How did your grandpa die?

Nearly 700,000 women lose their husbands each year, according to the U.S. Census Bureau, and the average life expectancy of women is 81 years old. Those factors alone should force investment advisors to check out two new studies on widows and financial fitness — and why widows don’t stay with an advisor their husband used.

Lack of trust was the key reason widows left an advisor after their spouse has died, according to a study by Spectrem Group. Another study from the Center for Retirement Research at Boston College found a decline in widows’ poverty, which could have implications going forward for government policy as well as for RIAs who increasingly may be working with widows after their main client has died.

For the Spectrem report, Widows and Divorcees: Empowering Women in Transition, researchers surveyed 500 women with a net worth of $500,000 or more and who were widowed or divorced, and the effects sudden singleness had on their financial decisions and relationship with their investment advisor. Key findings were:

  • Lack of trust was the primary reason for a widow leaving an advisor
  • Only 50% of widows felt well-prepared financially at the time of their spouse’s passing
  • The majority of widows didn’t enjoy the process of investing nor want to be involved in day-to-day managing of their accounts.

The CRR study, which examined data from the National Institute on Aging’s Health and Retirement Study, noted the key reason for the decline in widows’ poverty to 13% in 2014 from 20% in 2004 — it’s projected fall to 8% by 2029 — was due to three key factors:

  • Women’s rising levels of education
  • Women’s increased participation in the work force
  • Increasing marital “selection, “ that shows marriage, which used to be equally distributed, is becoming less common among those with lower socioeconomic status.

The study found that widows’ poverty level “has fallen over the past two decades, narrowing the gap between widows and married women by five percentage points.” Historically widows have been two to three times “poorer” than married women, according to the study. Researchers found that 25% of women born in 1950 held a college degree, up from 10% of those born in the 1930s. It follows that those with degrees held better paying jobs and were less reliant on a husband’s retirement income.

Advisor Experience

Advisors contacted by ThinkAdvisor offered different views on the studies and how to deal with widowed clients.

“What I see the most from my widow clients is that they do not know what they have nor have knowledge on where to start,” said Carolyn Howard, managing partner of Seacure Advisors. “I even had one widow who did not even have passwords to her joint accounts or her husband’s 401(k) information [and] she was highly educated.”

Her experience has been that it really doesn’t matter how much money they have or how educated they are, “the problem is the same. It takes empathy, time, patience, and hand-holding as they navigate new territory. It is ongoing work in helping them understand their finances. For many, it is like learning a new language. They are interested learners and begin to feel empowered as they venture into this new territory.”

Amy Jamrog, a financial advisor with Northwestern Mutual, has “definitely seen a change in the widows I’ve been working with over the past several years. They seem to have more money, partly attributed to market growth over the last decade, and also due to better planning when their spouse was alive.

“The biggest shift I see in widows is their increased worry and anxiety,” she said. “What they worry about is not what men are worrying about at the same stage in life. Widows are concerned about longevity, who’s going to take care of them down the road, whether they have enough money to maintain their independence for the rest of their lives, not wanting to be a burden on their children yet at the same time not wanting to die alone. Our conversations are definitely centered more around emotions than money or math in the first few months after the death of a spouse.”

Morris Armstrong of Armstrong Financial Strategies said that “as an RIA and planner … I have learned that a woman’s greatest fear seems to be that they will become a bag lady and perhaps they have taken steps to help prevent that.”

Howard agrees. “Even with more money, many widows still have the ‘bag lady’ syndrome,” she said. “They are often cautious about spending too much. This poverty decrease [from the CRR study] provides them with more options in moving forward in their lives.”

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