Working with Couples Poses Challenges to Financial Advisors

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Financial advisors may be putting their business at risk when they work with couples but really only know one of the pair, according to a recent report by financial services firm TIAA-CREF, Get Closer: Solving the Couples Conundrum.

Why? Because working with only one spouse – typically the husband – leads the advisor to think that whatever the husband says is also what the wife wants. (We'll refrain from any editorial comment here.)

But if through death or divorce the wife as a secondary contact now becomes the primary contact, advisors don't know how she thinks or what she wants – and 70 percent of the time, she bails and takes her business elsewhere, the report states. (TIAA-CREF cites this number from a 2011 study of wealthy women investors by Spectrum Group.)

TIAA-CREF surveyed hundreds of advisors and thousands of high-net-worth investors to determine how they wanted to work as a couple with their advisor.

Here's the bottom line: “When you consider that 50 percent of marriages end in divorce, and women tend to outlive men by five years on average, retaining your female clients should be a business priority,” the report states. “So the time to build better relationships with women clients is now.”

The survey revealed these statistics that help drive home the business perspective:

  • Seventy-four percent of advisors know the retirement age and profession of one partner in a couple, but only 16 percent know the other partner's retirement age, and 10 percent know an unmarried client's retirement age.
  • Seventy-four percent know the husband's profession, 15 percent know the wife's, and 9 percent know the unmarried client's.
  • Fifty-four percent know the charities that the husband supports, while 13 percent know the wife's and unmarried client's.
  • Twenty-five percent of advisors said they tend to communicate with one spouse in a couple.
  • Thirty-two percent of advisors said their divorcing female clients took their business to another advisor.
  • Sixty percent of advisors' clients are joint, and in most cases, that means a husband and a wife. In that sense, 60 percent of clients are women.
  • Among investor couples, 17 percent said the wife hired the advisor. But 10 percent of advisors said the wives did the hiring. While a third (33 percent) of investors said the husband hired the advisor, 40 percent of advisors thought the same.

There's a darker side to this “couples conundrum,” too.

“The fallout of unequal access to the couple can be unexpected and, in some cases, lead to ethical and compliance issues,” according to the report. “In our research, almost half (48 percent) of the advisors surveyed said that one member of a couple had asked them to keep a financial transaction secret from the other – and almost all of them (88 percent) had complied at least once. Thirty-eight percent said they complied whenever they were asked. What kind of secrets? We doubt it was all about surprise gifts.”

The report cites advice from attorney Thomas Giachetti, chairman of the Securities Practice Group at Princeton, New Jersey-based law firm Stark & Stark, who notes that advisors who allow one partner in a couple to keep a secret from the other are asking for a lawsuit and maybe disciplinary action from regulators.

“The behavior could be construed as unscrupulous activity, especially if it takes place during a divorce,” the report states.

TIAA-CREF suggests that advisors consider if they'd answer “yes” or “no” to the following five statements:

  1. Whenever a married client emails me, I copy the spouse on the response.
  2. When a client becomes widowed, I wait for her to call me – she needs time.
  3. If a couple is divorcing, I offer to work with them both and with their attorneys – and I inform them that I cannot process any transactions until both attorneys have been informed.
  4. When a secondary client (the spouse) is concerned about her finances, I reassure her by saying, “Just let me handle it.”
  5. I know when my clients plan to retire – and I figure their spouses will retire at the same time.

The correct answers, according to the report:

  1. Yes
  2. No
  3. Yes
  4. No
  5. No

About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.

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