Spectrem recently completed research with 250 women with more than $1 million of net worth who had recently divorced their spouse. The report focused on their relationship with their financial advisor and their investments. It’s an interesting segment for financial advisors because they present significant opportunity, especially if an advisor can be aware of some of the unique challenges faced by Divorcees.
First, it’s important to note that less than a third of Divorcees kept the same financial advisor after the divorces. Twenty percent searched for a new advisor and 48% didn’t have an advisor prior to their divorce but found one after the divorce. The primary reason, not surprisingly, for those women who changed advisors was because they didn’t want to use the same advisor as their ex-spouse (42%) while 21% said they did not trust the advisor after the divorce. As for those who kept the same advisor, 46% did so because they were happy with their investment performance and 27% indicated they had a stronger relationship with the advisor than their spouse.
What do advisors who are seeking Divorcees as clients need to understand? First, only a third of Divorcees enjoy investing and less than one-half like to be involved in the day-to-day management of their accounts. Yet despite their dislike of investing, only 28% indicate that they rely more on their advisor than in the past. Fewer than half (45%) has spent more time educating themselves about investments since their divorce. In many cases, divorcees are still working and don’t have the time to focus on their investments. They will be looking to their advisor to be well prepared and to educate them not only about the investments but why those investments are right for them.
What do they worry about? About half (49%) are worried about depleting their retirement savings early. More than a third (35%) worry about financing the education of their children and more than half (56%) worry about aging parents. While their concerns are not that different than other female investors, their unique role places them with greater responsibility and concern than those in a two-person household. Advisors need to be sure to discuss sensitive topics with divorcees to make sure they are aware of potential challenges (taxes, insurance and other) and have a plan to confidently manage their finances in the future.
It’s interesting to note that our research found that Divorcees tended to have larger concentrations of retirement assets (IRAs, etc.) than other females. This may be because divorce settlements often result in the split of a retirement plan, which may be rolled over into an IRA. Advisors should be careful to make sure that the asset allocation of all assets is taken into consideration and that the divorcee understands the implications of all of the various types of accounts.
Eighty three percent of Divorcees are satisfied with their financial advisor. This means that their advisors are being responsive to their requests and listening to their challenges. Yet although Divorcees choose their advisor because they believe the advisor will be honest and trustworthy (33%), investment performance is the key selection factor for 18% of Divorcees.
Divorcees represent an opportunity for those advisors who are open to proactively reaching out to these women as they seek to re-establish their financial lives. Those who are willing to listen to experts regarding their potential challenges will be rewarded with their loyalty.
© 2018 Spectrem Group