Engaging Both Partners: Why It’s Critical to Include a Non-Financial Spouse in Planning Discussions

Relationships are many things, and one of those things is a financial partnership. But what happens if one part of that partnership chooses to relinquish all decisions to the other? Due to lack of interest or lack of confidence, it is common for one partner/spouse to manage the financial decisions. However, this can be both problematic and risky for the non-financial partner.

The best financial planning processes engage both members of a relationship. It’s critical to find ways to both educate and involve the non-financial partner so that both are actively participating in the process over a lifetime.

Why It’s Important for the Non-Financial Partner to Be Involved in Planning

A comprehensive planning process explores a couple’s dreams – the full scope of everything they both might want. It then identifies goals – the things that are “must haves” for each of them to enjoy a quality life. Lastly, it identifies objectives – the list of things they set out together to do over a lifetime given the constraints that every family faces due to their earnings potential, assets, and fixed expenses.

It is common that each partner will have very different priorities. One person may be more focused on lifestyle factors such as travel, a retirement home, or hobbies, while the other is more concerned about healthcare and supporting extended family. If only one partner is involved, it may mean that important priorities for the non-financial partner/spouse are not fully reflected in the big picture.

Another potential issue is that the unengaged partner could become the sole partner due to death or divorce. The incidence of “gray” divorce – couples splitting in their 60s or 70s – is on the rise. This is not only risky but also stressful for the non-financial partner. Years of not being involved in the financial planning process, and the failure to gain knowledge and understanding, can be problematic when they unexpectedly become the sole decision maker. It can be overwhelming to begin learning about and making financial decisions while grieving or recovering from a divorce.

Financial planning is an ongoing series of discussions and decisions.  You and your advisor can take steps to encourage participation from your partner by recognizing your differences and including both of your dreams, goals and objectives throughout the process.

Recognize and Acknowledge Differences

To properly engage both partners, your financial planner should acknowledge that it is common and completely natural for each partner to play different and complementary roles. Financial decisions often fall into the day-to-day (managing the bank account and monthly expenses) and the long-term (setting aside money for retirement, investing for future goals, and managing important insurance decisions). One partner may manage the banking relationships and make sure there is enough money in the checking account while the other manages 401(k) and retirement savings decisions and any investment accounts. Both partners should be aware of short- and long-term decisions and understand the often-conflicting aspects of short-term needs and long-term goals.

Goal discussions should also delve into differences between partners about what is “enough.”  There can be real differences between what each of them views as basic or essential needs. One may view paying for their children’s college education as a must while the other may define a golf club membership as essential. Both are legitimate goals that need to be reviewed and, in some cases, negotiated.

It is also common for partners to have different comfort levels with risk. One may be more of a risk-taker while the other may find the stock market and risk-taking stressful. Understanding these differences is important to make sure both partners are comfortable with the plan.

Engaging the Non-Financial Partner

Both partners do not need to be present at every meeting, but it is critical to regularly touch base and communicate with the non-financial person.

An initial or annual planning meeting is a great place to start. And while it isn’t uncommon for the financial partner to do most of the talking, a financial planner should take steps to involve the non-financial person, too. This can be as simple as using body language and moving a chair to face the non-financial partner, asking questions to make sure they understand, and encouraging them to ask questions.

Sometimes those discussions require some mediation, especially when the financial person creates obstacles for the other partner asking more basic questions. For example, a financially involved spouse scoffed when his partner asked, “What is an ETF?” The financial advisor turned the question around and asked him to explain it. When he struggled to define this complex financial product, we were able to demonstrate that everyone benefits from asking questions.

To further engage the non-financial partner after a meeting, the financial planner may find it helpful to follow up separately, to reiterate what was covered and make sure it accurately reflects the couple’s goals. This provides that partner with an opportunity to engage and the advisor time to address questions which occurred following the meeting. It is also a good idea to send a summary email to both partners following meetings, especially when the meeting was attended by just one member. This helps to encourage the non-financially engaged partner to participate, raise questions, and identify new topics they’d like to make sure are addressed.

Managing Discussions Over a Lifetime

Engaging both partners in conversations over multiple years can also feel a bit like counseling.

For example, both parties should outline what retirement will look like, even down to the day-to-day details. This can mean working through potential landmines. One partner may want to schedule frequent travel, which can become difficult if the other hopes to provide regular childcare for grandchildren. One may want to use their wealth to support extended family, while the other prefers to give away their wealth to charity. A lack of shared interests, misunderstandings about when a partner plans to retire, or the reality of what it will be like being together 24/7 all need to be worked through. Proactive discussions can help both members navigate and solve for different expectations, potentially staving off gray divorce.

What about a financially irresponsible or spendthrift partner.  For example, if one partner bought a Porsche without consulting the other. Even if it seems like a simple annoyance, it affects the financial plan and needs to be addressed. Both partners should understand their decisions have an impact on their combined long-term goals and objectives. If buying the car means servicing a bigger debt, it may reduce their ability to fund other choices. They will need to address what that might mean – working a few years longer, working harder now to earn more money, or potentially abandoning another goal.

Plans naturally must respond to changes that are beyond anyone’s control. They are not static and need to be revamped over time to reflect job changes, health issues, and lifestyle choices. For example, the pandemic disrupted some families’ careers and lifestyles. Pandemic-fueled job changes may have changed a couple’s financial profile. For others, reduced travel during the pandemic left money to be allocated to other goals. Sometimes disruption can lead to opportunities, and in periods of change, it is critical to make sure both partners are engaged and aware of the lifetime impacts on savings or spending goals.

While engaging a non-financial partner may take some work, it is critical for both partners to be involved in a joint planning process, and in regular updates to the plan. This is not only important in ensuring the plan’s effectiveness, but it is also a crucial part of making sure that the non-financial member’s needs are accurately reflected, and that they are both prepared to manage their financial wellbeing, should they be on their own at some point in the future.

 

Wealthspire Advisors is the common brand and trade name used by Wealthspire Advisors LLC and Private Ocean, LLC, separate registered investment advisers and subsidiary companies of NFP Corp.
Accredited Domestic Partnership AdvisorSM and ADPA® are trademarks or registered service marks of the College for Financial Planning in the United States and/or other countries.
This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. ©2022 Wealthspire Advisors
Julie Williams

About Julie Williams, ADPA®

Julie is a wealth advisor in our Delafield, Wisconsin office.

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