ELITE ADVISOR BEST PRACTICES

Why Clients Should Have a Financial Agenda Before Cohabitating - Part One

Make sure your clients have considered the financial, emotional and legal implications of “officially” moving in together before they take the plunge.

By Valentino Sabuco, CFP®, AEP®

Key Takeaways:

  • Make sure your client and their significant other are fully aware of the financial, emotional and legal implications of formally cohabitating.
  • When it comes to saving, retirement goals and risk tolerance, make sure your client and their partner are in sync (or at least aware of their differences).
  • Before your client begins cohabitation with a significant other, it’s worthwhile to have a frank discussion with them about why they’re moving in together and, in some cases, why they’re not getting married.


READER NOTE: The third week in October is National Estate Planning Awareness Week. Visit www.thefinancialawarenessfoundation.org for more about important financial awareness campaigns and how you can use these initiatives to build your practice.

The latest U.S. census data show there are now more non-traditional households in America than at any other time in our nation’s history. And financial planning issues have never been more complicated—especially when one or both members of the couple are affluent.

Before your client begins cohabitation with a significant other, it’s worthwhile to have a frank discussion with them about why they’re moving in together and, in some cases, why they’re not getting married. This discussion needs to range from the mundane (who handles household chores?) to financial realities (who pays what? what happens if someone gets sick?) to life essentials (what if you have children? what are your long-term goals?).

Here’s an agenda designed to help you make the process as painless as possible. Open communication makes for a better relationship—both for the couple with each other and for the client with their advisor. Look at this as an opportunity to improve your relationship and strengthen trust in each other.

Find a comfortable setting for this discussion—one that’s relaxing and free of distractions. Although you may not complete the conversation in one meeting, definitely have this talk with your client before they move in with a partner.

Key questions to discuss

1. Why move in together? Discuss with your client and their partner why they are taking this big step. Are they both doing it for the same reasons? What are their long-term goals for living together? Getting married? Having children? Gaining greater financial security?

2. What are their personal goals in life? Outline the big picture each partner has of life. Does either of them have a burning career goal that requires a major lifestyle change? Are they entrepreneurial or 9-to-5 people? How does each partner intend to balance family and career? How does each feel about the other’s family and friends?

3. Do they want children? If so, how many? Are they planning to get married before having children? Do both agree on that? Under what religion does each want the children raised?

4. What are the career goals? Discuss whether both want to continue working after moving in together or expect each other to keep on working. Talk about whether each partner is considering a career change or opening up a business. Would this upset the financial apple-cart too much?

What if one of you wants to go back to school? Is that OK, and how will the education costs be paid— by one or both? Talk about whether one will stay at home if you have children, and which one it will be.

5. What is each partner’s health status? Be frank about discussing health situations and concerns. Are medical exams in order? If there’s a big age difference between the two partners, you and your client need to deal with the possibility of the younger one taking care of the older one’s deteriorating health for many years.

6. Does either partner have prior financial commitments? Do they have financial obligations for past business debts, college education, alimony and/or child support? Talk about it. Do they have aging parents who need or may need help?

7. Where will they live? Are they planning to move into an apartment, house or condo that one already occupies or into a completely new place? What will their relationship be in their housing: co-owners, landlord and tenant, or tenant and subtenant?

Where do they want to live? Do they want to live close to children from a prior marriage or near parents to be available to them?

How much is prudent to spend on rent or a mortgage? How will expenses be divided? If they want to buy a place, do they have the resources for a down payment now? If not, what’s the goal for saving the necessary down payment? Will they be putting in equal amounts for the down payment?

8. How will household chores be divided? Talk about the shopping, cooking, cleaning and errands. False expectations about these daily chores can become a continual source of disappointment and disagreement.

Depending on how your client responds to these questions concerning their financial position, age and health, their estate and financial plans, along with certain other legal documents, probably need reviews and updating. As there are many potential legal and financial traps here, this may be an excellent opportunity for you to help your client address their changing situation and interface with their team of advisors to keep their legal and financial house in order.


About the Author

Valentino Sabuco, CFP®, AEP®, is the executive director and publisher of The Financial Awareness Foundation, a 501(c)(3) nonprofit located in Sonoma County California. Valentino has pioneered the financial planning profession for over 40 years. TFAF serves as a nonpolitical and neutral “financial awareness advocate” for the public, the professionals and their associations, educational institutions, and nonprofits. Our mission is to significantly help solve a major social problem by dealing with the lack of financial awareness and financial literacy. We believe teaching financial literacy is very important as it gives people the essential tools to address everyday financial decisions in a more informed manner. Valentino can be reached at V.Sabuco@TheFinancialAwarenessFoundation.org or (707) 586-8620.