Legislation explicitly requires consideration of aged care needs
If anyone had doubts about whether aged care considerations needed to be considered when giving financial or superannuation advice, recent legislative changes should have removed these doubts.
The message is now clear for financial advisers and superannuation trustees. The requirement to consider the aged care needs of clients is unambiguously specified in the Financial Planners and Advisers Code of Ethics 2019 (“Code of Ethics”) as well as the recent Retirement Income Covenant.
Best Interest Duty (Standard 2), standard 6 and standard 5 of the Code of Ethics requires that advisers take into account “the client’s broader, long-term interests and likely future circumstances”. The explanatory statement clarifying Standard 6 uses the following example:
“For example, any potential need for the client or one of the client’s family members to move into aged care accommodation in the near future would need to be factored into any financial advice you give the client.”
With three out of the twelve standards specifically requiring consideration of the broader long-term interests, it cannot be clearer, that advisers must actively address and discuss aged care considerations for clients and the clients’ family members.
You can refer to these pages to find out how we can help you provide aged care advice:
The Three Phases of Retirement™
Advice processes and conversations need to adapt to consider the entirety of a client’s retirement. This includes not just the early “active” years, but also the potential changes to the client’s health and ability over time and the third phase of retirement – the frailty years.
The Retirement Income Covenant (the Covenant) comes into force on 1 July 2022 and requires super trustees to develop a retirement income strategy for their members. The Covenant asks trustees to consider the “life stage of beneficiaries and their likely consumption needs”. Similar to the Three Phases of Retirement™ which have been identified by Aged Care Steps, these needs should not be defined by age, but rather by levels of independence and frailty.
Trustees will need to consider the issues associated with the member’s potential cognitive decline over time as well as the need to access funds to fund health and aged care costs while allowing for support from state/territory and federal governments for health and aged care costs.
These client needs intertwine with good financial advice to consider the likely future for a client and the management of potential future risks. The aim is to help clients live their best life, no matter their level of physical or mental capability.
Aged care is a core part of retirement planning advice
Introduction of the Code of Ethics and the Retirement Income Covenant have reinforced the shift of aged care advice and frailty planning into mainstream advice, instead of just a peripheral and situational-based advice process. Aged care has become a core component of retirement planning and ongoing client reviews.
Helping clients to plan ahead for their frailty years will be just as important as helping them to restructure finances when a crisis hits. While aged care advice is becoming a core advice component, it does not require all advisers to become an aged care expert. But all advisers need a business solution for how to provide the support.
Aged Care Steps can help advisers and superannuation trustees to create effective advice solutions, whatever business model they chose.
Speak to our team today about how we can help you adapt your aged care advice process to meet your legislative requirements.