Making decisions with a partner

Household investment decisions are frequently made by one person, which produces a plan that only one person understands and only one person can sustain.

The common arrangement

And its problems.

One partner takes responsibility for investments, and the other is uninvolved.

Which produces: an allocation reflecting one person's risk tolerance applied to shared money; no shared understanding of the objectives; a plan that will not survive if the informed partner becomes unavailable; and a real possibility of the uninformed partner panicking during a decline they do not understand.

Surveys consistently find substantial differences in financial knowledge and confidence within couples, generally along predictable lines.

Different risk tolerances

A genuine problem.

Two people frequently have different capacities and tolerances, and the household has one portfolio.

Options: adopting the more cautious tolerance, which is safest behaviourally and may produce a shortfall; splitting the portfolio so each holds an allocation they are comfortable with; or agreeing a compromise with explicit acknowledgement of the difference.

What does not work is one person imposing an allocation the other cannot tolerate, since the outcome is a sale during the first substantial decline.

The binding constraint is whoever would sell.

The conversation to have

What to cover.

What the money is for, in specific terms, and by when.

What each person's attitude to risk actually is, expressed in money — what a decline of a stated amount would mean to each of you.

What would happen if either income stopped.

What you each grew up believing about money, which explains most differences.

What level of decision requires joint agreement.

And how often you will review together.

Making it shared

Practical steps.

Both parties know what accounts exist, where, and roughly what they contain.

Both have access, or know how to obtain it.

A written summary of holdings, providers and reference numbers, accessible to both.

An investment policy document agreed by both, which is where the risk conversation is recorded.

A scheduled joint review, however brief.

And explaining the reasoning rather than only the decisions, since a plan understood is a plan that survives.

Why it matters practically

Beyond fairness.

If the informed partner becomes ill, incapacitated or dies, the other must manage a portfolio they do not understand, at the worst possible time.

Which is a documented source of poor decisions and of vulnerability to fraud, since bereaved people are targeted.

Powers of attorney and clear records address part of this and do not address the understanding.

Which makes shared knowledge a protection rather than a courtesy.

The separate accounts question

Which suits some couples.

Individual accounts allow different allocations and different levels of engagement.

Tax considerations in some jurisdictions favour holding assets in the name of the lower earner or spreading across both to use allowances.

Which means separate accounts can be both practically and financially sensible.

The requirement is that the overall household position is understood by both, even where the accounts are separate.

Pensions specifically

Where inequality accumulates.

A partner who reduces work for caring accumulates less pension, which produces a substantial gap over decades.

Practical responses: claiming any credits protecting state pension entitlement during caring periods; contributing to a pension in the lower or non-earning partner's name where the system permits; and treating pension provision as a household matter.

And ensuring beneficiary nominations are current, since pensions frequently pass outside a will and an outdated nomination overrides it.

When you disagree

Practical approaches.

Separate the disagreement about the system from the disagreement about a specific decision.

Agree the objectives first, since disagreement about allocation is frequently disagreement about goals.

Consider a written policy as the arbiter, agreed when calm.

Consider a third party — a regulated adviser — where the disagreement is persistent and the amounts are substantial.

And accept a more cautious position than one partner would choose alone, since the alternative is a plan that will be abandoned.

What to write down

The minimum.

What accounts exist and where.

What is held and why.

The objectives and horizon.

What will happen in a decline.

Who to contact.

And where the documents are.

Dated, agreed and stored somewhere both can find it, which takes an evening and is the most useful investment document a household can produce.

General information only, not investment advice. Investments can fall in value. Consult a regulated financial adviser and a qualified solicitor about wills and powers of attorney.