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His, Hers, Theirs


















 An example from the Toth files … They are an elderly couple, each earned a high salary prior to retirement.  Both felt it was important to invest a healthy portion of their salaries.  There is just one small problem now;  one of them is strongly risk-averse, preferring conservative investments such as certificates of deposit and money market funds, while the other one is a risk taker who still loves tech and biotech stocks and initial public offerings – IPOs.

A clash of investment styles is common in marriages, says my wife, the family therapist, especially among couples after retirement.  The same goes for couples who bring sizable portfolios into a second marriage later in life.  So what do I recommend that couples do when their investment styles clash?

Discuss your different investment styles.  Just talking about your investment perspective which typically revolves around how you value money and how you treated money during your upbringing, may iron out some of your differences.  Make sure the discussion is without attack words or accusatory phrases.

Bring in a trustworthy advisor.  If you can’t resolve your differences on your own, a Certified Financial Planner – CFP, can bring an impartial, knowledgeable perspective to the issues.  Among other things, such an advisor can explain the issues around investment risk and reward, provide insight into your current money personalities, help you identify joint and individual goals and design a portfolio that suits your goals and needs.

Learn about investing.  Differing risk tolerances are what typically cause clashing investment styles.  One partner takes more risk than the other.  While “money personality” is a factor in how we invest, your tolerance for risk is also influenced by your understanding of how investments work.  Often the more the couple learns about the long term volatility and returns of various investments, and how the mixture of different types of investments can reduce the volatility of a portfolio over time, the less likely the couple will clash over investments.  Specifically, I have recommended developing a financial plan slowly as the parties build trust especially if this is a second, later marriage where there is past experiences to bridge.

The more conservative investor may recognize the need for some aggressive positions to help the portfolio stay ahead of inflation.  On the other hand, the risk taker might learn how more conservative investments can reduce overall portfolio volatility without seriously undermining the portfolio’s long term total return.

Clarify and specify your investment goals.  Knowing what you’re investing for can often bring mutual or, at least, a closer agreement on how best to get there. Say the couple wants to preserve assets and live on investment interest/dividends through retirement.  They determine how much target money they need to pay for the kind of retirement they desire, and how much of current income they can live on and perhaps invest the rest.  Each person may design their own asset allocation plan based on individual risk tolerances.  Following this exercise, the conservative investor may realize that sticking to CDs or fixed annuities won’t build a large enough nest egg by the time it’s needed, while the risk taker might realize that they don’t need to take as much risk to reach that goal. The crucial action is to plan a comprehensive retirement plan.

If nothing works, then establish individual investments accounts.  I discourage couples from splitting their portfolios into individual accounts, but sometimes it is the only practical way when investment styles are so deeply ingrained and different.  Perhaps that is the time to bring in the big gun – my wife, the therapist.

It is a separate issue if each person brings sizable investment accounts to a marriage.  Prenuptial planning is a later topic.

There are different ways to set up individual portfolios.  One approach is to have “his, hers and their” accounts.  Each maintains his/her own retirement account, yet they pool their own investment funds for such goals as a college fund for the grandchildren or traveling.  Even though the accounts are separate, sometimes one style balances out the other one over the long term.  Of course, if the more aggressive investor blows his or her retirement fund because of bad investments and ends up relying on the more conservative investor later to retire, it may cause some bitterness.

Review the individual accounts, making sure you don’t have overlapping investments (similar mutual funds, for example), examining investment taxes from the perspective of all accounts combined, being sure each person has full legal access to the other’s accounts in the event of death or emergency, and monitoring the separate accounts.

Or, set up a “play money” account.  I sometimes recommend that the risk taker invest perhaps five percent of the couple’s total portfolio in higher risk investments.  If those investments lose money, it won’t seriously harm the primary goal(s).

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Check the background of this financial professional on FINRA's BrokerCheck