From the October 2012 issue of Investment Advisor • Subscribe!

Madame Ex: Advising ‘Gray Divorcees’

Help female clients before they ever contemplate divorce, and you'll avoid losing them at the time they may need you most

We all know the cliché of the older divorcing couple: The husband, in the throes of a midlife crisis, dumps his aging wife for a younger cutie who will shore up his self-esteem and rouse the envy of his peers.

This may be one more stereotype that baby boomers are shattering. AARP has found that among couples aged 40 to 79 who split up, it’s twice as likely to be the wife who initiates the divorce.

Last month, in “The Baby Boomer Bust-Up,” we explored the increasing rate of divorce among older couples. That rate doubled between 1990 and 2009 for people aged 50 and older, according to a recently released study by sociology professors Susan Brown and I-Fen Lin of Bowling Green State University.

It’s particularly significant that divorce tripled in that time among women 65 and older, according to Brown and Lin. Since women typically own fewer retirement assets and live up to five years longer than men, they have greater need of solid financial advice after a divorce. You may think that’s not an issue with your wealthier female clients, but when a couple splits up, the ex-wife often fires her legacy financial advisor.

What Have You Got to Lose? $14 Trillion

Divorced, married or single, many women are high earners with substantial money to invest. As Bernie Clark, head of Schwab Advisor Services, told Investment Advisor’s Jamie Green in July 2012, women now control $14 trillion of U.S. wealth, which could more than double over the next 30 years. More than half of wives with business-related degrees out-earn their husbands. And as a Family Wealth Council study reported last year, up to 95% of women will have to manage their own finances at some point in life. Why, then, do so many advisors regard women as a niche market?

Part of the problem is that they work with couples primarily through the male spouse or partner, even if the woman has assets of her own. And women are noticing. Female clients who responded to the 2011 Northstar/Sullivan “Rebuilding Investor Trust” study rated advisors lower than did male clients in every category, including “making me a smarter investor” and “clearly [articulating] downside risks of investments.”

After the husband dies, more than 70% of widows fire their advisors within a year, according to 2011 Spectrem research. There’s no reason to think the relationship is any more permanent for divorcées. If a woman associates you with the negative experience she’s escaping, she may well “divorce” you, too.

Indeed, losing a female client after divorce is usually a result of having underserved her when she was part of a couple.

What Do Women Want From You?

First of all, your gender doesn’t matter much, as a Schwab Advisor Services study found earlier this year. What’s important is what you do, not which sex you are.

Some clues about what your female clients may be missing came out of a 2012 Schwab study of women with at least $1.3 million in investable household assets. Among the wants of these high-net-worth clients:

• Continuous, good investment performance. Some 58% of HNW women preferred long-term consistency of results to short-term financial gain. To women, investing is about having enough for what they want to do, not “winning” or beating the market.

• To be treated as individuals. Women aren’t a homogeneous population, but “a hugely diverse swath of the population,” as Schwab’s Neesha Hathi put it in a June interview with AdvisorOne.com. They want to be known by their advisor as individuals with unique values and needs.

• To be included in conversations equally with their husband or partner. One-fourth of women surveyed said that hiring an advisor was their decision; 37% said it was a joint decision with their spouse or partner, and 21% said their partner made the decision. Does that make you feel comfortable about retaining a female client you haven’t paid much attention to? We doubt it.

• “Face time” to help establish trust. HNW women prefer in-person meetings, with phone contact as the second-best option. Less personal electronic communications aren’t as popular.

Some other requests from wealthy women:

• More education and validation than men need. This is a huge factor in keeping female clients on board, says Eileen O’Connor of McLean Asset Management in McLean, Va. In a TD Ameritrade webcast, O’Connor added that women who don’t feel valued and listened to are more likely to end the relationship at the first opportunity.

• A relationship that’s not just business. “It’s OK to ask emotional questions,” such as “‘I notice that you are not as upbeat as you normally are. Can I ask why?’” O’Connor says. “I find that clients appreciate advisors asking those questions, and it gets easier asking them over time.”

• An advisor who is a fiduciary. For 80% of HNW women polled in the Family Wealth Advisors Council’s 2012 “Women of Wealth” survey, this is a sign that an advisor has their best interests at heart.

Building Relationships Before a Divorce

The solution to retaining divorced clients starts well before any fracture lines appear in a couple’s marriage. Consider the guidelines Liz Davidson of Financial Finesse shared in her June AdvisorOne.com blog:

• “Treat wives like they matter, even if they’re not directly making the decisions.” This should go without saying, but it’s easy to overlook—especially if the husband dominates the conversation and the decision-making process.

• “Create a community of female clients to attract new ones.” Ask female clients who are happy with your work to share their experience with others. Consider hosting events where they can bring friends to talk about shared concerns and brainstorm solutions with your help.

• “Communicate differently with women than you do with men.” For example, men tend to regard an investment as something that can gain value over time. Women are more concerned with being able to maintain their family’s well-being and comfort from day to day. In addition, we’ve learned that women prefer being face to face with an advisor so they can look you in the eye, while men tend to prefer sitting side by side.

We would add an extremely important point:

Educate women about their financial choices. If you take time to discuss the various options and explain why you recommend one choice in particular, less financially knowledgeable women will appreciate your professional skill, understanding of their needs and commitment to keeping them involved. (Spouses who think they know it all may learn something, too.)

For other valuable suggestions about how to reach women clients, see Olivia Mellan’s article “Majority Report” in the August 2010 issue of Investment Advisor.

She’s Talking About a Divorce: Now What?

Your role as an advisor takes on a new dimension when you’re consulted by a client considering divorce. “Many women who come to me haven’t thought through all the ramifications, so I help them analyze the process more fully,” Certified Divorce Financial Analyst Barbara Shapiro says.

A CFP who heads HMS Financial Group in Dedham, Mass., Shapiro startled us by explaining the first thing she does: “I always check to make sure [the woman] does not feel physically threatened. If she does, then that becomes the primary concern, rather than conserving assets. But if I am comfortable there isn’t a safety issue, then I get a feel for her current lifestyle and discuss with her how it may change, both physically and emotionally.”

When we learned that AARP identifies spousal abuse as a leading driver of divorce (see sidebar, “Why More Wives Are Calling It Quits”), Shapiro’s priority became much more understandable.

Your assessment of a post-divorce future may (and probably should) be more hard-nosed than your client has envisioned. For example, Shapiro was once consulted by a wealthy woman whose neglect by a workaholic husband made her lonely enough to contemplate divorce. Her life revolved around the country club and other activities related to her husband’s position. Shapiro says, “I pointed out to her that she wouldn’t just be divorcing him; she would be divorcing her lifestyle. So I encouraged her to give this serious thought before making a move from which there was no turning back.”

[Learn more about what divorcing wives fear most.]

Years later Shapiro ran into the woman, who thanked her for her advice. She had decided to stick with her husband, and when he died, “I got it all!” (Clearly, there wasn’t much love left in this marriage.)

Instilling confidence through new knowledge and patient guidance is also a crucial responsibility. “A majority of women contemplating divorce after many years of marriage are fragile,” says Linda Leitz, a Colorado Springs, Colo.-based financial planner who specializes in advising clients during and after divorce. “They have more to lose because they don’t have the time horizon; and whether they loved their husband or not, they’re going to be alone, and that’s very scary. My experience is that a majority of these women are overly trustful and uneducated about money.”

In fact, divorced wives typically suffer more due to financial ignorance than their ex-spouses. A 2009 TIAA-CREF survey found that older women are not only low in financial literacy, but they actually resist learning about money. And, shockingly, 2012 Financial Finesse research indicates that the financial knowledge gap between men and women appears to be widening.

Leitz explains, “It’s often the non-moneyed spouse who seeks me out during a divorce—the one who didn’t handle the household bills and the investments, and made less of the money or no money. So it’s like someone coming to me with a car but not knowing how to drive it. They need to know if they’re getting a fair deal in their divorce. After the divorce, they need to know what to do with the money they have.”

[Learn more about how divorce and the recession affect retirement.]

Leitz views her job as teaching these clients enough so that they can make educated decisions going forward. “If they want me to make their decisions for them, I refuse to do it,” she says. We applaud this attitude, which will end up helping women become full partners in the planning process.

As a new divorcée’s advisor, you may be called on to explain the ins and outs of investments, insurance and mortgages, or help your client learn to budget. She may need your assistance to find a less expensive house or apartment, or even to negotiate moving in with an adult child. Consider collecting and sharing success stories of women who saved money by moving into a smaller place or taking in housemates. You might also gather resources about different types of community support available to older divorcées.

Your client won’t always feel grateful about (and may be downright resistant to) having to seek a job after years of raising children and supporting her husband’s career. Says Leitz, “We have to find a way to be sympathetic to her feelings, while encouraging her to build a new life for herself.”

An Opportunity, Not a Problem

One-fourth of all divorces already involve couples who are 50 or older, according to BGSU’s Brown and Lin. Over the next two decades, their number is expected to grow by at least one-third. Hopefully, more research will clarify the issues involved in this disturbing trend.

The financial ramifications can be complicated, especially for women who need your help in understanding their money. But divorce is an emotional passage, too. The better you comprehend the challenges, from loneliness and fear of running out of money to worries about children, the more helpful you can be in advising your clients and connecting them with the right support services.

[Learn more about the characteristics and wants of wealthy divorcees.]

As the increase in older divorce collides with weakened portfolios, stubbornly high unemployment and massive numbers of baby boomers on the cusp of retirement, it threatens to become a perfect storm that could menace a substantial part of your client base. If you build stronger relationships now with both members of every client couple, you should be rewarded with self-confident, independent female clients who will stay with you for many years to come—and send more referrals your way.   

View all the articles in our series on the "Graying of Divorce."

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