Investment Consult

Investing with your spouse needn't be Mission Impossible

You can work harmoniously toward common goals, even if your approaches differ greatly.

Lewis J. Altfest, PhD, CFA, CFP

Studies consistently show that when couples disagree, it's most often about money, and my work with investors certainly bears that out. I often discover that one spouse favors aggressive risk-taking while the other cares most about safeguarding current assets. One may want to save for retirement while the other chooses to live—and spend—for today. I well remember a shouting match in my office between a conservative, bond-oriented husband and a wife who advocated a much more growth-oriented investing style.

Such differences explain why our client questionnaires allow space for each spouse to indicate a preferred asset allocation. We're also careful to ask both husband and wife about investing styles and goals.

If you and your spouse don't always see eye-to-eye about money, you may be wondering how you can develop an investment program that informs and satisfies both of you. These suggestions may help:

Schedule periodic money meetings. Aim for one hour a week, and don't use the excuse that your spouse "just isn't interested." Instead of pointing fingers and venting hostility, use these talks to identify common desires, explain your approaches, and discuss aspects of each other's investing style that you admire.

Learn from each other. I know one husband who wants to change investments as often as the full moon appears. But luckily, he respects his wife's views, and she usually manages to dissuade him at the last minute. In my own family, I'm usually the one who makes the final investment decisions. Before executing any major changes in our portfolio, however, I consult my wife, who is also a financial planner with our firm. Her insights have often led to improved performance.

Compromise. One two-doctor couple mixed half their portfolio his way (40 percent stocks, 60 percent bonds) and half her way (80 percent stocks, 20 percent bonds). The result was a very acceptable 60-40 mix. Whatever you do, don't have the chief decision maker simply overrule the other partner. Compromise leads to better investment decisions, not to mention better marriages.

Make sure you're both well informed.Even if you and your spouse are comfortable with having one of you as the primary investment decision maker, the less involved spouse needs to understand some basics. This will help avoid misunderstandings—and financial disaster, in the event of the decision maker's demise. The less knowledgeable spouse should spend time with financial articles in this magazine as well as with Money, SmartMoney, Forbes, Barron's, and the Sunday New York Times business section. TV shows such as PBS' Wall Street Week can help, too. It's also a good idea for the less involved spouse to take a shot at selecting and investing modestly in stocks or funds.

Get outside help. If communication and education don't produce agreement on goals, asset allocation, and investments, consider asking an accountant or financial planner to mediate. Or sign up together for an investing seminar aimed at couples. Banks and brokerages often offer such seminars at no charge. Maybe some outside input is all you need to break a deadlock.

Consider splitting up—financially. If all else fails, try separating some of your investments. Earmarking a modest-sized account for the partner who wants to play the market with volatile investments might solve your problems. That way, the risk-taker can have his fun while the other can rest assured that the downside is limited.

Sometimes, though, you have to go further. One of my clients had a penchant for low-quality junk bonds and penny stocks. The first time I saw him and his wife, when they were in their 60s, he'd lost nearly all of their nest egg. He disavowed speculating, and the couple began to rebuild their savings. But after five years, he again started taking imprudent risks. That led to another near wipeout and prompted his formerly quiet spouse to become more assertive. With my encouragement, the couple split their assets and invested separately.

An extreme solution? Yes. But it may be worth separating from half your investments if that lets you avoid separating from your spouse.

The author, a fee-only financial planner, is president of L.J. Altfest & Co. (www.altfest.com ), a financial and investment advisory firm in New York City. This column appears every other issue. If you have a comment, or a topic you'd like to see covered here, please submit it to Investment Consult, Medical Economics magazine, 5 Paragon Drive, Montvale, NJ 07645-1742. You may also send a fax to 201-722-2688 or e-mail to meinvestment@medec.com.

 

Lewis Altfest. Investment Consult: Investing with your spouse needn't be Mission Impossible. Medical Economics 2001;24:12.