This post has been written by wealth adviser Helen Modly, president of Focus Wealth Management, a U.S.-based fee-only registered investment adviser. This post initially appeared on MorningstarAdvisor.com.
It is becoming more and more common for us to work with couples where the traditional roles are reversed between the spouses. In some cases, the husbands have retired. Some have become stay-at-home dads. Even when some husbands are still working, their wives bring home the lion's share of the family's income.
In many cases, the husbands managed the family's investments early in the marriage, if there were any, but now the female primary breadwinners clearly desire a larger role in the investment decision-making process.
Beware of the elephant in the room
These couples are dealing with deeper issues than who will control the investment decisions, although financial conflict is a common symptom of these marriages. Advisers need to be aware that financial and investment arguments in these marriages are often proxy wars for other unspoken issues.
A June 2014 study by Pew Research found that 24% of wives earned more than their husbands and that at the end of the last recession in 2010, there were 2.2 million stay-at-home dads, not counting those men who were working part time. A third of these men say they are stay-at-home dads due to disability or illness; the rest are pretty equally divided between those who can't find work, are in school, or have chosen to care for family members. In some cases their wives were already earning more than the men when they got married, but in many cases, this income disparity evolved over time.
(The above report is by the Pew Research Center analysis of data from the U.S. Census Bureau).
Other studies show that this income disparity is a very real threat to these marriages. Husbands who earn significantly less than their wives are five times more likely to cheat on them, according to Pew Research.
The wives are much more likely to ask themselves, "Am I better off with him than without him?" which can be lethal for their marriage, especially after the children are grown.
Many men, especially older men, have been hardwired to be the provider for their families. Even women who are proud of their success often resent that their husbands do not have the same or greater level of success. This resentment is even more pronounced in younger women who may fail to marry altogether if they can't find a man more successful than them.
These couples often differ in how they handle the family's finances. One third of women breadwinners keep their finances completely separate from their husbands', and they are three times as likely to hide financial accounts from them.
Researchers have also noticed that higher-earning women tend to perform an even higher percentage of household chores than their lower-earning counterparts. Although somewhat counterintuitive, the reason appears to be an attempt to diffuse the tension caused by the perceived threat of her status to the husband's masculinity.
When these women decide that they want a larger role in their families' financial decision-making, it can create stress between the spouses due to a change in the amount of control the husband has and due to differences in the kind of relationship they want from their advisers.
The Advisers' Role
Advisers must be sensitive to the need to engage both spouses when working with these couples -- a fact with any couple, but especially these couples. Although I am not a huge fan of risk tolerance questionnaires, they may be helpful with these couples if they complete the questionnaire separately and then discuss any differences between their responses.
The adviser needs to be able to facilitate a respectful and productive conversation to identify their mutual objectives, resources, and constraints.
It is critically important for these couples to maintain a healthy balance of compromise and control over their financial decision-making. For example, they need to feel safe in having conversations regarding their goals and roles in spending, investing, and saving. We can remove a great deal of stress and anxiety from their lives by establishing a written investment plan for each of their accounts and then taking the responsibility to see that it is implemented, monitored, and revised as needed.
Basic gender differences
Prudential's 2012 research study of the difference in financial behaviors between women and men found that 70% of women stated they were more comfortable saving than investing. On the other hand, 70% of the men responded that they were willing to accept risk for higher returns, and 40% said they enjoy the "sport" of investing. In my 30 years of practice, I have never heard a woman make that comment.
Women, even those who are the primary breadwinners, are much less likely than men to believe they are informed about investing. In fact, Prudential found that only one in 10 felt knowledgeable about investments. Most women are looking for a collaborative partnership with their advisers rather than a relationship where they cede control. They want to be able to make informed choices, and they expect that their adviser will spend the time needed to get them there.
These women experience a severe time crunch in both their professional and their personal lives and are often juggling work, home, health, and emotional issues for themselves and their family members. The last thing they need or want is a financial adviser calling them once a week or more with the latest hot stock tip or new insurance product they "should" buy.
Women breadwinners are usually effective delegators and are comfortable following a plan. If you spend the time needed to understand their couple dynamic and present a thoughtful long-range plan to them, they make excellent long-term clients.
A great resource is Farnoosh Torabi's book, When She Makes More: 10 Rules for Breadwinning Women.
