Money issues can be a major source of friction for married couples, sometimes even contributing to the causes of divorce. It is therefore important that you ensure that couples who are your clients have a complete understanding of each other's financial situation and expectations.
Referring to a survey of 1,000 Canadians conducted by Pollara for the BMO Wealth Planning Group, Josh Miszk, vice president, investments at Invisor Investment Management Inc. in Oakville, Ont. says that, "98% of married couples think it is important to be on the same page financially as their partner." However, the survey also found that 43% of married couples have different investment styles and about one-quarter of them fight over money.
In spite of the importance of money issues in a marriage, most couples place them on the back burner: this often leads to regrets about not addressing these issues in a timely fashion.
Here are some tips to consider when discussing money issues with client couples.
> Keep it open and honest
Miszk says it is important for couples to be open and honest when it comes to discussing money. "First and foremost, no surprises should pop up." The discussion should not be about "what's mine and what's yours, making it easier to digest," Miszk says. This facilitates planning and achieving short- and long term goals as a couple. Miszk recommends having all banking, credit card and investing information in one place that is accessible by both spouses. It is important to recognize that both husband and wife must be part of the planning process and that you must get the buy-in of both spouses in the decision-making process.
> Make it an on-going process
Miszk suggests that you set aside a dedicated time, at least annually, for spouses to discuss their finances with you. This will give you the opportunity to set quantifiable goals and get a deeper understanding of the wants and needs of each partner. For instance, one spouse may want to buy a sailboat while the other wants to pay off the mortgage first. "This allows you to figure out a compromise as well as to identify what is important to each spouse," says Miszk. At the same time, periodic discussions allow spouses to stay on top of their goals and enable them "to visualize their dreams as they unfold," Miszk says.
> Create a budget
Miszk recommends creating a budget based on the combined incomes of both spouses: both spouses must be comfortable with the budget. You should advise them to keep track of their spending and to ensure that they stay within the budget to achieve the goals which they themselves set in the first place. He recommends that they reward themselves periodically for achieving their spending targets by spending on something they both enjoy.
> Recognize differences in individual risk profiles
You must recognize that spouses will have different appetites for risk taking when it comes to money and investing, cautions Miszk. In general, men tend to be more aggressive investors, whereas women are more conservative. In some cases, men prefer to take the lead on financial issues but that doesn't mean that women knowingly want to take a "back seat." He suggests that you embrace the differences and customize their portfolios based on their individual risk tolerances.