Editor’s note: This is the author’s sixth article in a six-part series for Rethinking65 on working with widows.
The final stage of widowhood, known as transformation, is when a widow’s new life as an independent woman evolves. Having emerged from profound grief and grown into her new lifestyle, the widow in transformation can focus on more advanced planning.
While she has moved on from the early stages, as her advisor, it’s still important to listen, share stories and help her focus on her values and aspirations for future generations. The memory of her husband is still there, and she will want to keep it alive through her day-to-day interactions with others.
Financial Empowerment, Financial Security
We know that dependencies in marriage leave some women less knowledgeable and vulnerable when they lose their spouses. Of course, this is not true for all women, but the data shows this observation applies to a large percentage of women. Financial empowerment is a subjective construct incorporating knowledge, skills, motivation and confidence. Research shows financial empowerment is a critical factor used to describe financial security.
Younger widows are more interested in building financial skills, but older widows often delegate decisions to a new partner or financial advisor. It is essential to recognize that widows are not a homogeneous subset of the population and that the widow’s age, in addition to other characteristics, may dictate how you should assist.
You are in a unique position to explore her feelings around financial confidence and encourage participation in day-to-day personal finance activities and planning tasks, cultivating the widow’s confidence and helping her feel financially secure.
From the first stage of anticipation through grief, growth and transformation, the goal throughout the journey is to achieve financial well-being. Throughout the past five articles in this Financially Empowering Widows series, the guidelines and exercises are intended to be administered thoughtfully and sensitivity to achieve this goal.
Recall the early days after her husband passed, when you sat with her and listened to her express her fears, concerns and regrets. You heard and identified immediate and future needs, but you also jotted down her regrets.
In a recent study, widows were asked the following question: “At the time you were widowed, did you regret not knowing something about money and finances?” Over 40% of the participants reported they regretted not knowing something about money. While the experience of marital shock and financial regret is fresh in her mind, now is the time to explore her feelings of regret so you can develop a better plan for the future.
A broad range of studies shows that financially literate individuals are better at budgeting, saving, planning for retirement and accumulating wealth. You have helped her transition from a state of powerlessness in her financial condition to participating and envisioning a positive future. Just as you have worked through the other stages, continue to build confidence and trust by educating her, eliminating financial jargon and guiding her to achieve her goals.
Partner and collaborate. Don’t just tell her what to do but help her understand the pros and cons of her options. Provide order, simplify the process and demonstrate that you will watch out for her interests. Research shows that this level of client service is even more effective in building satisfaction and loyalty among women than with men. Women are more likely to evaluate their advisor on their functional competence than men, who are more likely to assess their technical competence.
Comprehensive Financial Planning
You can start working with her on a comprehensive plan without facing resistance in this new normal. If you try to do this during the earlier stages, she may not be ready and pushing her can add to her fears and stress. You may want to talk about retirement income, estate planning, investments and taxes.
While you might have worked on a comprehensive plan for her and her spouse as recently as last year, that plan will no longer fit her lifestyle as a widow. Talk to the widow about her values and her goals for the future. You can help her tailor her plans to match her new life.
New Relationships, New Beginnings
As the widow moves into the new normal stage, she is now looking forward. Of course, she continues to grieve, but she is more open to new experiences and meeting new people. When surveyed, slightly less than half of the widows working with a financial advisor said their advisor never asked about new relationships and did not prepare them for a potential remarriage or cohabitating relationship.
You can help her prepare for a new relationship by ensuring she has completed the following pre-commitment documents: (a) new advanced healthcare directive; (b) overall financial plan consistent with her needs; (c) an updated deed to property; (d) long-term care plans; (e) a will; (f) a trust; and possibly even (g) a cohabitation agreement; and (h) a prenuptial agreement.
In a recent study involving remarried widows, most had prepared only one and, in some cases, two of these documents before they remarried or cohabitated, despite their desire to be more financially empowered.
It would also be best to encourage her to have an open and honest conversation about money with any potential long-term suitor before committing to a relationship. Discussions should include:
- Where to live.
- How to pay for expenses.
- Credit scores.
- Financial net worth.
- Retirement plans.
- Outstanding debt.
- Financial support to or for another person.
- Money history.
- What is significant about money.
- An expected inheritance or other sources of future funds.
In the same remarried-widows study, the widows only discussed half of these important financial topics before committing to a new partner. As the example below illustrates, the lack of money discussions often causes friction, misunderstanding and problems leaving the remarried widow insecure once again.
A year after Julia became a widow, she met a man who asked her to marry him.
Although she was just starting to feel like the fog was lifting, she agreed. While Julia had a financial advisor who assured her there was plenty of money to meet her needs, she was uncomfortable with day-to-day financial management. Julia was happy to turn over the responsibility to her new husband.
She did not know that her new husband had different views of how they would fund their retirement. She realized what was happening the following year when she looked at the balance in her account. Julia’s money was primarily in taxable accounts, but her husband’s money was in qualified accounts. He decided they should pay all of their bills out of her account to keep their marginal tax bracket under 22%. While this made sense to her, she did not recall signing anything to agree to this and she felt betrayed.
A conversation of how they would pay expenses could have prevented the ensuing argument, followed by old familiar feelings around disempowerment. Ideally, her financial advisor should have encouraged money discussions before they were married to establish expectations and a mutual plan.
Responsibility When Working with Widows
While financial advisors engage in financial planning, it is essential to recognize where the widow is in her journey, to understand how she feels about her financial situation, and to assist with all financial concerns at the appropriate time. Financial advisors should encourage a proactive attitude, particularly before entering into a new romantic relationship. The widow’s financial plan should consider her new relationship and its effect on her personal goals.
Working with widowed clients requires the thoughtful application of counseling and communication skills. A financial advisor who works with widows must be deliberative, systematic and reflective with their counseling and communication strategy. It appears that some financial advisors fall short in this regard.
For example, those who participated in the study involving remarried widows were asked whether they worked with a financial professional before entering into another marriage or long-term relationship. Approximately 50% of those surveyed answered yes to this question. Alarmingly, only half of the financial advisors asked whether the widow had entered a new relationship. Only a tiny fraction of financial advisors were aware of their widowed clients’ situation and the need to help them prepare financially.
Using a deliberate life transitions process — where a financial advisor spends time aligning with a widowed client — can help the client enter into a second marriage with better financial preparation, protecting the client against current and future risks.
A financial planning best practice is to move beyond a core financial situation analysis in a way that reveals a widowed client’s transition through widowhood. Financial advisors uncomfortable with emotional-laden discussions might consider developing referral networks with a Certified Financial Transitionist (CeFT), Certified Financial Therapist-I (CFT-I, and other mental health professionals.
Regardless of how such discussions unfold, financial advisors may find a more thoughtful process that empowers widows to be an essential driver of financial security and key to a long-lasting and rewarding client relationship.
Laura Mattia, Ph.D., MBA, CFP, is the CEO and a senior fee-only planner with Atlas Fiduciary Financial LLC in Sarasota, Fla.