You’ve probably got some married couples in your book who can’t agree on anything … which restaurant to go to, where to vacation, much less what sacrifices to make to save more or how they should divide their estate after they die.
And while opposites can and do attract, it creates havoc for you as a financial advisor trying to get everyone on the same page with investment decisions. You’re not trained to be a marriage counselor!
Consider the following scenarios where married clients often have difficulty agreeing.
Couple A “The Reluctant Spouse”: In this case, one spouse eagerly seeks financial advice, and the other is hesitant, even skeptical. One spouse returns your emails and phone calls, the other does not. But in some cases the spouse who doesn’t think they need your advice is the principal breadwinner in the marriage! How do you respond?
Couple B “The Spendthrift”: Here, one spouse is a relentless saver, careful with every penny, and thinks conservatively about everything from grocery purchases to the price of financial advice to college education. The other is the complete opposite, spending money on what the other spouse sees as frivolous items, making frequent online shopping purchases, pursuing expensive hobbies, and harboring unrealistic expectations about sending the children or grandchildren to pricey private universities. What’s your approach with them? And again, what if the over-spender is the primary breadwinner? Does that make a difference?
Couple C “The tortoise and the hare”: In this marriage, one spouse wants to invest everything in “safe” investments like T-bills or CDs and is deathly afraid of any risk you might propose to them. The other spouse is day-trading cocoa futures on Scottrade, and thinks your mutual fund approach isn’t nearly aggressive enough. What’s the solution to this Odd Couple drama?
Let’s just say, we hope all three scenarios aren’t going on in the same marriage or you’ve really got your hands full! But it’s likely you’ve seen one or more of these client situations or a combination of them in your daily work.
The Reluctant Spouse—Key Principle: Show Your Value
When one spouse wants to work with you and the other doesn’t, you’ve really got a dilemma on your hands. Because ultimately your advice affects both and you need their agreement. You can try to be patient and persuasive or you can offer them an ultimatum to get on the same page or find a new advisor. But it’s vital to get buy in from both spouses. I know some advisors who will not work with a couple unless both spouses show up at all meetings and fully participate. The key to remember is that your job is always to convince the less enthusiastic spouse. Don’t get caught up in talking only to the spouse who agrees with you. You will have to continue to educate the skeptical spouse and persuade them as a first step in any proposal. Try to discover the source of their skepticism, and where appropriate, demonstrate your value through case scenarios and examples.
Setting Spending Goals—Key Principle: It Takes Discipline to Succeed
When one spouse spends like a drunken sailor and the other hates it, there can be real trouble in a marriage. (Of course there’s also trouble when both spouses spend like drunken sailors, so it’s probably good to look on the bright side if you’ve got at least one saver spouse.) Spouses probably both overspend in their own areas of enjoyment. It’s human nature. Getting them going on a budget plan where they can talk about their long-term and short-term goals and how their decisions today affect their future is paramount. Both spouses need to see that today’s impulse buys influence their future lifestyle. There’s a fine balance between enjoying life now, and being short-sighted about the future. Taking an “Eat, drink and be merry for tomorrow we die” attitude never got anyone a retirement dream home. As clients reveal their goals to you, try to find ways to make them more tangible, with pictures and timelines. And run financial scenarios showing them the impact of their daily decisions.
The Risk Divergence—Key Principle: Diversification and Agreement
If you’ve got a couple where one spouse wants to be extremely aggressive with investments and the other does not, it’s vitally important to have both complete separate risk tolerance questionnaires. (This should be standard practice regardless.) It’s important when setting up an Investment Policy Statement to have the statements about risk reflect both parties in the marriage. Example: “I am willing to accept a loss of 10% in one year.” Find out about the risk-averse spouse’s past experiences that have made them so conservative, and same with the riskier spouse. In my example above, you could ask the more risk tolerant spouse to bring in their Scottrade statements. Try to understand what motivates them without judging. Ask a lot of questions to better understand why they’re behaving as they do. There’s usually always a story behind everything. And then let the results speak for themselves. The problem with trading commodities futures, of course, is that it is a fickle strategy, prone to severe swings. (And over time, your client’s statements will probably reflect that extreme fluctuation—show them a smoother, better way, and educate them about how severe losses erode principle, and make achieving goals more difficult.)
While it takes patience to work with “The Odd Couple” clients, your persistence can pay off. If the marriage is fundamentally strong (and that’s a big if) then you should be able to find a way to work within the parameters of their unique marriage dynamics. If not, maybe it is time to agree to part ways. There are plenty of couples who want your advice and won’t present you with constant disagreements.