How high net worth women are risking their future finances

Leaving important long-term planning and investment decisions to a spouse can end up being a potentially costly decision. Here are three reasons why.

I recently came across research that revealed women worldwide are leaving long-term financial planning to their husbands, a decision that could put their financial security at risk. The global study, which looks at the behaviour of High Net Worth Individuals (HNWIs), found that while the majority (85 percent) of HNW women are involved in the day-to-day finances of the household, they tend to leave most investment decisions and long-term planning to their spouse. These findings were also supported by a Canadian survey of women 45 years and older, which pointed to a lack of confidence about their financial future despite being very proficient in household money matters.

Women are still taking the back seat, it seems, and deferring to their husbands to take care of the long-term finances while they tend to focus more on the needs of the family. And I found it intriguing that millennials were the most likely to defer these decisions to their partner.

As a family law lawyer, I am privy to the details of separating couples’ financial situations and often see women who are at a loss when it comes to understanding the totality of their current and future financial outlook. Considering that the divorce rates in Canada and around the world remain high, and that women continue to outlive men, leaving husbands in charge of long-term finances is not a wise choice. In fact, women – and especially HNWIs – who are not involved in all aspects of their financial affairs are at risk of several consequences:

1. Lack of access to financial information – Women who are not involved in their long-term finances may find themselves struggling to piece together the financial information they will need to re-organize themselves in the event of serious life events. This could be due to a sudden death or even an acrimonious divorce where one spouse is attempting to hide sources of income.

   Once they’ve decided to separate, many women already feel extremely anxious as did one recent client who came in for a consultation. She realized that she did not have any knowledge of her family’s financial affairs and had no idea whether she even had enough funds available to her to retain professionals to help, or whether she’d have enough money for the future.

   While the legal separation process will provide obligations on all parties to produce their financial information, this disclosure process may be faster and less costly when both spouses have some awareness of the family’s finances.

2. Poor or improper planning – Married couples become accustomed to a certain standard of living, especially those with considerable income and assets. However, women can sometimes discover that improper long-term planning by their spouse requires them to re-adjust their lifestyle unexpectedly at a later stage. This will have even more impact in the case when there is a divorce or death, leaving the remaining spouse on a sole income and a financial future that is now less than anticipated.

   For example, one male client, who was the sole income earner in the family, had never bothered to take out life insurance – something most people do once they are married, buy a home or have children as a way to protect the family income. By the time the separation occurred, and the family needed to split the assets and re-build their lives, the husband had developed health conditions that made it prohibitive to qualify for life insurance. This created considerable stress for the dependant wife and resulted in a more expensive divorce because the professionals needed to find and negotiate ways other than life insurance to secure the husband’s future spousal support obligations.

3. Negative financial surprises –A spouse who is not involved, or is less engaged, may then be surprised to discover their partner has liabilities they did not know existed, which places their financial future in jeopardy. It’s important that women are aware of and understand the financial decisions their husbands make, including taking on or consolidating additional debt. In another client case, a business owner ran his business to the ground. When the business was failing, he borrowed money so that no one would suspect his business was experiencing difficulties. At the time of separation, the wife was surprised to find out that the business was in trouble and that the family had incurred so many debts.

Lasting, satisfying relationships are often those with open communication. As the study points out, women who partner with their spouse on long-term financial decisions also report high levels of satisfaction, less anxiety about the future and make fewer financial mistakes.  With most women having a longer horizon that needs to be funded, taking this partnership approach to decisions about their future is a great investment.