Financial Advisor

September 2010 issue

Going Dutch For Advisors?

How do you merge finances in a marriage if both spouses already have separate advisors?


When young couples marry in their 20s and 30s, they wind up sharing a lot of things: a house, children, maybe a bank account. They may be buying their first house, having their first children.

But for older couples getting married or remarried, it’s a different story. Many already own a home, have children and have their own bank accounts. They may also have their own accountants, financial advisors and estate attorneys. For them, merging households is trickier business. They not only have to decide whose house to live in but whose advisors to use.

“I can’t tell you how many newlyweds come to our site asking about this very question,” says Ryan Himmel, a CPA and founder of BIDaWIZ Inc., an online Web site for accounting and financial advice.

Himmel says more women than men make inquiries on his site, in some instances because their husbands wanted to be the one to choose the family advisors—even if both partners were coming to the marriage with their own. The husbands felt it was natural for them to make that decision either because they were bringing more money to the marriage or because they believed they had more financial expertise. That’s not a very good check and balance for the other partner in the marriage, Himmel says.

Himmel advises couples to be strategic about the decision and to choose the advisor who best fits both partners’ needs. That means the husband and wife should be interviewing each other’s advisors and then taking a step back to reassess their options.

“There have been cases where some of the credentials of the accountant were never checked by the spouse using them, and the new spouse then does some cross-referencing and finds the accountant’s licensure is not accurate,” Himmel says.

Himmel says he helped one client prepare for her new husband’s accountant by sending her off with a set of criteria and a list of questions—what types of tax returns he did, for instance. One of the questions was about Roth IRAs, and when she asked, it was clear the accountant wasn’t up to date on them. It made the husband realize perhaps his accountant, who he’d trusted implicitly, wasn’t the best choice to be the family accountant.

If they are visiting a new spouse’s financial advisor, they have some other questions to ask as well. Do the advisor’s clients fall into a particular demographic? Does the advisor have a certain asset allocation? It’s also important to check with the advisor’s licensing agency to make sure his or her licenses are up to date, Himmel says.

Sometimes, the new couple’s choice of advisor depends on who had his or her advisor longer. If one spouse has been with an advisor for so long that they’ve bonded, then the other spouse usually allows that advisor to handle the marital assets.

And then sometimes, it just comes down to gender. “Very often, I think the females in the partnership are more likely to acquiesce to the lead of the other partner,” says Cicily Maton, president and founder of Aequus Wealth Management in Chicago. “I tend to think that this has a lot to do with women not having had as much experience in working with advisors. And more often, the male in the partnership has.”

While some partners will maintain their own assets and advisors—particularly in a second marriage—Maton doesn’t encourage that. She asks her clients to come up with a joint financial plan and blend their new lives.

“We find it helps the new marriage off to a much better start,” she says, though she encourages those entering second marriages to have a prenuptial agreement. And each partner in the marriage should hire his or her own lawyer to hammer it out.

One couple was so aware of the impending melding of their finances that they postponed their wedding until one partner was able to pay off debts—which, like their assets, were in excess of $1 million. “They put it off because the one didn’t want to take on the other’s debts,” Maton says.

While it may have seemed cold, Maton applauds couples with foresight. Most are too starry-eyed to discuss the mundane things like who will pay the mortgage or the taxes or the groceries, or whose house they will live in until they’re well into the relationship.

“We tell them it’s better to have those discussions in our office rather than at home, where there is no one to referee or offer perspective,” she says.

When using an advisor one partner had before the marriage, couples must be wary of the advisor wanting to protect the original client’s interests over that of the new partner. There’s not always a unity of purposes, says Marlene Eskind Moses, president of the American Academy of Matrimonial Lawyers.

“When there’s wealth involved, and you’re combining wealth, it’s important to protect the wealth that belongs to each party,” Eskind Moses says. “Obviously, you want to have the mutual benefits of combining that wealth. But you also have to be mindful if the marriage doesn’t work, what the result will be.”

People get married and the first thing they do is transfer their assets into their spouse’s name, and that’s not necessarily a good idea. Those transfers are good for estate tax planning purposes, but they’re horrible for divorce cases, she says.

“The discussion becomes, should we plan for what’s good for us now, or should we plan for what’s good for us if the marriage doesn’t work?” Eskind Moses says. “What is the couple trying to attain?”

A couple needs an advisor that is going to help guide them through that process, whichever goal they choose. But both parties need to feel they can trust the advisor that’s chosen, especially if that advisor has had a long relationship with one party in the marriage.

“I frankly think it’s good for everyone to have their own advisor, and the two can work together,” Eskind Moses says. “I know it’s more costly, but then you know your individual rights are protected.”

Many couples on second marriages opt to manage their assets separately and thus retain separate advisors. Robert Riedl, director of wealth management for Sumnicht and Associates in Appleton, Wis., would know. He currently has several women in their 60s and 70s who have come to him seeking financial management, and he’s never even met their husbands.

“When you and I get married, we mix our assets. What I’m seeing in numerous cases today is that I’m being hired by half of the couple, to manage their assets,” Riedl says. “I don’t even see his assets.”

Oftentimes, the wife has liquidated her whole estate and has moved in with her second husband, who has set aside much of his wealth for his children but is taking care of his wife’s day-to-day expenses—and then some. But having come to the marriage with some of her own money, which she now doesn’t have to spend, she can invest it, and that’s where Riedl comes in.

“I’m able to invest her money as if she’s a 30-year-old instead of a 55-year-old, because she’s being taken care of. There are no requirements on her assets,” Riedl says. “Her longer-term needs will only come into play when he dies.”

Debra Opri, a family lawyer who practices in California, New York and New Jersey, likens a marriage to the merging of two companies, like Continental and United airlines. Couples must determine who’s going to be the CEO, who’s going to be the CFO and who is going to be on staff. To that end, she believes it makes sense for each party to have separate advisors.

“You have a business: You go to work, you earn income, and you invest it. You’re a business entity. So how do business entities protect themselves?” she asks.

In her own marriage, Opri decided from the outset to use her own accountant and file her taxes separately because she wanted to protect her business.

“Frankly, I don’t want someone telling me what to do and how to run my business and my funds,” she says.

Opri says she’s represented a lot of successful women over the years who have felt the same. They feared that once they merged their finances with that of their husbands, their money—and the decisions surrounding it—would no longer be theirs.

“My advice is always, ‘Keep your accountant. Keep your lawyer. And let him keep his,’” she says, noting that Lucille Ball always had three sets of everything: one to look after her, one to look after him, and one to look after both of them.

“She basically said, ‘I have everybody watching everybody,’” Opri says.

Christine Moriarty, a financial planner in Vermont, says she couldn’t disagree with that approach more. “If you agree to keep everything separate, what kind of marriage do you have?”

Moriarty says she has among her clients a couple who always kept everything separate, and now they’re getting divorced, in part because they kept everything separate.

That said, she doesn’t advocate merging everything. The decision is couple-specific and item-specific. For instance, Moriarty, 48, got married three years ago to her husband Larry, 69, and they each kept the attorneys they had before the marriage, but they hired one estate attorney for both of them. They file their taxes jointly because it makes financial sense to (her husband does the tax returns because he’s an accountant), but they’ve maintained their old landline phone numbers from before the marriage. Her calls are forwarded to the house phone, which is his number, and the phone rings differently for her number.

“You can have his, and hers and our money. You can have his, and hers and ours everything. And if you get stuck, because you each want to keep your own, you can hire a third person to do everything,” she says.

But the best decisions about merging assets or advisors are not always the most rational ones. Moriarty’s insurance agent told her on numerous occasions that it would be a lot cheaper if she and her husband got an umbrella policy with one agency, but they’ve wanted to keep everything separate. She says she liked her agent. And her husband said he liked his. They compromised and put both cars with her agent and the house and the umbrella policy with his agent.

“The most practical is not always the best emotionally,” she says.


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