With A Minor In Psychotherapy

Financial advisors and bartenders dont have much in common, except for one crucial occupational skill they dont even train for: acting as psychologists to their troubled clients. But unlike bartenders, advisors dont have the luxury of lubricating client discussions over a martini or margarita. And the heart-to-heart talk often involves not a one-on-one, but one-on-two: boomer couples who hold diametrically opposing views on financial priorities.

“A lot of the time, I play the shrink,” says Rick Van Benschoten, a manager partner at Lenox Advisors, New York. “When couples are at odds with one another, we dont start by discussing cash flow and retirement models. The first step is to get them onto the same page.”

Thats not so easy, he adds, when the boomer partners are, financially speaking, polar opposites: one a saver who feels strongly about retirement planning; the other a carefree spendthrift who desires only to live for the momentnest eggs be damned!

This situation commonly arises, says Van Benschoten, where one spouse works and is goal-oriented and the other doesnt work and is non-goal-oriented. The chasm in financial priorities may extend to other areas that are contributing to underlying tensions.

All of this can lead to confrontation when one spouse makes budget-busting requests. Van Benschoten cites one couple where the wife forced the husband into buying a beach house and, some months later, demanded a new primary residence.

Disagreements also may arise among partners who are penny-wise, but pound-foolish. Bill Driscoll, a financial planner with Driscoll Financial, Plymouth, Mass., recalls 2 spouses who were outspending cash flow by $1,500 per month because of high interest rate payments on credit card debt, yet fought in his presence over their substantially lower food bill. The latter, Driscoll told the couple, was too minor an issue to spend time on.

Often, advisors say, the financial troubles stem from a lack of communication. When boomer couples dont talk openly and frequently about budgeting and retirement objectives, frictions can mount, forcing them to take their differences to a financial advisoror a divorce attorney.

Driscoll, however, notes that financial-related intermarital conflicts usually arent so dire among his boomer clients.

“If you take finances out of the equation, couples generally get along very well,” he says. “The old saying, opposites attract, tends to be true of the spouses I see. But finances are the one area that creates seemingly insurmountable problems.”

Reconciling differences in financial priorities, he adds, requires of the advisor an ability to listen empathetically, navigate points of friction without taking sides or becoming emotional, and then gently guide the couple to a solution. The conflict therefore demands interpersonal skills, as opposed to proficiency in selling techniques.

The solution, observers say, generally splits the difference, achieving a middle ground on spending and saving priorities that each partner can live with. The result: a retirement plan that, while curtailing the spendthrifts free-wheeling ways, typically entails a longer timeline (and/or a smaller nest egg) than the saver spouse wanted.

As a tactical concession, Van Benschoten frequently suggests that the non-saver spouse scale down expenses annually (for example, by $20,000, $30,000 and $50,000, in years 1, 2 and 3). So instead of retiring in, say, year 5 (the savers first choice), the couple retires in year 7.

“The [spendthrift] spouse has to have a win,” says Van Benschoten. “He or she is not just going to say, Fine, Ill reduce my living expenses by $100,000 per year so we can retire in 5 years.”

To fund retirement objectives, Driscoll encourages his middle-income clients (those with earnings ranging from $50,000 to $150,000 annually) to invest up to the corporate-matching contributions in their employers qualified retirement plan, such as a 401(k); and to place surplus savings in a Roth IRA. One reason: the ability to withdraw contributions, albeit at a price. (Unless an exception applies, most distributions from a Roth IRA before the owner reaches age 59 1/2 are subject to a 10% “early withdrawal penalty.”)

Additionally, a permanent life insurance policy should account for at least 20% to 25% of the couples death protection, says Driscoll.

However funded, the retirement plan has to be monitored over time to ensure success. So, regular follow-up meetings between the advisor and client-couple are critical, observers say.

“Just giving the partners a plan and saying, do this, isnt enough,” says Driscoll. “We have to hold the proverbial Damocles Sword over their heads to keep them on track.”


Reproduced from National Underwriter Edition, December 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.