A new romantic relationship isn’t something your client is likely to talk about, unless you ask. Do so — you can provide helpful guidance and win a new client in the process. Romantic compatibility doesn’t necessarily extend to financial matters. Advisors can help by asking the right questions.
Some people are savers while others are spenders, said Julie Seberras, head of wealth planning and practice management at Manulife Wealth. But if a couple doesn’t have honest conversations about money, their differences can cause tension.
An advisor can help facilitate that dialogue with the couple to see if they’re aligned.
“It’s very hard to look at somebody with love in your eyes and say: ‘I can’t stand that you buy too many pairs of shoes, or that you spent money on this giant motorcycle,’” Catherine Metzger-Silver, an Edward Jones advisor in Kentville, N.S., said.
Couples should discuss big purchases, ideally beforehand, “If you can’t talk about money and finances, which is very uncomfortable,” she said, “should you be with this person?”
There’s nothing wrong with keeping finances separate, Metzger-Silver said, and combining certain expenses.
For example, couples could agree to save a certain percentage of their income in a joint household account and an emergency fund. Then, they can plan for retirement together as they grow older.
If they do decide to keep individual accounts, transparency is crucial, Seberras said. Money infidelity can be in the form of secret savings or secret debt. It’s OK not to disclose an account balance to a partner, but they should at least know the account exists.
Debt incurred before a relationship should be kept separate, she said. While a partner can offer to help pay off some debt, they should not attach their name to it.
Again, transparency is important. “You want to talk about what debt you’re bringing into the relationship, how you want to tackle it as a couple, what your values are around debt and ideally come up with a plan on how you’re going to pay it down,” Seberras added.
Increasingly common law
It used to be that couples got engaged and then married before living together, Metzger-Silver said. Now lots of couples move in together first.
Advisors can get to know their clients’ partners early on and help couples see if they’re financially compatible.
If a couple decides to move in together, advisors should encourage their client to find a lawyer to write up a cohabitation agreement, said Michael O’Brien, an advisor with Sun Life in Mount Pearl, N.L. That can be changed to a pre-nuptial agreement should they become engaged.
“I’m very excited for them, but I also have that little rain cloud over my head to say, ‘What can go wrong here?’” Metzger-Silver said. “Things are wonderful and lovely now. Just make sure you’re on the same page with how things are going to roll out if some day you’re not.”
The definition of a spouse can vary too.
Tax law considers common law partners the same as married partners. But common law partners have fewer rights to a deceased partner’s estate than married ones, Seberras said.
Advisors should remind clients in new relationships to review their group benefits, she said. Claiming medical and dental benefits from a spouse’s plan saves money.
And if a person has a defined benefit pension plan, suggest they consider adding their partner as a beneficiary. Survivor benefits may be available, Seberras said.
“You have to consider all these definitions and what you’re working with,” she said.
O’Brien believes that both partners should attend client meetings. One person can take the lead in handling finances, but both should know what the financial plan is in case one person is incapacitated.
“You’re only as good as your worst player,” he said.
Client engagement
Metzger-Silver said she gets excited when clients announce an engagement. But she makes sure to address serious financial questions, like how much the wedding will cost and whether the couple still has the same financial priorities they had at the start of the relationship.
Large, elaborate weddings are common. One of her clients travelled to New York City to pick out a $30,000 wedding dress from a shop that appeared on the TV show “Say Yes to the Dress.”
Clients could use a line of credit or funds from a TFSA to pay for wedding costs and then repay the money with cash gifts from the wedding reception, O’Brien said.
Advisors can help make saving for a big wedding part of the couple’s financial goals. But they should illustrate the impact it could have on other priorities like saving for a home or paying off student debt, Metzger-Silver added.
It’s also wise to build in a budget buffer. “I highly recommend not going into debt to pay for a wedding,” Seberras said. “That is no fun.”