Spouses are - shockingly - all too easily overlooked in wealth transfer conversations. The author of this article examines how to address this issue.

The following brief commentary addresses the financial requirements of spouses. Their needs are all too easily forgotten amidst the obsession (so it can appear) with what Millennials want. As much as transfer across generations, transfer of wealth within them can be just as, if not more, important and urgent. Statistically, women tend to outlive their husbands and partners, which means that there is an important gender dimension at work. Wealth advisors who have spent years mainly dealing with a man - who is usually the "primary" client as the title of this article states - might discover that a widow, for example, is not going to be happy if she feels that an advisor does not understand her concerns. This underscores the need for advisors to talk to couples and children at an early point in the client relationship and not wait until the sadness of bereavement takes place. (It may even raise the question of whether the notion of "primary client" designation is always helpful.)

To address some of these points is Ned Dane, head of private client group at OppenheimerFunds. He has also been a speaker at conferences hosted by Family Wealth Report. The editors of this news service are pleased to share these views and invite readers to respond. Email tom.burroughes@wealthbriefing.com

At OppenheimerFunds, we’ve been encouraging financial advisors to expand their view beyond the needs of primary clients and, wherever possible, serve their clients’ whole families.  Considering the estimated $30 trillion wealth transfer from Baby Boomers to younger generations already underway (1) advisors who recognize the next generations’ need for financial guidance can provide a vital service while at the same time helping to ensure the future viability of their own practices.

The “whole family”
Yet the term “whole family” doesn’t apply just to kids and grandkids. Spouses are an essential and often-overlooked part of the equation. Advisors must be prepared to help manage the horizontal transfer of wealth - especially for women who, statistically speaking, are 3.5 times more likely than men to outlive their spouses (2).

Without taking an active and ongoing role in making decisions over the years, survivors may be unprepared for the complexities of managing their assets when that role is suddenly thrust upon them. And advisors who turn their focus to the spouse only after the death of the primary client may find that it’s too late to forge a new relationship. Indeed, some 70 per cent of women leave their family financial advisor after the death of a spouse.(3) 

Fortunately, advisors looking to deepen relationships with spouses start from a position of strength. According to The Generations Project, a recent OppenheimerFunds study, three quarters of investors surveyed said they discuss topics such as their personal finances or tax planning with an advisor. That provides a natural opportunity to expand the conversation.

Committing to communication
Women tend to favor a balanced approach and place a higher importance on the professional qualifications of the financial advisors they work with, OppenheimerFunds research suggests.  Other studies show that women (along with Millennials) are leading the way when it comes to incorporating environmental, social, and governance factors into their investment decisions. (4) Men, meanwhile, often display a greater degree of investing confidence, and may be more ready to accept the necessary risks in order to achieve long-term growth. (5) In other words, women and men can gain valuable perspectives on finances from one another.

Yet one of the first things to recognize is that fostering greater communication takes work. Without a concerted effort to make sure both partners understand the key issues and have a voice, true collaboration may not happen.

Indeed, investors who share decision-making paradoxically express a higher level of financial uncertainty than do those making decisions on their own. According to the Generations Project, 33 per cent of women who share responsibilities were unsure of their views on diversifying the assets in their investment portfolios, compared with just 12 per cent of those with a primary role in making decisions. A similar disparity (32 per cent -14 per cent) occurred among women asked about their interest in specific types of assets, and about their preference for active versus passive investment strategies.

The advisor mindset
To help bridge that gap, advisors may start by taking a close look at how they structure their own practices, and by making necessary adjustments. For example:

-- Think of yourself as a whole family advisor. The act of defining yourself in this way can help keep relationships with spouses and younger family members top of mind; 

-- Include families in business development. Reach out to spouses and family members. Put time in your calendar for conversations with them, and create an “organization chart” for each client family; and 

-- Know your client. The “know your client” rule is a cornerstone of any successful advisory. Knowing the values, goals and concerns of spouses and families is the next key step.

Thanks to the growing financial power and prominence of women, younger couples today tend naturally to take a more partnership-oriented approach to finances. Yet even as gender roles evolve, human nature and the complexities of finance suggest that productive collaboration between spouses will always take special effort—and that financial advisors will have a key role in making that happen.

Footnotes

Accenture: The Great Wealth Transfer, 2015.

https://www.barrons.com/articles/widowed-women-highlight-wealth-gap-between-genders-1536096020 

https://advisors.vanguard.com/iwe/pdf/FASGPESM.pdf?mod=article_inline 

https://www.barrons.com/articles/u-s-holds-off-on-russian-sanctions-for-now-1541784656 

https://www.massmutual.com/~/media/files/MM%20Womens%20Risk%20Study.pdf