The death of a spouse brings with it much more than grief. It often means a significant drop in income, especially for women. Financial advisors can have a key role in helping to mitigate — even prevent — the loss in income.

Widowhood and its repercussions are a huge issue for society and for the financial profession, says Brigitte Neumann, executive director of the Nova Scotia Advisory Council on the Status of Women. “Women are far more likely to be widows,” she notes. “And unattached women are far more likely to be worse off financially. They are the poverty group.”

According to a study conducted by Statistics Canada, the median income for women five years after being widowed had dropped by more than 15%. For men, the situation was reversed: five years after becoming widowers, their income was 5.8% higher.

In some cases, that drop in women’s income put them below the low-income threshold — and kept them there. The study, which looked at men and women widowed between 1993 and 2003, found that almost 9% of widows and 5.1% of widowers were living below the poverty line.

Although women with lower incomes were hardest hit, the StatsCan study found that the financial impact of widowhood was felt at all income levels. Women with the lowest incomes saw their fortunes plummet 9.8% in the five years after their partner died. For women in the highest income brackets, this figure was 8.6%.

“The vulnerability of older women is unspeakable,” Neumann says.

Financial advisors need to speak up. Helping clients prepare for the worst is an essential element of service. “These are not easy conversations, but they have to happen,” says Patricia Lovett-Reid, senior vice president with TD Waterhouse Canada Inc. “As an advisor, it’s a role that you play. You get very intimate. You get to know your clients’ desires. You’re facilitating.”

UP-TO-DATE WILLS

Lovett-Reid recommends advisors start with the basics: ask the client couple if they have wills and if those are up to date. If no wills exist or are not up to date, advisors need to discuss with clients what they want to happen with their assets in the event of their death.

“It seems so simplistic,” Lovett-Reid says, “but it is the foundation. People know where they stand, but they need to be reminded.”

Clients also need to understand the financial ramifications of losing a spouse. That can be a hard discussion to have, especially when people feel immune from the situation being discussed. “We don’t want financial advice when we should have financial advice,” says Neumann. “We don’t want to think about these issues.”

But this helps make the issues manageable. Providing a checklist, for example, of what documents people will need when a partner dies — marriage certificate, death certificate, statutory declaration, inventory of assets — can be immensely helpful.

Advisors also need to identify opportunities early on for ensuring a financially healthy lifestyle later. Such planning, says Lovett-Reid, should not be dictated by rules and regulations. “Don’t let probate drive the estate-planning decisions,” she says.

Questions around gifts and gift-giving also have to be asked. “We are in the age of philanthropic opportunity that is going to be a tidal wave,” says Lovett-Reid. “You will see this feeling of wanting to give back — and people will want to explore the tax advantages.”

For business owners, the financial situation is usually more detailed and more complex. “Many business owners don’t appreciate that goodwill embedded in the business is actually embedded in themselves — and the business is worth far less without them,” says Howard Johnson, president of Veracap Corporate Finance Ltd. in Toronto. “Advisors can help by helping owners realize the actual level of goodwill and how to transition goodwill from themselves to the business itself.”

Any discussion that has at its core the fact that loved ones will die and loved ones will be left behind to live alone is not easy. But it is one that cannot be avoided, and one that more and more clients are looking to their advisor to initiate.

“This is part of the advisor role. Advisors have to be proactive,” says Johnson.

ONGOING DISCUSSIONS

Such discussions are not one-time events, nor should they be. As clients move through their lives, advisors need to be armed with information to help clients plan for what lies ahead. That means advisors need to be more than financial experts. They also need to be coaches, mentors and great listeners.

@page_break@For women, in particular, financial planning is about ensuring that they can take care of themselves and their families when the unthinkable happens. A female investor poll conducted by TD Waterhouse found that three out of five women who have personal responsibility for managing household investments say that achieving financial independence was the reason they became interested in investing. Seventy-seven per cent said that “saving for retirement” was the issue that first got them interested. Yet more than one-third admitted they do not know what proportion of their current household income they will need to have a comfortable retirement.

“That clearly indicates they haven’t tried to calculate their retirement needs or haven’t sought professional advice,” says Lovett-Reid. “Even with the best intentions, if you don’t have a goal, you can’t have a plan.”

Women who have a smaller investment portfolio (less than $50,000) were far less likely to have a financial plan or use the services of a financial professional, the poll found. But even among those who manage a larger portfolio, more than one-third stated they do not work with a financial planner.

Those are disconcerting statistics — and become more disconcerting when placed in the current Canadian context: the first baby boomers turn 60 years old this month. And every 10 seconds for the next 10 years, another boomer will join those ranks.

When the aging population is combined with the fact that women, on average, live six years longer than men, the reality is that more and more women will be spending part of their lives as widows. And they will need help from their financial advisors. IE