Financial advisers are professionals uniquely suited to assist their clients with assessing and managing health care costs in retirement. But consumers who have access to a planner’s services do not appear to be better informed about the associated costs than people who do not use an adviser, according to a new research brief from Boston College’s Center for Retirement Research.
“About two-thirds of the households surveyed work with a financial advisor,” the brief stated. “An important question is whether advisors have a better sense of healthcare risks and costs. And if so, do households with an advisor have a better sense of their risks and make better plans?”
A research company fielded a survey of 401 financial advisers in the summer of 2024. It found some key differences between households regarding the risks associated with health care costs as well as long-term care (LTC). The results showed a disconnect between the households and the advisers, with the advisers demonstrating more acute concerns about such costs in later life.
“Unlike the households, financial advisors surveyed think that LTC affordability or covering medical costs are the biggest risks their clients face to ensuring a secure retirement,” the brief explained. “Almost three-fifths of advisors believe that LTC affordability is a major risk compared to just 33% of older households.”
Nearly half of the surveyed advisers are also worried about their clients’ ability to cover medical expenses, compared to just 24% of household respondents. “Advisors also rank these two risks as the highest for their older clients, while investors themselves rank them among the lowest,” the brief explained.
Advisers are also of the mind that their clients will need long-term care at a higher rate than the households do, according to the findings.
“[C]lose to 60% of advisors think that at least a quarter of their clients will need 3-plus years of LTC in retirement,” the brief stated. “The advisors also have a pretty good sense of how much various LTC services cost, with over 80% estimating the correct range for nursing home and assisted living costs.”
While advisers are “slightly less knowledgeable” about in-home care costs, nearly 75% of surveyed advisers still provided “a good estimate” of such costs. And 90% of advisers were “at least somewhat confident” about their cost estimates.
But older households with access to financial advisers do not demonstrate a better understanding of such risks when compared to those who do not have an adviser. “In fact, those with advisors are even less worried about their risks and their ability to cover the cost of major healthcare shocks,” the brief explained.
Part of this may stem from a higher level of preparedness in absorbing costs among those who utilize a financial adviser, the brief said.
“For example, they could have LTC insurance, be wealthier, and/or be married and have children who may be able to take care of them,” the brief explained. “However, regression analysis shows that even after controlling for LTC insurance, wealth, marital status, and other demographic characteristics, those with an advisor are still less concerned about their healthcare risks than those without.”
The brief added that another reason why clients with advisers have such confidence is because their advisers may not be discussing these risks with them. But the survey shows that the “vast majority” of advisers are having these conversations with their clients.
