Spouses are not having the necessary important conversations when it comes to retirement planning, new research from the U.S. reveals. This silence has resounding implications for financial advisors, in terms of either building their businesses or losing clients over time.
The 2011 Fidelity Investments Couples Retirement Study — conducted by Boston-based FMR LLC, known as Fidelity Investments, this past summer — found that husbands and wives approaching retirement and those currently retired were “struggling with overall communication, planning and management of their retirement finances.” Only 41% of respondents said they handled their investment decisions for retirement savings together. Although 58% of couples said they work with an investment professional, only 35% said they worked jointly with that professional.
This lack of communication is not unique to the U.S.; it is a Canadian problem as well. “We see this day to day,” says Keir Clark, associate director of wealth management with ScotiaMcLeod Inc. in Fredericton. “One or the other spouse — it [is usually] the man — tends to take the lead in the relationship.”
“It’s Venus and Mars,” notes Mike Himmelman, an investment advisor with Citadel Securities Inc. in Halifax. “I’ve noticed there are [big] differences between men and women. Men are usually more aggressive — that’s the way they’re wired.”
Women also may be less enamoured with the topic of retirement planning, notes Clark, who is also a senior wealth advisor: “There’s a very profound lack of interest. The nuts and bolts of retirement planning is one of those things most people don’t like to do. It’s not quite as bad as going to the dentist — but almost.”
The gender divide was apparent in the Fidelity study, which found that wives often are not as involved and/or are less knowledgeable about their retirement finances than their husbands — especially regarding financial confidence, engagement, awareness and their approach to investing.
For example, when asked how much money they expect their income sources to generate monthly in retirement, more than twice as many wives (32%) as husbands (15%) said they do not know.
With respect to assuming full responsibility of the household’s retirement finances, the divide was equally marked: 72% of husbands said they are completely confident in their ability to do so, compared with only 35% of wives.
This lack of engagement may mean bad news for advisors if the husband dies first, as is most often the case. Says Clark: “Almost half of spouses leave their current advisor when a spouse dies.”
“I deal with the husband; hubby dies, and I lose the client,” says Himmelman. “I’ve won the battle [in the] short term, but I’ve lost the war — to my chagrin.”
Thus, encouraging both husband and wife to participate in retirement planning together is essential, he adds: “It’s important to have both people involved in the process. Then, it makes for a very easy transition.”
There may be some reluctance, but advisors need to push their clients to include their spouses in retirement planning, notes Clark: “I recommend to my clients that they bring their spouse to the next meeting. They’ll often try to skirt it; we try to insist. This is a significant issue in [their] life.”
At that subsequent meeting, Clark often begins with a review of non-financial issues — areas of potential disagreement and divergence.
According to the Fidelity study, which analyzed retirement expectations and preparedness among 648 married couples, one-third of couples either don’t agree or don’t know where they plan to retire, while almost two-thirds of couples approaching retirement don’t agree on their expected retirement ages. Roughly three-quarters of all couples disagreed on whether or not they even have completed a detailed retirement income plan.
Clark gets couples talking about these issues — and more — by providing them with ScotiaMcLeod’s Visualizer Workbook. Together — and privately — couples answer questions and provide information about key elements of retirement, including leisure, support networks and accommodation. Only one page, dealing with the financial implications of the couple’s retirement vision, is shared with their advisor.
The workbook opens the door to the use of a successful approach that advisors can put in place for couples planning for retirement, notes Clark. There are four components to that approach: first, discuss non-financial goals; then, budgeting; then, effective administration; and, finally, investments.
“It really begins with non-financial life goals,” says Clark. “If you tack that to the front of the line, it stops you from going right to the financial formulas and standard approaches.”
Involving both spouses in retirement planning is likely to take on greater importance for advi-sors, says Himmelman: “This will be a bigger issue moving forward. People are getting older.” IE