The death of, or divorce from, a spouse ranks among the top-five financial challenges facing female HNW clients, with estate planning, investment decisions and legacy planning also key hurdles cited, according to a new survey by Key Private Bank.
The survey of more than 140 of the firm’s client-facing advisors about their experiences working with high-net-worth (HNW) females who became “suddenly single, explored how women should prepare for a suddenly single scenario; immediate steps women must take after the death of or divorce from a spouse; and strategies advisors are using to coach women facing these situations.
Eight in 10 advisors (82 per cent) say some or hardly any of their married female clients have a contingency plan in place to navigate the emotional and financial impacts of finding themselves on their own.
According to more than half of advisors (52 per cent), putting a contingency plan in place is critical, since becoming suddenly single often limits female clients’ cash flow, calling for changes in spending. Among women who become suddenly single, 40 per cent of advisors note that those female clients are best prepared to navigate the short-term financial changes, but are less equipped to think through their long-term financial plan.
“Navigating finances following the death of or divorce from a spouse doesn’t mean half of the ongoing expenses or financial obligations have disappeared, so it’s critical to have a contingency plan in place,” says Cathy O’Malley Kearney, National Head of Trust and Chief Fiduciary Officer at Key Private Bank.
Following the death of a spouse, specifically, seven in 10 advisors say identifying financial decisions that must be made immediately is the most important financial step women should take, versus those decisions that can and should wait. And yet, over half of advisors (56 per cent) say this is also the biggest challenge facing female clients.
“Our earlier advisor poll on women found that only three per cent of advisors are witnessing female clients drive family wealth conversations,” says Veena Khanna, Director of Strategy at Key Private Bank. “While we encourage all of our client-facing professionals to be sensitive to the psychological impacts that result from a major life change, it’s our job as trusted experts to empower clients with the confidence they need to take charge of their financial futures immediately and for the long-haul.”
To help female clients successfully take full control of family finances, particularly following the loss of a spouse, three in 10 advisors say empowering female clients to direct the creation of their long-term financial plan, after they direct the creation of a short-term financial plan, is the most impactful approach.
Advisors agree that the top three most important steps married women should take in creating a contingency plan are identifying and documenting sources of income, budget, and other assets (36 per cent); meeting with a financial advisor to strengthen financial skills (33 per cent); and determining which financial decisions must be made immediately in these types of scenarios (14 per cent).
Additionally, one in three advisors (34 per cent) say the most effective strategy for coaching female clients through the decision of whether to hold onto expensive assets, to which they may have an emotional attachment (eg, a vacation house, artwork, etc), is identifying the root of and working through the issue.