Is your partner’s 'play it safe' strategy costing you a comfortable retirement?

Scotiabank surveyed 934 Canadians last month (1), finding that over a third of respondents (38%) cited not aligning on risk tolerance when investing toward a common goal as one of the biggest challenges couples face. Risk tolerance wasn’t the only friction point, with 34% revealing that differences in spending or saving habits were major hurdles.

Helen He, vice president, Retail Investments at Scotiabank, told The Globe and Mail that different risk appetites between partners can stem from money beliefs formed in childhood, careers and differences in attitude and practice when it comes to saving (2). Additional data from the survey showed that Boomers were most likely to struggle to meet in the middle regarding risk (42%), with Gen Z following closely behind (38%).

While navigating the intricacies of each person’s risk appetite may not be easy, Scotiabank found that couples still choose to invest as a unit, even if complications arise. Most Canadians couples lean on one another when investing due to: Trust in their partner's financial judgement (66%), confidence in their investment knowledge (64%), and a belief that investing together can strengthen the relationship (59%).

More than just money on the line

Investing together means putting money on the line from both partners, which can cause friction when markets go through major downturns. Partners may blame one another’s risk tolerance for either a loss or missed opportunity (and missing out on potential gains).

A recent survey from Money Mentors (3) found that over the past year, 25% of couples admitted that financial factors hurt their relationships, while 52% said they have experienced negative effects — such as losing sleep — due to disputes surrounding money.

To put this in context, every partnership tends to fall into the same pattern, with one partner who is more risk-averse, explains certified financial planner (CFP) Simon Wong during an interview with The Globe and Mail (4).

As a result, the more risk-tolerant partner may push the conservative partner — usually during market upswings — and this can create feelings of anxiety and resentment for both people.

How couples can invest well

Financial alignment is a core marker of a healthy relationship, and couples that choose to invest together need to find that intricate equilibrium, or risk relational strife.

To help, here’s some expert advice on how partners can learn to negotiate the stock market and invest as a unified team.

Start with the big picture

Wong told The Globe and Mail that couples should pay more attention to being in 100% alignment on their financial goals in the long term, rather than what to do during short-term market swings. Knowing that your partner supports the overall reason for investing funds can help establish a foundation of shared interest when deciding on investment tactics.

A good place to start is to find out your own risk tolerance. The Canadian Investment Regulatory Organization has a helpful investor questionnaire (5) to help you determine what kind of investor you are.

Choose to be a team

Often, couples that choose to invest together face an imbalance, as one person may have more financial knowledge than the other. As a result, the person with more knowledge can become the dominant decision maker when it comes to investing (6). While this appears logical, at first, it can breed resentment and frustration over time. Instead, couples need to have a team mindset and communicate often and openly about decisions, even if only one person is making and executing on these decisions.

Consider healthy compromises

Couples that have wildly different risk appetites don’t need to invest all of their money together. Opening separate investment accounts can be beneficial, both financially and for the relationship. For example, couples that have separate investing accounts can hold duplicate investments to ride market upswings together, or diversify their assets to weather financial storms more easily (7). But by splitting the accounts, it also gives each investor an opportunity to explore strategies or assets their partner doesn’t favour.

Bottom line

Investing as a team isn’t easy. It takes transparent conversations, a willingness to support each other through market ebbs and flows, and the ability to manage emotions while supporting each other’s goals. Is it a high bar? Definitely. But the payoffs — financially and emotionally — are worth it.

Article sources

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Scotiabank (1); The Globe and Mail (2, 4); Business Wire (3); CIRO (5); Fyooz Financial (6); Innovation Wealth (7)