Spokane wealth advisers agree that when it comes to investing, a diversified portfolio is essential for long-term stability as it generally outperforms and protects against inflationary erosion. It’s that confidence in long-term market growth that allows them to see the potential benefits of the state investing long-term care funds into a mix of assets, including stocks and corporate and government bonds.

Earlier this month, voters approved Senate Joint Resolution 8201, a proposed constitutional amendment to allow the Washington State Investment Board to invest funds from the Long Term Services and Supports Trust Fund, known as the WA Cares Fund, into a broader range of investments. That board also handles funds from pensions and retirement accounts in this manner. 

As of Sept. 30, the WA Cares fund had a balance of $2.9 billion.

Advisers say that while the approach introduces short-term market risk, in the long run, diversification offers a better chance of keeping pace with inflation and ensuring the funds’ future payouts.

Mike Vickerman Jr., founder of Spokane-based Vickerman Investment Advisors Inc., says that with the new measure, investments are not limited to the stock market. The investment board also will be permitted to place that money into diversified investments, including U.S. and international equities, as well as emerging market equities, and different investment classes within fixed income. Those types of investments typically also have a strong presence in real estate investments, he adds.

“They can grow the assets more,” Vickerman says. “Some people have nervousness or fear that the money is just going to go to the stock market. That always raises fears in the public. I don’t know what their allocation will look like, but I’m very convinced it will likely be diversified in some way.”

Vickerman notes that the Washington State Investment Board also handles assets for the state’s pensions and retirement accounts. Those funds are in alignment with a personalized portfolio, he says.

“Having (funds) in a diversified portfolio over cash is a far superior product long-term,” Vickerman says. “With a diversified portfolio, part of the goal is to grow the assets to keep up with inflation or do a little better than inflation. I think that’s why it was on the ballot, and I also think that’s why it passed.”

Jim Czirr, senior wealth adviser and senior director for the Spokane office of Mercer Global Advisors Inc., which does business as Mercer Advisors, agrees that a diversified portfolio is essential for long-term stability.

“If there’s a goal you’re investing for that’s a decade or more away, just from a time horizon standpoint, equities have almost always been the best performing class asset that’s traditionally available to the investor,” Czirr says.  

Czirr adds that for large institutional portfolios, such as pension funds or trust funds, diversification is crucial to achieving growth and stability. In addition to equities, he notes that fixed-income investments, such as government or corporate bonds, play a critical role by providing liquidity and steadier returns during market fluctuations.

“I think the ultimate goal for this board is to match a few different things, and one of them is the need for liquidity, and the other is your time horizon,” Czirr says. “It’s up to the investment board to determine the right balance and allocation of how much stock, how much bonds they purchase and acquire.”

Czirr points out that insurance companies around the world — which need to have cash on hand to pay out policies in the event of a death, an accident, or fire, and any other unexpected incident that might happen — function by having a mix of equities and bonds in their portfolios. Bonds are helpful options to meet short-term goals and for immediate requests for liquidity, he says.

The Washington State Investment Board already manages public pension assets successfully and operates under a fiduciary duty to act in the best interest of Washingtonians, adds Czirr.

“It’s led by a team of professionals who are very capable and competent in regard to making these decisions,” Czirr says. “We’ve already entrusted them with the public retirement plan. We’re entrusting them with one more pocket of money.”

While wealth advisers emphasize the investment side of the fund, benefits professionals say the bigger question is whether the WA Cares Fund itself can provide meaningful long-term care coverage for Washington’s aging population.

Melissa Koontz, senior vice president of employee benefits for the Spokane office of Irvine, California-based Alliant Insurance Services Inc., says the state program was created in response to skyrocketing long-term care costs that have made private insurance unaffordable for many.

The WA Cares Fund, financed by a 0.58% payroll tax, provides eligible participants up to $36,500 in lifetime benefits — a modest amount compared to the average cost long-term care. However, the funds can help delay the need for Medicaid assistance, she says. 

“The question has always been, is there going to be enough money to take care of a massive aging population that will need that with a 0.58% payroll tax?” Koontz says. “I think that’s why proponents of this most recent law would say we should be investing those funds.”

Opponents of the measure, on the other hand, she contends, are likely people who already don’t think there is enough money to sustain the program to begin with. The additional layer of investing those funds into the stock market, not knowing how it will perform from year to year, intensifies that debate, she says.

Koontz notes how the law has also reshaped the private insurance market, prompting a wave of new long-term care products as awareness of coverage needs grows. Compared to the last couple of decades, products previously available that covered long-term care expenses had become largely unaffordable to the overall population, she says.

Alliant and other brokerage companies have helped introduce many businesses in Washington state to group long-term care products, Koontz says. When the original passage of the WA Cares Act was pending, there was a one-time exception for individuals that allowed them to purchase their own coverage from the private market, Koontz says. The industry saw a surge of companies implement these types of products during this exception period in order to allow individuals to opt out of the state plan. Because of that surge of buyers, it also lowered the cost of private long-term care products, she says.

“Perhaps most importantly, like other group insurance products, it removed the requirement for medical underwriting for individuals, which enabled a lot more people to purchase the products,” Koontz says.

Discussion of the WA Cares Fund among the benefits industry has quieted down in the last couple of years, she says. The proposed amendment isn't going to impact employers or insurers, as it is more focused on growing the fund, she adds. Ultimately, while the law itself has a polarizing effect on those who support or oppose it, the underlying issue isn’t whether people need long-term care or not.

“I think there is no question about whether the need is there,” Koontz says. “It’s the vehicle that people disagree on. What is the best way to make it economical for more people and to really cover the need?”