Susan Hyatt, an international health-care expert based in Oakville, Ont., was working in London advising the British government seven years ago when she had to fly home to help her parents. They live in different cities, and each was experiencing a health crisis.
Despite having taught at the faculty of medicine at the University of Toronto for many years and holding executive positions on multiple health-related boards around the world, including that of St. Michael’s Hospital in Toronto, Ms. Hyatt found herself facing an extraordinarily challenging situation.
“It didn’t matter what I did; I could not get either one of my parents moved out of a hospital setting back into a community setting,” she says. “They were both suffering from dementia and other illnesses and neither of them could go to their own homes. It took me six months.”
It was a shocking reality check, especially in a country that purports to have “free” medical care.
“People think the health-care system is going to look after them or there’s going to be some sort of government support for a community-based service,” Ms. Hyatt adds. “That system is broken; you’re lucky if you can get a few hours a week in home care. If you only get two hours a week of publicly funded care, where are the other hundreds of hours going to come from if mom needs help? That’s coming from out of your pocket.”
Ms. Hyatt continues to help her ailing parents, acting as power of attorney for both of them on occasions over the years.
Her own experience navigating the health-care system — the “maze,” as she calls it — led to the formation of Silver Sherpa, a professional services company she co-founded with Keith Monrose. It helps seniors and their families address crises that result from serious health challenges, the loss of a spouse, disorganized finances, and other factors that can turn people’s lives upside down.
While the logistical and emotional aspects of finding suitable care for those whose health is declining are often overwhelming, the financial side can be just as daunting, and not just for average Canadians. Individuals of great wealth, too, need to plan for the distinct possibility that they or their parents will need some kind of care in their later years.
Consider some of the numbers. The average length of time Canadians spend as caregivers for an elderly person who becomes ill is more than six years. The labour-related costs of caring for aging parents are substantial, according to a 2017 Canadian Imperial Bank of Commerce report called Who Cares: The Economics of Caring for Aging Parents. Nearly 30 per cent of those with parents older than 65 needing help must take time off work, sacrificing roughly 450 working hours a year.
Basic care at a retirement facility can run on average around $4,000 to $5,000 a month for one person. That climbs to a starting point of $7,000 a month for dementia care. Ms. Hyatt’s father lives in a publicly funded long-term care home; her mom is in a private dementia facility, which costs $10,000 a month. She and her sister have surpassed the $500,000 mark in terms of her mom’s care over the past few years.
However, those costs can be much higher. Ms. Hyatt is aware of a woman who is very ill who wants to stay at home. Her family is spending approximately $30,000 a month for home care around the clock and more on a private chef, since she can only eat certain types of food and they have to be puréed.
“You can do that if you’ve got the money, but you’re going to need an army of people,” Ms. Hyatt says. “High-net-worth people may have more money to throw at the problem, but it doesn’t solve it.”
Although wealthy Canadians may have more assets to draw from to fund care later in life, they’re also interested in preserving their legacy and passing their wealth onto the next generation, Ms. Hyatt notes, meaning that planning ahead is crucial.
“You’ve got to recognize that going from hospital to home, or home to retirement facility or assisted living all requires time to sort out,” she says. “You may be spending a lot of money on a facility for your parent that’s not appropriate, then you have to move them in three months.
“High-net-worth people also want control and they want choice,” she adds. “If you want control of what your elder years are going to look like, you need some kind of game plan for exactly what kind of care you want.”
Planning for aging and prolonged care is a key part of David Lloyd’s work at Newport Private Wealth, which focuses exclusively on high-net-worth clients and has offices in Toronto and Kelowna. The co-founder and chief wealth management officer says the firm has a five-point plan that includes a close look at spending habits and liquidation of assets, such as second or third properties, to fund increasing health-care costs.
“With our clients, many want to be very independent; they don’t want to be a burden on their children,” Mr. Lloyd says. “It can be difficult for some people to accept the fact that they’re going to draw down their assets. People spend their entire lives working hard, saving, and accumulating assets for decades, and then all of a sudden they retire and it’s not in their DNA to spend capital. It just goes against their grain.”
Ironically, Mr. Lloyd says, he often has to reassure clients that it’s okay to spend during their early retirement years on things like travel, to “make hay while the sun shines.” At the same time, his team also focuses on managing risk and reducing volatility of returns to help people set themselves up for later years.
Financial modelling typically assumes an average rate of return between 3 and 5 per cent, he explains. What is not factored into that equation is the volatility of those returns. You only need to look back a decade to the effects of a financial crisis, when some investments declined by 20 to 30 per cent.
“The anxiety that that creates is significant,” Mr. Lloyd says. “That wonderful projection of the 4.5-per-cent rate of return all of a sudden doesn’t look too reliable, and there’s this huge emotional element that has to be factored in.
“What we try to do is impress upon people that you don’t need to take a lot of risk,” he adds. “We can restructure and rejig the portfolio to diversify your holdings into 12 different asset categories. That will reduce that volatility, so they won’t have to go through that roller coaster at a time when they are more sensitive to those fluctuations.”
Those different asset classes include real estate, preferred shares, private debt, high-yield bonds, and other vehicles not correlated to markets. “If the markets do decline, there’s a dampening effect,” Mr. Lloyd says. “It helps smooth out the waves a little bit and generate more predictable returns and cash flow that will help fund things going forward. We think it’s very important for people to migrate into this reduced investment risk.”
Simplifying finances is especially important for wealthy Canadians, since their financial affairs tend to be complex. Handling complicated finances is fine when people have the mental acuity and physical energy to deal with all the moving parts, but when those abilities start to wane, it can be a burden on heirs or a large expense to have financial advisors sort things out.
Having a proper business succession plan and a plan to deal with accrued tax liabilities are part of the organization of finances. So is ensuring that designated beneficiaries are in place on registered accounts, estate plans and wills to avoid future conflict.
“As part of simplification, liquidity becomes much more important,” Mr. Lloyd says. “It’s important to liquidate at reasonable values. In the event that doesn’t happen, heirs are left doing that and it’s usually children. They might not have the same knowledge of the history of the investments, business interests, any handshake deals made; there are so many elements to private investments that even if there is a well-documented shareholder agreement, it might be subject to interpretation.
“When someone dies and I get the call from a son or daughter to say, ‘I don’t understand this,’ then you have to start to piece it all together,” he says. “It can be very time-consuming and expensive, and you can end up getting cents on the dollar because you’re a motivated seller.”
Softer subjects such as lifestyle can be touchy ones. Many members of the silent generation don’t want to talk about things like retirement homes or personal-support workers. The issue may not be whether high-net-worth Canadians can afford help but whether they’re willing to accept it.
“As I say to families, the 747s are on a final approach,” says Ms. Hyatt of Silver Sherpa. “They are going to land, and it’s only a question of whether they’re landing this week or six months from now. You better get your ducks in a row if you’re going to be ready.”