Why financial planning should be done as a couple – and how cashflow planning helps
Every financial planner has been in a situation with a client couple where one of them is more engaged than the other. Often one of them deals with the finances while the other shies away because they are not interested or, more commonly, because they find finance hard to talk about.
The failure to talk about money is a common problem. Research from M&S Bank revealed that just 17% of people in a relationship regularly talk about finances with their partner. The study found that one in 10 are either apprehensive about discussing debts, don’t share how much they earn, or know details of their partner’s wages.
However, getting your clients to openly talk about money management as a couple is tremendously important, with three very clear benefits…
1. Both parties can share and compare their goals
Client couples may differ in their attitude towards money. But it might not be apathy that is preventing one party from getting involved: it could be a bad past experience which you need to be sensitive to.
They may also have different goals or life ambitions. For example, one may want to retire as early as possible, while the other may love their job and want to work for as long as they can. Some client couples may never even have discussed their true dreams with each other.
As a financial planner, it’s up to you to figure out the root cause of their behaviour by teasing information from them and helping them to open up. Using a cashflow planning tool can help you to ask careful questions which naturally engage individuals in the planning process, such as:
- What’s on your bucket list?
- What do you want to do with your life?
- What does your dream retirement look like?
2. There are tax efficiencies
Working together can help client couples draw pensions tax-efficiently, or extract profits from a family business without paying too much in tax. If one partner is the main breadwinner, they may have an unused Income Tax allowance or may not have taken full advantage of their Marriage Allowance.
Using a cashflow planning tool with clients allows you to give them a visual representation of their financial position now and in the future, making it far easier for them to grasp how their wealth will be affected over time. It can also clearly demonstrate the benefits of working together and using the appropriate tax allowances and strategies.
3. It can help ensure their joint objectives are met
There’s no template for a financial plan, and no right or wrong way to devise one. One client might have a particular idea of how they would like their joint finances to work, but their spouse or partner may have other ideas.
What’s important is not that a couple have the same goals but that they collaborate and talk about how they achieve their joint objectives.
Cashflow planning can help to enable these types of discussions about money with both parties. By visualising their joint future, it can encourage collaboration and a plan that works for both of them.
Clients who collaborate can take advantage of a huge raft of benefits, from factoring in the impact of death and serious illness, to ensuring they can meet estate planning objectives such as leaving enough for their children. Only by working together can client couples make the most of their money.