If you’ve had a chance to look over the results of our recent consumer survey of over 420 prospective residents of continuing care retirement communities (CCRCs or “life plan communities”), then you know that one of the biggest, if not the biggest, reason for delaying a decision to move is uncertainty or concern regarding the financial management of the organization. In fact, among the four answer choices we provided within the survey, this scored a whopping 32 percent higher than the second most popular answer, which was paying an entry fee.

Indeed, one of the most common questions we get from our followers at myLifeSite is: “How can I tell if a CCRC is financially sound?” Doesn’t it make sense then that if CCRCs could satisfactorily respond to this concern, they could positively impact their sales and occupancy rates? Yet, I wonder how many CCRCs proactively address this topic with prospective residents.

A topic residency counselors should emphasize

I recall that during my years as a financial advisor, whenever a client’s financial plan pointed to a need for additional life insurance, we would present the coverage options to the client. That discussion would almost always include a one-pager about the insurance company’s financial strength. Why did we do this? Because we knew it would help give the client the confidence needed to move forward with purchasing the coverage.

There is an important parallel here. Buying life insurance helps a family enjoy today by giving them peace of mind about tomorrow. But that peace of mind is diminished if there is doubt about whether the financial protection will be there when needed. The same could be said about choosing to live in a continuing care retirement community.

From discussions over the years with CCRC staff and prospective residents, my impression is that during the conversations with prospective residents, this topic often takes a back seat to others, such as lifestyle, floorplans, wellness, amenities, etc. Certainly, these are all very important aspects of the CCRC decision. Yet none of these aspects really matter if there is a lack of clarity—or even worse, confidence—regarding the financial well-being of the organization.

>> Related: 6 Key Considerations for Your CCRC Decision Process

Boosting confidence in the community’s financial health

If I put myself in the position of the prospective resident, here’s what I think I might like to hear from a member of the CCRC sales staff sometime at the end of the first meeting or during my second visit:

“Mr. Breeding, here at Serenity Now Retirement Community, we recognize that while there are many wonderful benefits of living here, choosing the right CCRC is also an important financial decision. Therefore, if you have any questions about the financial management of our organization, I want to be sure they are adequately addressed.

In the meantime, here’s a summary sheet that describes a little bit about our organization’s history and track record, a break-down of a few key financial markers that we believe are important, and a short description of the state’s financial regulation and oversight of CCRCs. I am also happy to put you in touch with a member of our residents’ council, which works very closely with our board and whose members have vast amounts of financial management experience.”

Simply by virtue of the staff member proactively saying this to me, I would know I’m dealing with a professional and transparent organization, and one that appreciates the value of resident involvement. This approach would give me a great deal of confidence and likely would separate this CCRC organization from the competition.

Of course, in most states, CCRCs are required to provide prospective residents with a disclosure statement, which typically includes a copy of the audited financial statements. Yet, the average person can’t make heads or tails of the information. And without in-depth knowledge of how CCRCs operate, which often requires an understanding of actuarial practices and contract types, even their own financial professionals may not be much better equipped to explain the data.

>> Related: Crunch the Numbers: Staying in Your Home vs. Moving to a CCRC

Innocuous reasons for avoiding the issue

The obvious next question then is: Why would an organization ever not be forthcoming about their finances? One of the most common reasons may be the residency (sales) counselor, who is typically the main point of contact for the prospective CCRC resident, is not comfortable having the conversation.

This is understandable. After all, many who serve in this role do not have a background in finance. Even if they did, the financial model of a CCRC is a different animal from a typical operating business. So, the question then becomes how best to integrate the appropriate member of the finance team into the discussion to adequately address the prospective resident’s questions.

Another reason might be that the residency counselor fears it might be a distraction—that it could sidetrack positive momentum and perhaps delay the prospective resident’s decision process. While I certainly don’t accept this as a valid reason, I will say that I at least understand this concern. Anyone who has ever been in sales knows the importance of keeping things simple and not causing unnecessary distractions.

But selling the CCRC lifestyle is much different than selling other products, and the organization’s financial standing is by no means an unnecessary distraction. Choosing a CCRC may be one of the biggest decisions a person ever makes. It’s a lifestyle, housing, healthcare, and financial decision, all wrapped up in one.

Because the stakes are high on many different levels, a higher level of trust and confidence are required. Aside from simply being the right thing to do, residency counselors should understand that providing prospective residents with information that helps them feel more confident about this decision will only help their results in the end.

>> Related: How Do I Know If a CCRC is Financially Viable?

When the numbers aren’t stellar

Finally, the reason an organization may be less than forthcoming with their financials is that they are not comfortable with what the data shows. In some situations, this may unfortunately be due to financial mismanagement. In other cases, it could be the result of external forces, such as a disruption in the marketplace or the economy. One might argue that the latter may still be due to financial mismanagement if planning has been too short-sighted.

Either way, poor finances are generally a reflection of low occupancy, and this situation creates a bit of a catch-22 for the organization. Suppose, for example, that a new management team has been brought in, and they are trying to do all the right things, yet occupancy remains low as a result of the previous management team’s actions (or inaction).

By proactively choosing to reveal less-than-stellar finances, the organization may still struggle to grow occupancy, and thus improve finances. But does this mean the organization should not be forthcoming about their finances? Certainly not. In this case, the prospective resident will really want to understand what plans are in place to turn the tide and get the organization back on solid ground, who is backing the community financially, and more.

Clearly this is not an enviable situation for any organization, and it speaks to why strong financial management should be a top priority of every CCRC. Financial management has a huge impact on sales and the ability to grow occupancy, whether the organization realizes it or not.

>> Free Resource: Guide to Evaluating the Financial Viability of a CCRC

Money matters

CCRCs offer a great solution for many older adults: a healthy lifestyle today with a plan for the unknowns of the future. But given the long-term financial commitment required to live in a CCRC, prospective residents are too often turned off by a lack of confidence in a community’s financial standing—perhaps even when there is no real cause for such concern. I believe this is one of the biggest barriers standing in the way of a better tomorrow for many older adults.

That being said, financial viability is a crucial topic for prospective residents to discuss with the communities they are vetting. If a CCRC is less-than-eager to share financial data with you, it is worth digging deeper. It may simply be that the residency counselor isn’t confident in their knowledge of this subject, or it may be a red flag of a larger issue with the community’s financial management or occupancy rates.

Either way, it’s important to get to the bottom of this topic so that you can understand the CCRC’s financial standing and make an informed decision about how it may impact you in the long run.

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