When Couples Disagree on Money Matters

They may never see eye-to-eye, but you can help them make decisions with eyes wide open.

By Bryce Sanders
Bryce Sanders
Bryce Sanders

“All relationships have a kite and a string.”

In many couples, there is one person with great imagination and ambition and another who sees the practical side of things. I recall the story about a boat show in Florida where many exhibitors displayed fabulous yachts and a financial services firm displayed a large sign that said, “How Are You Going to Pay For It?” As a financial advisor, you often encounter client couples sharing different views concerning money.

Let us pause and establish what we are not talking about: We are not talking about couples who are not in agreement about how their money should be invested. On joint accounts, it is assumed both parties are in agreement, so either can issue instructions or sign checks. We are not talking about marital discord, nor about one party trying to do something unknown to the other. That is a totally different situation with legal implications. We are talking about when one person is enthusiastic and the other, though open-minded, has not come around to their partner’s way of thinking. Let’s look at some of those scenarios:

The client seeking to buy an exotic car

It has been a good couple of years in the stock market for your client couple. They have been doing well in their respective careers. Both enjoy driving and one of them wants to buy a new Corvette C8. (You know it when you see it.) It costs about $75,000. The other spouse is not convinced. Cars depreciate the moment they are driven off the lot.

Approach:  If your car-loving client wants to win over their spouse, they need to do some research. The spouse is concerned about depreciation. From this point of view, the best sports car is the Porsche 911, depreciating 36% over five years. Corvettes come in at position No. 5, depreciating 44.1%.  By comparison, the Maserati Ghibli depreciates 69% over the same period.

Like stocks and bonds, the “holding period” of vehicles is important. The average length of ownership for a Corvette is 10.5 years. Generally speaking, Americans own cars for about eight years. Should your client consider a 2-year-old Corvette with some depreciation already factored in? How are they going to pay for it?

The young client who is not saving for retirement

Next through the door is the young client couple in good jobs each earning a great income. One party sees the need to save for retirement while the other assumes they will live forever, earn more and more, and the good times will never end. The second party does not see the logic of saving for retirement because it is far off in the distant future.

Approach:  As a financial advisor, you’d likely side with the saver. But the spender must be heard out and won over by the saver, not you. You might start by pointing out that retirement saving involves redirecting money as it comes in towards tax-deferred savings in a retirement account or taxable savings in a joint account. In the second scenario, the government gets to take a bite through income taxes and another bite through realized capital gains and dividend income. With tax deferral, all that is pushed off into the future, allowing compounded growth. If the spender feels they are giving up access to the money (perhaps they want to buy a Corvette like the first couple), they can often borrow against retirement assets, depending on the plan. You can help the saver make these points and show examples that illustrate the power of compounding.

The client who wants to buy a vacation house

Your next client couple loves visiting the Hamptons. Such famous neighbors. One of the spouses would like to buy into that lifestyle. The second one is not so sure. The couple has asked you for advice.

Approach: Like many things in life, things are often not what they seem. Property in the Hamptons is expensive. Let’s assume your clients are doing well in their careers. But even so, can they afford that pricy vacation home? As a financial advisor, you could probably run the numbers, letting them know how much house they can afford and what the mortgage would cost them on a monthly basis. FYI: The average house price in the Hamptons is now $3.1 million. Do they simply want a beach house or must the house be in the Hamptons?

Last year, the average property tax rate paid in Hampton Bays was 2.3%. On that $3.1 million home, this would cost your client about $71,300 annually. And as we all know, property taxes rise. Your clients could potentially rent out the house  during the season, but this might defeat their purpose for owning it. They could be renters instead. There are timeshares in the Hamptons, although timeshares come with their own set of issues. The major question would be: Once all the direct and indirect costs are known, can your client couple afford it?

The aggressive investor and the cautious investor

The stock market has been volatile lately. Memories of the longest bull market in history are still fresh in clients’ minds. Your next set of clients coming in today are investors. They believe in the stock market. They understand investing for the long term and dollar cost averaging. You have taught them well. But there is a problem: One half of the couple believes in asset allocation, diversification and professional money management. The other half feels day trading is the way to make money; they think their partner’s approach to investing is boring. How should you advise them?

Approach: Unlike the Corvette buyer or the Hamptons house coveter, this may be the easiest difference of opinions to resolve. Introduce them to the investment pyramid, also known as the risk pyramid. Under this concept, which has been around for years, a client’s investments are like an ancient Egyptian pyramid — wide at the base, narrowing towards the top.

Explain that the bottom of the pyramid, the largest section, contains low-risk assets, such as U.S. government bonds, money market securities and CDs; the middle section contains medium-risk assets such as corporate bonds, large-cap stocks and real estate; and the top portion is the high-risk investments. The genius of the investment pyramid is everyone might be allowed some risky investments, yet one’s overall risk tolerance determines how large (or small) that top category should be. The risk-taking spouse can have their “play money” but their overall wealth needs to be integrated into the investment pyramid. All their wealth cannot be their “play money.”

In the end, couples who disagree will have to make up their own minds. However, by using these approaches you should be able to help them make decisions with their eyes wide open.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” is available on Amazon.





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