Page 30 - Newcom

holistic planning 29 Dr. Samir Sinha, director of geriatrics at Sinai Health System in Toronto, says biomarkers can be useful in pre- dicting certain diseases but not others. “The biological testing that’s done, at least in Canada right now, is for things that are pretty black and white: Do you have this or don’t you have this?” says Sinha, who served as the expert lead on the Ontario government’s sen- iors strategy in 2012 and is co-chair of the advisory board for Ryerson University’s National Institute on Ageing. Certain genes associated with breast cancer are “highly predictive,” he says, whereas the gene associ- ated with Alzheimer’s is less so. Significant family history of a specific illness can also be a strong signal. The technology exists to test for the presence or absence of something — whether a person has a bio- marker or not, Sinha says. “The problem is we don’t know what to do with the answer. We don’t know what the answers mean. I can’t tell you with any certainty whether you have that disease.” The science might evolve to the point where a financial planner recommends clients get tested for certain diseases, he says; for now, he’s not convinced of the benefits. McClanahan prefers to ask clients about their health and apply their answers to financial planning. She starts with a life expectancy of 100. If the client’s finances are fine for that lifespan, she doesn’t go into greater detail. “If, however, it looks like they’re going to be struggling to have enough, that’s when it’s important to look at their health and look at their life expectancy,” she says. “If you have a 350-pound diabetic who smokes, you shouldn’t be planning for that person to live to age 100.” In such cases, she adapts their finances accordingly and encourages them to adopt healthier behaviours. Interpreting the family tree Lyle Wolberg, partner and senior financial life advisor at Telemus Financial Life Management in Detroit, Mich., uses a tool that helps clients track their family health hist- ory for financial planning purposes. Rather than relying on testing, the tool called Genivity builds a family health tree based on information gathered by the client or a close relative who acts as the family administrator. The platform helps clients discover health facts that could impact their financial plan, Wolberg says. If a client learns about cases of a specific illness, for example, Wolberg may recommend purchasing insurance. “People typically don’t want to buy insurance unless there’s an illustrated need for it,” he says. “There are opportunities to show how it could be used as a leveraging technique because you’re still insur- able. Once you’re not insurable, it’s off the board. You can’t utilize that tool for financial planning.” On the other hand, if the family history is exception- ally healthy, he may adjust a client’s asset allocation. “You need to be a little bit more aggressive,” he says. “Because the timeframe is longer, the risk is not so much short term — it’s outliving their wealth and their money. They need to keep pace with inflation for longer periods.” Wolberg says Genivity is used to tweak financial plans; its findings aren’t taken as gospel. “As a fiduciary you have to be a little bit more conservative,” he says. The service has proven useful to his practice in another way. He says health discussions have strengthened his rela- tionship with spouses who are less involved in financial deci- sions, and introduced younger family members to the firm. 30 OCTOBER 2019 What do our genes tell us about financial behaviour? While scientists and corporations invest heavily to research the rela- tionship between genes and aging, researchers in the field of neuro- economics are conducting experi- ments to determine the link between genes and financial behaviour. Scientists at Northwestern Univer- sity found that variants of two genes that regulate the transmission of dopa- mine and serotonin play a significant role in risk-taking when it comes to investments. The paper, published in 2009, found that risk-taking varied by roughly 25% based on which gene variant an individual carried. In 2009, academics from New York University, the University of Cambridge and the Stockholm School of Eco- nomics also found that genes account for roughly one-quarter of variation in portfolio risk. The researchers matched portfolio choices made after pension reform in Sweden with the country’s twin registry to show what role genes play in financial decision-making. More recently, a researcher from the University of Washington’s Foster School of Business also used the Swedish twin registry, as well as the Swedish gov- ernment’s record of citizens’ finan- cial transactions required under its former wealth tax. Foster’s Stephan Siegel and Henrik Cronqvist from the China Eur- ope International Business School compared the records for identical twins, who share 100% of their DNA, and fraternal twins, who share 50%, to isolate the genetic component of financial behaviour. They found that roughly 30% of the variation between individuals is attributable to genetics—more than the combined factors of age, gender, education, wealth, home ownership and parenting. At least half of the variation between people, they said, is shaped by individual experiences. What does this mean for financial planning? Probably nothing, for now. It could be some time before gene variants make their way into know- your-client forms. But it’s possible that a decoded genome could even- tually be used. Siegel believes asset management will increasingly rely on data and genetics to the point where client profiles are developed through a combination of transaction history and genetic information.