Marriage counselors are quick to suggest that couples considering joining together in wedded bliss first discuss a few key topics, and chief among them is money.
There are a number of sub-topics within the matter of marriage finances, but perhaps the most significant one is “Who is going to deal with our finances?”
Our new wealth segmentation series study Financial Behaviors and the Investor’s Mindset discovered how investors answered that question. The study asked married investors to describe the level at which household finances are pooled or kept separate.
“This information is key to understanding how to approach investors in discussing financial plans and investments,’’ said Spectrem president George H. Walper Jr. “Advisors need to know if they are dealing with a single decision-maker or to what extent couples make financial decisions together. Not having that information can lead to a degree of misunderstanding between advisor and investor.”
Among Ultra High Net Worth investors with a net worth between $5 million and $25 million, 59 percent pool all finances together as a household. Twenty-eight percent of UHNW Investors pool most of their finances while each spouse maintains accounts they can use individually. Nine percent of investors separate most of their financial accounts while 4 percent do not mingle their finances at all.
Whatever decision was made regarding how finances are handled among two people, there seems to be little disagreement about the process. Asked to rate the agreement between the investor and spouse about their finances, UHNW investors place the agreement at 83.68 on a 0-to-100 scale.
The study segments investors by age, wealth, advisor-dependency and occupation, and the largest difference among investors was in occupation. Among Ultra High Net Worth Managers, for instance, 69 percent pool all finances together, while only 53 percent of Professionals (attorneys, physicians and accountants) and 53 percent of Senior Corporate Executives pool finances in the household.
Interestingly, 13 percent of UHNW Business Owners have entirely separate finances in their household, more than double the incidence of other occupations.
Among Millionaires (those investors with a net worth between $1 million and $5 million), 61 percent have finances entirely pooled, slightly higher than that of investors with a higher net worth. Among Mass Affluent investors (with a net worth between $100,000 and $1 million), 65 percent pool all finances.
The level of spousal agreement regarding finances drops as net worth drops. From the 83.68 rating by UHNW investors on the 0-to-100 scale, Millionaires rate the agreement of spouses or partners in a household at 81.41 and Mass Affluent investors rate it at 78.20.
The level of agreement among household members grows as the age of the investor grows. Among Millennial Millionaire investors, the level of agreement is at a relatively low 67.00, while Gen X agreement is at 79.81, Baby Boomer agreement is at 80.50, and World War II agreement is at 87.32.
There is also a noticeable difference between how finances are handled based on the advisor dependency of an investor. Among advisor-dependent investors who look to their advisor for all investment decisions, 78 percent say their household finances are pooled. Among Event-Driven investors who use advisors only for significant individual financial events, only 51 percent pool finances. Those investors are much more likely (39 percent) to have most finances pooled with each household member maintaining individual accounts.