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Investing concerns of senior Citizens
It's time planners customised their services to meet specific financial requirements of senior citizens
My 90-year-old uncle has been looking for a wealth manager to take care of his over `5 crore assets.
However, this segment of investors has not received the attention it rightly deserves. Senior investors represent an excellent learning ground for a financial planner or adviser.
First, senior investors spend a lot of time reading. Add to it the wisdom and perspective that comes with age, and you are looking at an investor who can size up a financial adviser in a matter of minutes. To advisers who want to build a solid knowledge-based practice, such investors can become mentors.
Second, senior investors want their financial affairs to be in order. They like quality paperwork and have a keen eye for detail. They also persist in solving operational problems. A large number of complaints and representations in the financial services business are by senior citizens, who have examined an issue in great detail and want to know how a problem can be resolved. Many advisers do not spend time on operational issues. They typically have back office staff to handle paperwork. Many of them have limited knowledge or training to deal with detailed or complex queries. Relationship managers and private bankers are supported by service managers who take care of the paperwork. Senior investors are seen as pesky by many in the financial services business even though they can offer the best scope for service and operational excellence.
Third, asset allocation for senior investors is a completely different ball game because virtually all standard recommendations are irrelevant to this group because most asset allocations tend to stop at retirement planning. The challenges in asset allocation for the seniors include converting physical assets, such as real estate and gold, into liquid assets that can be used; ensuring cash flow management happens without frequent juggling of assets; determining how much to keep and how much to draw down and use; ensuring they do not outlive their assets; and protecting living expenses from inflation. And, these are the toughest challenges in asset allocation and well worth an adviser's time and effort.
Fourth, insurance is an ironic challenge for seniors. Many of them are aware of their mortality but are not eligible for life insurance. If adequate assets have not been created and jointly held, as well as allocated in a manner that these can generate a steady income, there is no way a senior investor can compensate for the lack of life insurance for dependants. This switch from insurance-based to asset-based protection has not received the attention it should from finance professionals.
Fifth, the biggest concern for senior citizens is health. While some may be hale and hearty, many others are not, and most of them are mortified about hospitalisation and medicare expenses. They rue the fact that no attention is paid to the quality of life of a senior, and that he is treated only as a `patient' who needs tests, treatments and supportive equipment at prohibitive costs. My uncle thinks that the choice of staying at home with his cats and dogs should be respected, instead of hauling him to a cold hospital if he were to fall ill. According to him, loving and being loved more important than staying alive and fighting death.
We have a skewed system that hurts senior investors, who should be able to exercise their choices about medical expenses. Financial advisers can help such people in building a corpus for medical expenses, and managing it in accordance with their wishes. My uncle wanted to execute a power of attorney that restricted approvals for expensive medical treatment for him at his age, and has found it to be a legally valid option. Only, he is unable to find an adviser who will sign in.
Sixth, senior investors need advice on estate planning. My uncle's children are well-settled and do not need any of his wealth. He is still keen to leave behind some of the assets for his grandchildren, some of it to his caretakers and the rest to charity. Except for expensive and laborious trust structures suggested by his bankers and chartered accountants, he has not been able to complete this task. There are complexities in what he wants to do. There are properties still carrying his deceased wife's name; there are legal heirs who are NRIs; there are minor grandchildren; and there are beneficiaries who are not his heirs. It is his biggest cause for concern. He has a registered will, but is not sure how it will be executed eventually .
We are a very proud young nation. However, this should not stop us from taking financial planning and wealth management to senior investors. They are waiting for good quality advice, and can recognise it when they see it. So advisers and planners need to find a way to address this segment of investors as well.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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