A financial plan for seniors: Survival and success in a new economic era. (Assisted Living).

LAST MONTH'S COLUMN DISCUSSED THE NEW ECONOMIC ERA that has begun for seniors as their investment returns have plummeted in the past 12 to 18 months. One-year CDs and Treasury Bill returns dropped by approximately 51 percent and 59 percent, respectively, and the S&P 500 Index was off by 22 percent. It's time to sharpen our focus on five strategies to address these growing challenges.

Develop strategic financial planning initiatives. Many sponsors have taken a "don't-ask-don't-tell" position regarding a senior's true affordability. But now we must respond specifically to their financial concerns and misconceptions by showing seniors how they can optimize the use of their income and assets. Essentially, we need to provide customized financial-planning guidance showing them practical approaches to maximizing their independence later in life while preserving their all-important estate legacy.

Make the government the senior's financial partner. Show consumers and their families how they can reduce their assisted living monthly service fees effectively by up to 21 percent--without costing you anything. Each qualifying senior can preserve up to an additional $10,000 of his or her estate legacy over a 2-year length of residency while saving the alternative cost premium of private-pay nursing. Independent living residents of CCRCs and life-care communities and adult children can also enjoy similar tax benefits, but there are some qualifying restrictions. (See "When are fees deductible?" November 2000 CLTC, page 28.)

Focus on the true value of money. Let's face it, many of us have not focused enough on improving the efficiency of our operations or offering innovative, value-centered pricing for our services. Ask yourself two important questions: (1) If you are a not-for-profit and using endowment funds or other sources to subsidize your operations, how much of that subsidy is really reducing your market-competitive rates versus subsidizing higher-than-benchmark operating expenses? (2) As a for-profit, would you be willing to develop an upfront/entry-fee pricing strategy where the cost of capital ends up in the middle between the seniors' after-tax fixed-income savings rates of less than 2 percent and your real cost of capital?

Sharpen strategic market positioning. Classic senior living misconceptions and current economic concerns must be addressed proactively now. Five commonly expressed concerns are: (1) "Costs more than I want to spend," (2) "Can't afford it," (3) "They'll probably raise the rent," (4) "I'll outlive my assets," and (5) "I want to leave a legacy to my children."

Here are two positioning statements that lay the foundation for expanding your financial advice and counsel to seniors: The first is, "The surprisingly affordable living alternative offers ambience, dignity, and maximum independence for many seniors in their later stages of life." The second is, "Assisted living is a sound, practical, and necessary 21st-century personal-planning imperative--just like health insurance, life insurance, and estate planning."

Now that we've defined the economic issues and provided a market-positioning platform, we need a cohesive plan.

Develop the financial plan. A customized financial plan for a particular senior and his or her family should contain at least four key elements: (1) How, specifically, your community's pricing compares with the senior's current cost of living. (2) A measure of the senior's affordability based on Social Security, pensions, conservative returns on their savings, and possibly putting newly liquidated home equity to work creatively. (3) The factoring in of annual service-fee increases. And (4) where necessary, it should show the family how prudent spend-down may be an appropriate option.

Finally, we need to expand financial-planning advice and counsel to the same level of detail with which we cover product benefits, features, and amenities. Approach financial planning much like an estate planner, insurance professional, or financial consultant--while always suggesting that the senior get independent advice.

Sales and marketing professionals frequently say: "These are great ideas, but don't you know how much precious face-to-face time I actually have with senior prospects?" The answer is yes, and I also understand how you've run out of credible and attractive themes for traffic-generating events and direct-mail, call-to-action strategies. Practical financial planning for the future is an excellent seminar theme likely to draw qualified traffic.

Now, more than ever, senior living must be positioned as a prudent financial-planning and investment strategy that offers an affordable lifestyle and health options while preserving an estate legacy.

RELATED ARTICLE: RESPONDING TO THE SENIORS' INVESTMENT RETURN DILEMMA

Five strategies

1. Develop strategic financial planning initiatives.

2. Make the government the senior's financial partner.

3. Focus on the value of money.

4. Sharpen strategic market positioning.

5. Putting it all together -- the senior consumer's customized financial plan

Jim Moore is president of Moore Diversified Services, a Fort Worth, Texas-based national senior housing and health care consulting firm. He is author of Assisted Living 2000 and, most recently, Assisted Living Strategies for Changing Markets.