When two people live together, they are required to divvy up duties within the household.
One person may be in charge of home repairs, one person may be in charge of groceries, one person may be in charge of cooking, one person may be in charge of cleaning.
When it comes to household finances, there are many different ways to handle the task. A couple might make all financial decisions together, or one household member may be better with numbers and budgeting and make all of the financial decisions alone.
Whatever the case may be, an advisor working with a couple needs to know who is making the financial decisions. The advisor needs to know if he should be listening to one voice or two.
Obviously, there is an advantage for the advisor to know how a household handles financial matters. The advisor needs to know where the couple’s income comes from, and if the household is a two-income home. He or she should know whether the couple pools all of their funds or if each member has assets they wish to invest separately.
Advisors are not just being nosy when they ask about household financial functions. Households with joint decision makers tend to approach investing differently than households with one financial decision maker.
According to Spectrem’s Perspective Joint Decision-Making Households, couples who make decisions together are less likely to take significant risks with their investable assets. Joint decision makers spend less time dealing with investments, and target their investments more toward future security than toward investment growth.
That is not to say all households operate according to those tendencies, but it is beneficial to have those assumptions as a jumping off point for discussions with investors who come in as a couple.
There are also degrees to which households operate jointly or separately. It is quite possible that a couple may make basic household financial decisions together, such as saving for college expenses or creating a rainy day fund, or when to buy a car and whether to purchase a new one or used one. However, that couple may then break from joint decision-making when it comes to investment matters such as stock or mutual fund purchases. If a couple has individual investment funds, they may also have individual investment attitudes, and an advisors needs to know how the two people differ in that regard.
The Spectrem study considers four major segments of couples – joint decision makers who pool all finances, joint decision makers who pool most but not all funds, couples who maintain almost entirely separate finances and couples who do not pool any funds. Each of those segments has characteristics unique to their situation, and an advisor needs to know which type of couple he or she is dealing with in order to make sure booth parties are satisfied with investment decisions.
There is one aspect of the household financial picture that can be confusing and daunting for an advisor to deal with. Occasionally, individuals within a couple disagree on who is in charge of finances.
Spectrem research shows that most married males believe they are in charge of household finances, while most married females believe household finances are handled jointly. The one attitude advisors must avoid is to assume the male is in charge and disregard the female in a couple, because the female may very well have influence over which advisor the couple uses. While she may not be interested in investing today, she may come into family funds down the line and require an advisor.
Today there are also couples in which the female is the major breadwinner. Advisors must initiate meetings with couples with an open mind in regard to gender.