Aged care and increasing demands on planners

Anna Lawton
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Planners will have to offer this advice, one way or another, if they are going to keep their client base. But it’s not for everybody. It’s a touchy feely subject.’ – Anna Lawton

The complicated world of aged care is about to get a bit more complicated with this year’s proposed changes to the core of the myriad of regulations covering support for the old and infirm. Anna Lawton, a financial planner who heads up Aged Care Services for Equity Trustees, believes the area increasingly requires specialists to get the best outcome for clients. Lawton – with her senior placement consultant, Denise Tomaras – spoke with Greg Bright.

We all know the demographics: the babyboomers have commenced retiring and are going through the system like a pig in a python. But it’s not only superannuation which will be challenged by the generational shift. The provision of adequate medical, aged care, retirement living and other services will be sorely tested in the coming years.

Anna Lawton, who started her career in financial advice with a specialist aged-care planning practice, Lifetime Planning, in 2002 seems sanguine about the prospects.

“The fee structure at the federal level is changing to move to more of a user-pays model,” she says, “but government subsidies paid per resident in aged care are more than most people realize. People don’t see what the Government gives to the provider.”

The previous Government came up with the changes due to take effect from July 1 but the final legislation and regulations are being re-worked by the new Government. Generally speaking, people with more money will have to pay more than they do now, with grandfathering for existing aged care residents.

While Lawton still does some client-facing work, most of her role since Equity Trustees acquired Life Time Planning in August 2011 has been to help the financial advisors. Often times, she and Denise Tomaras, whose former specialist placement agency, Tender Living Care, was also acquired by Equity Trustees, are dealing with the families of the client – whoever holds the power of attorney – at a very difficult time of their lives.

“No-one wants to move out of their home,” Tomaras says. “But what happens as they get older and frailer? What happens when they get dementia?”

The Government is hopeful that the new legislation will lead to a shift in the way people use the available services but Lawton is skeptical. She admits, however, that people seem to be more willing to plan ahead and are generally more aware of a looming problem. “They’re aware of the reality but they still want to be in control,” she says. “Ten years ago if you tried to organize an aged-care seminar for residents of a retirement village (independent living) you’d be lucky to get five people to show up. Now, it’s more like 40-50 and many will ask afterwards for copies of the slides and notes.”

Lawton says the ideal scenario is to have retirement living and aged-care facilities on the same site, as is increasingly happening in New Zealand, for instance, but Australia’s federal system is an impediment. The states control retirement villages and the Feds oversee aged care. And each state has different rules, making life more difficult for the big national operators.

“The owners and operators would probably have to have different business entities for retirement and care and medical services,” she says. “It is complicated.”

In New Zealand, with the help of a central government, the most common model for new facilities is a sort-of circle where, typically, an elderly couple will start with independent living on the edge of the circle and then move towards the centre as they become more infirm and/or one of them dies. Onsite medical facilities will focus on the common ailments of old people, such as ears, eyes and teeth. Things such as hip replacements will still take place in the main hospitals.

While there has also been recent changes to the various systems aimed at helping people who remain in their homes, Lawton says no-one says that they will be providing more hours or visits. Typically, the client will elect a certain number of visits per week and various add-on services, such as push-button alarms that feed into an ambulance service, with pay-as-you-go pricing.

Under the new Federal system for aged care, the old accommodation bond and “charge” will be replaced by accommodation payments through a refundable accommodation deposit (RAD), a daily payment or a combination of both.

Under the current system the resident’s assets are used to determine how much they pay for their accommodation and their income is used to determine how much they pay for ongoing care. Under the new system the two are combined into a means-tested amount. A RAD above $550,000 requires approval from the Aged Care Financial Authority.

A big issue for many will be what to do with the family home. Only a portion of the home’s value (currently $144,500) will count for the assets test if it is rented out compared with the entire proceeds if it is sold.

For financial advisors, there will be a greater focus on looking at the family home situation, which is often an emotional issue for the client, as well as how to structure the accommodation payments and where to invest the remaining funds.

But Lawton says it’s not just the complicated nature of the work which might prompt a financial advice practice to outsource this component of its service.

“There’s no doubt there will increasing demand for knowledge of the area, especially with the ‘best interest duty’ under FOFA,” she says. “Planners will have to offer this advice, one way or another, if they are going to keep their client base. But it’s not for everybody. It’s a touchy feely subject. You get involved in the family dynamics. There is a lot of pressure on the family member in charge, who can be subject to emotional blackmail by other family members… It’s a social, financial and psychological dilemma that hits them all at once.”

Although it was a specialist financial advice practice started by Ken Mitchell, a pioneer in the field, Lifetime Planning also used Tomaras’s company to assist with placements and the two firms were acquired by another one, Paragon Care, before finding their home with Equity Trustees. The “Lifetime Planning” and “Tender Living Care” brands were rebranded only last year.

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