Special needs children, who suffer from physical or mental disabilities or prolonged illnesses, need financial support for a longer period. Read on to find out how IFAs can approach these families, understand their needs and plan for them.
How to approach families of children with special needs?
Approaching such families is a challenge for IFAs as they are usually isolated and avoid external contact, says Ghaziabad based Jitender P. S.Solanki, of JS Financial Advisors. “I usually meet these families at workshops I conduct for various NGOs. I have also been getting many clients through media articles I write on a regular basis about the need for financial planning for families with childrenwith special needs,” he says.
Advisors can approach such families through special needsschools.
Challenges of planning for a family with special needs children
- Lack of awareness: One of the major challenges IFAs face while planning for families with special needs children is the lack of financial awareness. “Most of my clients, when I met them, were investing only in FDs and insurance plans; they were not enthusiastic about investing through mutual funds. It was only after showing them their future monetary needs and their actual financial position could I convince them to start investing,” says Jitender.
- Contingencies for medical expenses: Another challenge that IFAs face while planning for such families is providing for medical contingencies. “The medical expenses of such families is usually very high. Apart from a regular medical plan, these families also need special contingency plans for the child. This is because children with special needs are not eligible for medical insurance as they have a pre-existing condition,” says Col. SanjeevGovila, CEO, HumFauji Initiatives.
- Plan for 2 generations: Unlike traditional planning, where the financial planning is only for the lifetime of the client, advisors of special needs families have to set aside funds for two generations. “In most cases the child might survive the parents. So when we plan for such families we need to ensure that the child is provided for throughout his/her lifetime,” says Jitender.
- Guardianship and trust funds: Another important duty of the financial planner is to ensure that the parents set up a trust fund for the child when they are still around. “I insist on my clients setting up trust funds for their children and implement them during their lifetime. They can then understand and resolve any teething trouble that might arise. Another reason is that, I feel, when a trust is functioning for a long time the chances of it closing down are fewer,” says Col. Sanjeev.
Needs IFAs must provide for
Unlike traditional clients, families with special needs children require longer duration. They also require money frequently to fund for exigencies, says Sanjeev. “Usually you don’t have to plan for marriage and higher education of these kids, but instead focus on lifelong support and emergency funds. While regular families might have 6 months’ salary as emergency fund, these kids might need more than 12 months’ salary to be put aside for eventualities,” he says.
Advisors who cater to such clients prefer balanced funds to pure equity funds. “It is also important to note that these families are more risk averse, hence pure equity funds are not favoured. I usually go for a combination of debt funds, liquid funds and balanced funds while planning for such clients,” says Jitender.