Financial services firms traditionally focus on how we save and invest our money or insure ourselves against risk. Now, happily, they are beginning to think about how we spend our assets, especially in old age. And that includes long-term care and health care costs.

Their focus on what the biz calls “accumulation” is no surprise. After all, they get paid for selling insurance or managing money, not for helping their customers use those assets. Creating a profitable business model for guiding spending is not easy.

But things are slowly changing. Recently, interest seems to be growing in what the financial firms like to call ”decumulation,” or what the rest of us would describe as “spending.”  The most creative firms are saying, “OK, we’ve helped you build your nest egg. Now, we can help you use it.”

Rethinking Assets And Care

The other day. I attended a private conference organized by The Aspen Institute. For years, the group has operated a financial security program, almost exclusively focused on how to boost savings. But, for the first time, it expanded its agenda to include expenses in old age.

Two big financial services firms helped sponsor the day-long event and most attendees were senior execs from the insurance or investment world. A couple of us were there to talk about health care and long-term care.

The Costs Of Care

That matters, because these can be significant expenses in old age. And too few people plan for them.

For many, health care costs largely are predictable. The biggest cost for most retirees is for premiums for Medicare and perhaps for Medicare Supplement (Medigap) policies. While these likely will rise annually, you know the expense is coming.

But predictable does not mean cheap. The research organization KFF estimates that 7.4 million Medicare enrollees, or about 10%, spend more than 10% of their income on Part B premiums alone. That does not include Part D drug coverage or Medigap insurance.

And there are the unpredictable health care costs for treatments or procedures not covered by Medicare. Overall, 14% of all spending by Medicare beneficiaries was for health care, according to KFF.

Then, there is long-term care. It is common but less predictable. More than two-thirds of older adults will need some personal care before they die and more than half will need a substantial amount.

On average older adults will need long-term care for a couple of years, mostly at home. But about one in five will require assistance for five years or more.

Many will be living with dementia, but conditions such as heart or lung disease, Parkinson’s disease, or severe arthritis also can mean long spells of long-term care. And these are far beyond what most Americans can afford.

The actuarial firm Milliman estimates that costs for those who need care for 4-5 years will approach $400,000 and reach nearly $700,000 for those who need care for 5 years or more. Median retirement saving for a 65- to 74-year-old: About $200,000.

Answering Questions

But even those who have the assets may have no idea how to spend them, or how best to turn their investments into cash.

Do I need home care or should I move to senior living? How do I hire an aide? Is there an adult day program nearby for someone with dementia?  Which of my investments should I liquidate first? Many older adults, even those with resources, need the answers.

Aspen’s first-of-its-kind event generated many questions about how financial firms can respond to these needs but few solutions. But the idea that they even are asking is a big step forward.

Two Tracks

The idea seems to be moving on two tracks.

One, closest to their current business model, is building financial products that make it easy to withdraw funds from existing investments. Lifetime annuities are a common example: Every month, you get a get a fixed sum distributed to your checking account that you can use to pay your bills. No need to sell stock or mutual funds every time you need cash.

These insurance products are highly regarded by financial economists but immensely unpopular among consumers. Here’s my column from a few months ago that describes the problem.

Outside The Comfort Zone

The second idea is more ambitious. It is about providing hands-on assistance in how best to spend those resources.

The long-term care insurance company Genworth Financial is well ahead of the game. It acquired and built out a firm called CareScout, which provides care navigation services for older adults and their families.

A staff nurse will evaluate an older adult, build a care plan, and provide a list of vetted local providers to meet a client’s needs. The services are available for those with long-term care insurance from Genworth or other participating carriers, or can be purchased through its website for about $250-$300.

At least one other insurance company is engaged in a study to determine family caregiver needs.

These sorts of benefits can be a valuable supplement to more traditional financial services. And they can help firms build relationships with older adults and their families.

But they are well outside the comfort zone of insurance companies, money management firms, or even most financial advisers. Building out networks of navigators and local providers is not easy. Just understanding long-term care delivery is a nightmare, even for experts.

Still, it is a truism in long-term care that while money may be necessary, it is not sufficient to build a quality package of services and supports, especially for those aging at home.

These firms generally service a relatively small niche of older adults, mostly upper-middle income or high net worth families. But there will inevitably be many different solutions to long-term care needs, each appropriate to the range of income groups. And the CareScout experience may show how these firms can assist even middle-income families at an affordable price.

It may take a while, but financial services firms seem to be coming to understand the added value they can provide by going beyond just selling insurance and investment products.

It will be interesting to see whether they can develop market solutions to what has been an enormous challenge for older adults and their families: How to access long-term care when they need it.