Septuagenarians who’ve let their spouses manage the couple’s investments for decades are unlikely to suddenly become interested in being day traders, but they may be more committed to learning about their wealth than many advisors realize.
Not only are both spouses starting to think more about their mortality, “no one wants to have to have to ask their children for money,” says Gail Cohen, chair and general trust counsel of Fiduciary Trust International (FTI), which as of Dec. 31 had approximately $94 billion in assets under management and administration.
Usually it’s the woman who has taken a backseat in overseeing a couple’s investments. “It could happen the other way, but I don’t see that as often,” says Cohen, “and perhaps it’s more generational at this point.”
Sometimes it’s how a couple divided the household chores, she says, or maybe the uninvolved spouse was busy with other interests. It isn’t necessarily tied to which spouse brought wealth to the marriage (either or both could have) or to education. The hands-off spouse “could be extraordinarily bright with advanced degrees, but not in this area,” she says.
For some wives, “all of a sudden there’s a real recognition or realization that the husband might not be around anymore,” says Cohen, so they want to get involved. It’s also very common for the spouse who manages the money and oversees the wealth to begin to get anxious in their 70s about their partner’s more limited financial awareness, she says.
“When you hit your 70s, all of a sudden your parts start to deteriorate more quickly,” she says, and facing mortality becomes an especially big concern for the spouse with the money know-how. “They say, ‘Who’s going to be me when I die?’” she says.
This fear often kicks in at a younger age when a money-managing spouse is prematurely ill, says Cohen, although some couples don’t worry about this until their 80s. She has also observed a lot more people doing planning during the pandemic.
In addition to facing their own mortality, they’re seeing more people around them die who perhaps didn’t do proper planning, she says. “The changes in the administration and the tax laws have also prompted people to figure out what they’re doing,” she says. “We’ve seen a lot of people really digging down into their estate plan.”
Although an investment-savvier spouse doesn’t necessarily expect their mate to start picking stocks and doing all the things they do, says Cohen, they do want them to be intelligent enough about financial issues to hire the proper advisor and ask the right questions.
When she and her colleagues start working with new clients, the first thing they do is look at their estate planning documents to understand what the plan is, how the assets are owned, and how they’ll be available for the surviving spouse.
“We then will map out exactly what that plan will look like for the spouse,” she says, by outlining what the trust is, what it’ll provide for, who the trustees are, and what the surviving spouse can expect to get. Next, they take a look at the assets and describe for the spouse how they’ll be investing the assets. They also explain what investing is, the trade off between risk and reward, and how different asset classes behave, says Cohen.
“It’s really about portfolio construction,” she says. “I think you need to start top down,” no matter which spouse you’re speaking with, and show the type of risk and return they can expect from different asset classes. She and her colleagues also explain how they do research and look at assets, and they teach clients how to read their statements and how to use FTI’s website and apps. They also explain their rights with marital trusts.
“We don’t talk down to the spouse,” says Cohen. She also tries to avoid acronyms and shortcut lingo when speaking with clients. “These concepts don’t come instinctively to people, and regardless of whether or not someone is financially literate, advisors need to speak in plain language,” she says. “I often think that when somebody uses a lot of jargon, it may be because they don’t really know what they’re talking about.”
To help build confidence in clients, she acknowledges the concepts are difficult to understand, she reinforces the concepts, and she lets them know that “nobody gets it all in one fell swoop,” she says. “And by the way, I think that during these sessions, even the spouse who has been running the assets learns a lot.”
Cohen also works with clients on their financial plans to make sure there is enough liquidity and their budgets are appropriate. A spouse who hasn’t been paying attention to the finances may not realize they won’t be able to maintain their lifestyle, she says, or they may think they can no longer afford their lifestyle although they can.
She and her colleagues show clients a chart that illustrates the flow of their plan, and also share it in writing and talk about it, she says, in order to hit the different and multiple ways in which people learn. If you’re “demystifying the chart” by explaining it as they’re looking at it, “you’re not getting the glaze over,” she says, and “you tend to keep their attention a bit longer than if you’re just a talking head.”
Whether or not a client seems interested, “I think you still need to provide them with as much information as you possibly can, in an easy to understand way, and keep things as simple as possible,” she says, because advisors can potentially face liability.
In addition, “I think that having the spouse, as a co-trustee or a trustee is crucial,” says Cohen. ‘If somebody were to suggest that their spouse shouldn’t be the trustee because they don’t really understand that, that’s a bit paternalistic,” she says. Although they may need someone to help them make decisions, “they need to have that empowerment,” she says. “No one wants to have to ask their children for money.”
She recalls a situation where two siblings were co-trustees for their parents’ estate and one of the siblings was very reluctant to give any money to the parents.
A scenario where you might want to avoid having a spouse serve as a co-trustee, says Cohen, is when there is an adverse relationship with the remaindermen, such as stepchildren who are going to sue the surviving spouse.
She also notes that a spouse who has been more hands-off about the finances may suddenly relish that role once they start attending planning meetings and improving their financial literacy. She also dismisses the common misnomer than women are always more conservative investors than men.
One of her favorite stories, she says, is about a husband and wife who were both in their 90s when she suggested a grantor retained annuity trust (GRAT) for them. After she explained it, the husband decided to engage in this strategy, and it was highly successful. The wife, who was a doctor, was even more impressed with the strategy. “She was like, ‘Why aren’t we doing this with everything?’ She was all in,” says Cohen. “I think that it truly varies from client to client.”
Has getting older women more onboard with their finances helped Cohen retain them as clients? “Absolutely. I think that there are two things that can really help you retain clients,” she says. “One is education and the other is problem solving, and I think they go hand in hand.”
Jerilyn Klein is editorial director of Rethinking65.