Investing as a Couple
By Laurie Haelen
In a perfect world, both halves of a couple share the same investment goals and agree on the best way to try to reach them.
It doesn’t always work that way, though; disagreements about money are often a source of friction between couples.
I work with clients every day and have found that one of the greatest challenges in building a successful financial plan is getting couples to work together toward common goals.
The first step is defining what the common goals are and documenting them. Making good investment decisions is difficult if you don’t know what you’re investing for. That is why it is critical to outline both long-and short-term goals, ideally together.
In some cases, you may have the same goals, but put a different priority on each one or have two different time frames for a specific goal.
For example, your spouse may want to retire as soon as possible, while you’re anxious to accept a new job that means advancement in your career, even if it means staying put or moving later. Coming to a general agreement on what your priorities are and roughly when you hope to achieve each one can greatly simplify the process of deciding how to invest.
Ensuring both spouses or partners know how and why their money is invested in a certain way can help minimize blowback if investment choices don’t work out as anticipated. Making sure that both partners understand from the beginning why an investment was chosen, as well as its risks and potential rewards, may help moderate the impulse to say “I told you so” later.
A diversified portfolio should have a place for both conservative and more aggressive investments. Though diversification and asset allocation can’t guarantee a profit or protect against a loss, they are ways to manage the type and level of risk you face — including the risks involved in bickering with your significant other.
Aside from attempting to minimize relationship strife, there’s another good reason to make sure both partners understand how their money is invested and why. If only one person makes all the decisions — even if that person is the more experienced investor — what if something were to happen to that individual? The other spouse might have to make decisions at a very vulnerable time — decisions that could have long-term consequences.
If you’re the less experienced investor, take the responsibility for making sure you have at least a basic understanding of how your resources are invested. If you’re suddenly the one responsible for all decisions, you should at least know enough to protect yourself from fraud or work effectively with a financial professional to help manage your money.
If you are the more conservative investor, consider:
• If you’re unfamiliar with a specific investment, research it. Though past performance is no guarantee of future returns, understanding how an investment typically has behaved in the past or how it compares to other investment possibilities could give you a better perspective on why your spouse is interested in it.
• Consider whether there are investments that are less aggressive than what your spouse is proposing but that still push you out of your comfort zone and might represent a compromise position.
• Work with a neutral party, such as a certified financial planner, to get the information — such as risk and performance — of investments and see how historically they have impacted the success of financial plans. Looking at it with the best data available may help you see more clearly.
If you are the less conservative investor, consider:
• Listen respectfully to your spouse’s concerns. Additional information may increase a spouse’s comfort level, but you won’t know what’s needed if you automatically dismiss any objections. If you don’t have the patience to educate your spouse, a third party who isn’t emotionally involved might be better at explaining your point of view.
• Concealing the potential pitfalls of an investment about which you’re enthusiastic could make future joint decisions more difficult if your credibility suffers because of a loss. As with most relationship issues, transparency and trust are key.
• A partner who is more cautious than you are may help you remember to assess the risks involved or keep trading costs down by reducing the churn in your portfolio.
• Remember that you can make changes in your portfolio gradually. You might be able to help your spouse get more comfortable with taking on additional risk by spreading the investment out over time rather than investing a lump sum. And if you’re an impulsive investor, try not to act until you can consult your partner —just like impulse spending, impulse investing rarely has a good outcome.
The most critical thing in the whole process to remember is that neither partner is necessarily “right.” Only the process of documenting your goals, investing with the appropriate level of risk for the long-term and monitoring the progress of the goals will provide the best chance for success.
There is no guarantee that working with a financial professional will improve investment results, but the presence of a neutral party will likely make it easier for a couple to make decisions. Be sure to understand how an adviser is compensated and whether they are an investment fiduciary who is held to a high standard.
There are many more investments available today than there were many years ago. This is mainly good news for investors but can also be confusing. Understanding what is available, and understanding the concerns of your significant other, is a challenge that is worth embarking upon.
Laurie Haelen, AIF (accredited investment fiduciary), is senior vice president, manager of investment and financial planning solutions, CNB Wealth Management, Canandaigua National Bank & Trust Company. She can be reached at 585-419-0670, ext. 41970 or by email at lhaelen@cnbank.com.