are living longer, and more of them are going into the workforce. That creates a host of planning issues, such as making sure they don’t disqualify themselves from benefit programs and that they’re cared for after their parents die.
Seventy-six percent of people with developmental disabilities live at home with their parents and 25% of those caregivers are over 60 years old, says Mary Anne Ehlert, founder of Protected Tomorrows, a Lincolnshire, Ill.-based advocacy organization for the special needs community. And the average age of the person with developmental disabilities living at home is 38.
“You can see some of the issues and concerns that these parents have who are older and worried about what happens to their children if something happens to them,” Ehlert says. “The reality is that the special needs market is significant and it’s growing, yet the majority of advisors aren’t talking about these issues with their clients. The reason why is because there’s so little education about it out there.”
Asking QuestionsThere are various types of disabilities, and Ehlert says they can impact families in different ways. Developmental disabilities typically refer to something a person is born with, such as Down syndrome or autism. Cognitive disabilities include multiple sclerosis, Parkinson’s disease, Lou Gehrig’s disease and other ailments where a person had a normal life before getting a life-changing diagnosis.
“The adjustment period for them is difficult because they know what they once were,” Ehlert says. “The family is typically supportive. But it’s different from parents who have a child with Down syndrome and who see their child in only one way.”
Alphabet Soup For advisors, handling special needs situations can be time-consuming work with a limited return on investment, and some have given up trying to make it a focus of their practice. Pat Collins, a partner at Greenspring Wealth Management in Towson, Md., says his firm dropped special needs as a niche area because ultimately it didn’t pay off.
Opening Up Many advisors who engage in special needs planning do so because of personal family experiences. Others are thrust into it when they take on a client with a special needs family member.
Key Items Experts say there are some fundamental things advisors need to do when serving special needs individuals and their families, such as not underestimating the amount of money needed for future care. “It comes back to creating cash flows for the many stages of life for a person with disabilities,” Ehlert says. “It’s important because many people with disabilities increasingly are living longer lives.”
By Jeff Schlegel for the June 2012 issue of Financial Advisor.