Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
Andrea Andersen, certified financial planner at Edward Jones in Calgary, has a motto when working with couples experiencing a strained relationship due to money: “Be hard on the problem, be soft on the people.”
Ms. Andersen says she’s seeing many relationships under strain right now as markets are bobbing up and down, interest rates continue to climb and the overall cost of living is a source of daily stress for many.
Financial advisors have the unique role of trying to get people’s monetary lives on track while also balancing the emotions and tension it can bring to relationships, but the experts say it requires looking at the numbers and the people.
“The key things an advisor has to have is empathy, be able to listen without judgment and remain neutral, focusing on the client’s goal,” she says.
“You’re involved in people’s lives, and that’s great, but you also have to be the person that steps back out of the emotion and says, ‘Okay, is this getting you closer to your goal, or is it taking you further away?’”
What Ms. Andersen has noticed over the years is that couples can have drastically different views about, and relationships with, money. Having a third-party financial expert on board can be invaluable.
“Two people in a relationship can have very different views about money,” she says.
“They’ll have different priorities when it comes to saving and spending. An advisor can help the couple get on the same page.”
We can teach them about financial literacy, giving them the confidence to make the best decisions and choices with their money, she adds.
For her, it’s about going beyond what people are spending their money on and questioning why they’re spending it in the first place, because digging into those conversations is part of the process of fixing the problem.
“One person may be looking for safety and security, while the other person’s basic need might be the reduction of stress or ease of life,” she explains.
“It’s really important that when you’re working with a couple who has those extremes, you’re able to understand what each partner needs and how to satisfy those needs.”
How to assess a situation
Margaret Leong, senior investment counsellor and portfolio manager at BMO Private Wealth in Vancouver, also says financial planners can act as a conduit to facilitate conversations with couples and come up with a plan.
“Marriage is like a tree,” Ms. Leong says. “We need to water it and provide nutrients to help it grow stronger and financial plans are the nutrients.”
She says right now her clients are worried about their living expenses rising while their compensation is not increasing at the same rate but adds there are strategies she talks about to get them back on track for both the short and long term.
“It boils down to people need to spend time, sit down, and evaluate what their current situation looks like and then identify some of the problems,” Ms. Leong says.
“The first part is to assess your current situation. The second is to identify the problems and strategy to deal with this issue, and number three is to build a regular monitoring process to revise the data or change things as needed as life goes along.”
She points to having clients create an inventory of what they own and what the cost base is to establish how much borrowing is associated with these assets. Next, talk about cash flow, itemizing income and expenses. Ms. Leong says this can be the most eye-opening as there can be some surprises. It’s helpful to avoid the blame game.
“Often, we spend money through credit cards without knowing, but when you start itemizing, you would look for ways, as a couple, as a family, to cut the amount of discretionary expenditure,” she says.
“It’s not used to blame each other, but it offers a picture of how two people can work together to accomplish a better outcome down the road.”
The amount of work and monitoring that needs to be employed to make the strategy work depends on how much financial trouble a couple is in, Ms. Leong adds.
Look for investment solutions
Setting up a plan in advance of financial ups and downs, as well as having some insurance in place, can help couples ride out these turbulent times with fewer tensions, says Selene Soo, director of wealth products for RBC Insurance Services Inc.
“There are so many investment solutions that can help people save and by that, they can reduce the amount of stress they experience when times are tight,” she says.
Segregated funds are a financial tool that she says can help people at all stages of life to help grow their investments and protect them in times of economic downturn.
“They’re very similar to mutual funds,” she says. “They provide the growth potential of mutual funds, but they have unique insurance benefits. They provide guarantees for your money.”
If the markets drop, and your savings and market value drops, the insurance company will guarantee equity at specific times, she adds.
“This can reduce a lot of stress as people are watching their investments fall,” Ms. Soo says.
“But the bottom line is when you have that open communication with finances, it really will avoid any confusion or tension down the road.”
For more from Globe Advisor, visit our homepage.