Being candid with clients in serious relationships can help reveal or head off potential problems
For advisors, knowing and handling the financial affairs of a client as well as that of their partner is par for the course. But clients who don’t get married right away face a drastic course correction: a financial plan laid out for a single person will have to be adapted to accommodate a new wife or husband. To prepare for that transition early and easily, advisors have to be upfront with unmarried clients in relationships.
“When people go on first dates, they rarely ask each other about their financial behaviors and long-term wealth plans,” wrote Michael Rousseau, financial planner at CCR Wealth Management, on WealthManagement.com. That blissful ignorance tends to continue even in long-running relationships, which makes coming to terms with financial issues that much harder.
To avoid that trap, Rousseau suggests advisors can explain to their clients that honestly talking about and listening to financial goals and values with their partners, before marriage, lays the foundation for healthy wealth accumulation and marital harmony. With that advice, the client and their partner can talk about their financial habits, goals, and preferred approaches. “Clients usually take comfort in learning that their financial advisor would be happy to facilitate this conversation,” he said.
Couples also tend to not be open about their financial situations, including information like income, savings, investment holdings, and liabilities. An advisor may already know their client’s financial picture, but serving the prospective relationship well requires learning the same about the future spouse. An unpleasant surprise, like massive debt, could even cause an engagement to be called off.
Rousseau noted that some forms of debt are forgivable; those that aren’t could negatively impact an estate in case of a spouse’s unexpected death. “Meanwhile, real estate holdings can also have big implications,” he added. Couples where both members own a home, for example, may face a difficult choice deciding where to stay: is it better to live in a larger property located in a better neighbourhood, or a less ideal one with far more equity?
Finally, couples should generally be encouraged to pool their finances when they get married, as advisors have less flexibility and have less ideal options when they can’t see everything in one place. But in certain situations, like when the couple is running a complex business, it may be better from a credit-planning perspective to have certain assets or structures tilted toward one spouse rather than jointly.
“These are, of course, delicate conversations,” Rousseau said. “But when you don’t have them, you run the risk that your client may already be having them with their spouse’s advisor—which means you’re in danger of becoming their former advisor.”