Investment advisors and planners are stuck. For decades, the industry has perpetuated a figure that suggests 70% of widows drop the financial professional shared by the couple and who presumably had done little to engage or impress the now surviving wife.
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Except, there’s a problem with this flimsy finding, says researcher Ken Kehrer, who took a new look at behavioral data.
The figure fuels the rallying cry to improve targeted and robust financial planning and wealth management services for women especially, so its intent is well-meaning. It is true that more widows do part ways with advisors than other singled-out demographics. No argument there from the founder and principal of Chapel Hill, N.C.-based Kehrer Group.
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But to brush over a fuzzy data origin for the popular “shock” statistic and downplay the nuance and expectations of today’s investing households does a disservice, say Kehrer and other advisory thought leaders.
Interpretation runs amok?
Curious why the industry was fixated on this figure, Kehrer joined with Luke Allchin, a director for strategic research and data firm RFI Global, to review the original small-sample widow study but could find only traces of one out-of-print report and little about the data architecture.
The archival hunt did lead to a theory: The biggest flaw may be interpretation. Survey responses leaned heavily toward dropping a particular professional: life insurance agents, presumably after the policy claim.
Moving forward, the team tapped RFI’s MacroMonitor database to capture the 7.3 million widows in the U.S. (5% of all households) and the 1.6 million widowed in the last two years and looked at behavior back to 1978.
What the larger sample size showed is that nearly 14% of recent widows in households that have at least $150,000 or more in financial assets and are actively saving or investing for retirement or are retired cut ties with an advising relationship or changed advisors.
A lot fewer than 70%.
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The 14% compares to nearly 5% across all investing households, which means widows are almost three times more likely to move on from the family’s advisor.
Undoubtedly the loss of a partner is a vulnerable time. Industry experts stress that both sides — client and advisor — should adjust expectations for relationship scope right after a major life event because widows (and widowers) grieve at their own pace.
“That’s why we say to clients, ‘Try not to make major decisions while you’re going through the fog … for at least the first year,'” Regina McCann Hess, president and financial advisor at Forge Wealth Management, in Malvern, Pennsylvania, said on her Women & Wealth podcast.
McCann Hess said the surviving partner should call their attorney for help with a must-do list for the first 90 days after the death. Bigger financial decisions, including professional changes, can wait, she said.
Emotional response?
Are advisory removals then often more reactionary than rooted in performance or other tangible factors?
“We hear lots of chatter about advisors ignoring the wife in conversations with husband-wife client households, but our data cannot yet verify that,” Kehrer said.
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“For the households most likely to have a financial advisor, the husband still dominates financial decision-making. Does advisor behavior have something to do with this? Are households where the wife is not involved in financial decisions largely those households making more income and likely to change the financial advisor when she is widowed?” Kehrer added. “All grist for further thought and analysis.”
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