Women not planning for the unexpected

Women have a lot of responsibilities when it comes to marriage, but financial planning often falls by the wayside. So what happens if a spouse dies or a marriage dissolves?

That’s what TD Waterhouse tried to find out in its 2007 TD Waterhouse Female Investor Poll. The company asked 995 women if they have a “Plan B” in the event of a divorce. Only 16% of those surveyed said they did.

“People think that it’s always going to happen to someone else, not to them,” says Patricia Lovett-Reid, senior vice-president at TD Waterhouse Canada. “But we need to have that contingency plan, that ‘what if’ scenario.”

For the surveyed women who didn’t have an alternate plan but are working with an advisor now, certain life events forced them into planning. According to the report, 65% took a more active role in family finances after a divorce, 61% became more involved after a partner became ill or disabled and 59% after the death of a spouse. In contrast, only 47% of women got more active in finances after they got sick themselves, 46% after they lost a job and 43% after the birth of a child.

“This is a call to action,” says Lovett-Reid. ” The women looked at themselves if they became ill or lost their job or had a child — something that could impact the family dynamic. We still put ourselves second. It’s okay to be a little selfish and get a plan.”

But getting women to develop a financial plan early is easier said than done. Vera Adamovich, a CFP with the Independent Planning Group, says many women think that they need to know a lot about math in order to get their finances in order. They also have the notion that using a financial planner will be beyond their financial means, especially if they’re going through a divorce.

To ease her clients’ apprehensions, Adamovich says, she simplifies the planning process. “I know what the laws are around divorce, so I can help them see in simple terms what they will have and what they’re working with. I just lay it out for them.”

She says there are two basic things that she discusses with her clients: what they are earning, whether it be from child support or job income; and what they need for retirement. “I break it down into these simple components and take it from there.”

Once her clients get a handle on these concepts, they often feel empowered. “I encourage women to see a divorce as an opportunity for a new beginning,” she says. “I find that shift in view is powerful.”

While women generally start planning after a major life event forces them into it, planning early is always the best practice.

Bev Evans, a CFP at RBC Dominion Securities, makes it a point to bring both spouses together when they discuss their financial plan. “I like to insist that both partners are always present for a meeting, even if one of the spouses says, ‘oh well, I just do what the other one says.'”

She encourages the less financially savvy partner to come to the annual review, at the very least. “It helps the advisor understand what’s going on, what the clients are like and what issues might be there that the client doesn’t even realize,” she says.

Having both spouses on top of the financial plan also helps for more proactive, rather than reactionary, planning. If something happens, such as a divorce, it’s easier for the advisor to help the client who’s already had the head start. “It’s better if someone comes to me earlier than later,” she says. “I explain that it’ll cost more if they’re not responsible, and I know what the rules are. I can help them understand that and encourage them to do a lot of deciding in advance, among the couple, before they throw it in the hands of the court.”

Part of the reason more women don’t approach a financial advisor early is that thinking about a marriage ending or a death in the family is a difficult thing to do. “It’s far more difficult than I ever realized it was going to be,” says Lovett-Reid, who’s in the midst of developing her plan B. “It’s hard to do when everything’s going along fine. It’s tough to stop and imagine what would happen if life throws you a curveball and forces you to think what you would do next.”

She says advisors can ease the process by asking their clients the right questions. “It’s as simple as saying, ‘Here we are today. Are you taking on too much risk in a portfolio? What if markets were to have a severe correction? What would be your plan B?’ Savvy advisors are constantly running the ‘what if’ scenario.

“It becomes an insurance policy on life,” she adds. “It’s best if never used, but it’s invaluable if your client needs it.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com

(11/05/07)