Client couples

Introduction

The myth of “automatic marriage” is widespread in Quebec. In fact, more than 50% of common-law spouses believe they have the same rights and obligations as married spouses after one year of living together, which is false. The tax system contributes greatly to this misperception, since unlike the law, it treats common-law spouses who have lived together for one year as married spouses.

Moreover, very few spouses anticipate a possible break-up even though they are aware of the high divorce rates that characterize Quebec. When the time comes to discuss a separation, few couples feel concerned and less than 5% of Quebec couples have signed a cohabitation agreement , even though this possibility has existed for over 20 years.

Financial services advisors therefore have an important information role to play with their clients who are in a relationship. Especially since, among people who live with their partner and who deal with a financial services advisor, 90% say they have only one advisor for the couple. In this context, meeting with a client couple brings some of your obligations to the forefront. Some specific situations may raise questions about how to properly carry out your professional activities.

The guide Helping couples manage their finances offers solutions, because your obligations remain unchanged and applicable to both spouses, even if they are in love and seem to share everything!

Know your client

You must first consider both spouses as independent, but interrelated, clients. When analyzing the couple’s needs, it is important to assess the specific needs of each partner, while considering their goals as a couple. Thus, you must ensure that you know both clients well in order to make recommendations that are adapted to their individual reality and to their couple. It is necessary to develop two investor profiles because, although the investment objectives of the spouses may be similar, the elements of the profile - personal and financial situation, financial knowledge, investment horizon, risk tolerance - as well as the types of products in which they want to invest are rarely identical. Therefore, you need to ask questions of each client in order to make recommendations that will truly suit both partners.

Some couples may have identified a spouse who will take responsibility for the couple’s financial affairs: this situation requires additional vigilance on your part. A disinterested person will tend to offload responsibility onto their spouse, or even you. It is important to emphasize that it is their eventual financial situation that is at issue and that decisions will have consequences. You cannot take responsibility for a spouse who does not seem interested. Both spouses should be involved in their financial situation to the extent possible.

Some people are uncomfortable talking about their debts for a multitude of reasons. They may be ashamed of their financial situation, be financially illiterate and pretend to understand, or rely on their spouse’s knowledge. If you adapt your vocabulary, make it simple, and make sure they understand what you’ve said, you’ll increase your chances of piquing their interest.

Duty to inform

When you meet with a couple, it is particularly useful to know how they manage their finances and their marital status in order to properly inform each spouse, define their needs and offer them sound advice. The way finances are managed or a separation, can have important financial consequences for either spouse if they have not planned ahead.

The legal difference between matrimonial status (married or common-law) and matrimonial regimes (community of property, separation of property or partnership of acquests) should be considered when planning each spouse’s finances, as well as in the event of separation or divorce.

Married spouses who separate obtain a division of certain assets used by the family or accumulated during the marriage, depending on their matrimonial regime. Common-law spouses, on the other hand, retain only their respective assets. Informing the couple of the particularities of the matrimonial statutes and regimes will lead to a better understanding of the consequences on the financial situation of each partner in the long term and in the event of a separation or divorce, and may generate discussions between them. The goal is to achieve a balance in the interest of both spouses.

Complementary knowledge

Knowing that many couples separate, this knowledge, which is complementary to your field of practice, is part of the information that you should consider when analyzing the financial situation of each of your clients and determining their needs. It adds to your expertise and enhances your service offering.

To support the information you share with your clients, you can also direct them to reputable websites (e.g. Éducaloi) that explain the rules in the event of separation or refer them to a lawyer or notary.

Request from one of the spouses

When a request comes from one spouse and involves both spouses, you must provide the information, explanations and consequences of the request to both spouses, not just to the person who made the request or who is contacting you. You must also ensure that both clients understand your explanations.

Two ex-spouses who own a product

If the ex-spouses were both owners of a product prior to their separation that they wish to keep, this can add to the complexity, as it is anticipated that they will not necessarily have harmonious communications. In this situation, the communication of product-related information to each of the ex-spouses becomes very important. Recommending solutions that are better suited to their new situation may also be desirable.

Updating client files

If a separation or divorce occurs in one of your client couples, make sure you get the new contact information for both clients as soon as possible, as you may need to reach them quickly. Their file will need to be updated as their situation has changed: you will need to review their objectives and redo the analysis of their financial needs, as well as their investor profile. It is also important to anticipate changes to certain products, such as naming beneficiaries on insurance policies and products where former spouses are joint owners.

Protection of personal information

A survey shows that 27% of people put money aside without their spouse’s knowledge. It is safe to assume that they may not reveal this information to you for fear that you will disclose it to their spouse, but this could distort your analysis of their situation. One-on-one meetings are a good way to build trust and to address the more sensitive topics.

Reiterating your obligation to protect your clients’ confidential information may encourage them to share all the information required for you to make appropriate recommendations.

Conflict of interest

The obligation to protect your clients’ personal information is one of the obligations that allows you to serve spouses or ex-partners without placing yourself in a conflict-of-interest situation. If you ever need information from your client's spouse or former spouse, you must obtain their voluntary and informed consent. In this situation, it is prudent to define the scope of the consent sought, i.e., what information may be disclosed and to whom the client allows disclosure.

Keeping both spouses or ex-spouses as clients involves the following actions:

• Update the file of each client.
• Inform each client of the financial implications of separation or divorce on their own situation, including RRSPs, pensions, portfolios and beneficiary designations.
• Protect the confidential information of both clients and do not share it with anyone, including their spouse or former spouse, unless you obtain formal consent.
• Direct your clients to another professional if you do not have the expertise to answer a specific question, such as divorce or tax issues.
• Acknowledge your limitations: if you do not feel you can serve both clients independently and professionally (whether they are still in a relationship or separated), you should be transparent and explain your reasons for referring one or both clients to another professional.