Many advisors devise strategies for retaining widowed clients. But too few grapple with the basic question, when dealing with married couples, of whom their client really is: him, her or both?
“It’s true, many advisors fail to ask themselves that,” says Eleanor Blayney, the CFP Board’s consumer advocate. “They defer to the male, or the more vocal, or the wealthier of the two — and we’re learning that needs to be corrected.”
One reason the issue requires attention is that if the more assertive spouse dies first, the survivor — usually the wife — is left with an FA she sees as her late husband’s counselor, not hers. As a result, up to 70% of surviving spouses leave their advisor within a few years of losing a life partner.
Another reason advisors should know how to handle both halves of a client couple is the high divorce rate. Nearly half of all U.S. first marriages end in divorce — with financial troubles cited as a primary cause. Add to this the prevalence of so-called financial infidelity between partners, and the odds of losing business are high.
“This is a real-world situation advisors need to address,” Blayney says. At the same time, she says, there is no universal standard governing the treatment of client couples.
Therese Nicklas, a planner with U.S. Wealth Management in Braintree, Mass., whose team manages about $100 million, has given the matter a lot of thought. For her, gender, demeanor or status as wealth creator aren’t the factors that determine which person in a couple is her client. It’s how they do their taxes. Joint filers are treated as a single client, “because when you’re doing planning, you’re referring to the tax returns,” she says. Even if they don’t file jointly, she adds, married clients who wish to be advised as a unit are handled that way at her firm.
Mark Martiak, an advisor with Premier Financial Advisors, who manages about $350 million, takes the default position that both members of a married couple are his clients. In fact, he insists couples who work with him be “jointly involved in and engaged with” all phases and aspects of the planning process. Where one-half of the partnership happens to be more knowledgeable about financial matters, Martiak makes a point of bringing the other up to speed.
This view of married clients means he won’t keep secrets — not if the secrets affect the couple’s joint finances. So if a husband said he planned to cut his wife from his will or drop her from an insurance policy, Martiak would insist the client make a clean breast of it. And if this disclosure didn’t come, he’d end the relationship with the couple. “It would hurt, but it’s the right approach,” he says.
Martiak, who is based in New York, doesn’t always tackle things head-on, however. If he had reason to believe one spouse were hiding significant spending from the other, he says, he’d address it as neutrally as possible in terms of setting a responsible budget for the whole family.
But where one spouse’s vices don’t dent the couple’s household finances, mum’s the word. “You can’t say anything,” Martiak says. “It’s not your business.”
Spell It Out?
Carolyn Ohlsen of tax and estate law firm Lowenhaupt & Chasnoff in St. Louis, Mo., thinks advisors should put the ground rules for their relationship with married clients in writing. These could take the form of disclosures in the firm’s ADV brochure or a separate “advisory agreement” that “would determine both the identity of the client and specific expectations,” she writes in an e-mail.
But the CFP Board’s Blayney says she knows of no such documents in actual use. For now, most advisors who work with client couples make only verbal disclosure of their policies, at the outset of the relationship. “I think they’re wary of burying relationships in paperwork,” Blayney says. “Or else they don’t want to give things the air of a prenup.”