Wealth managers need to take note of the behavior of widowed and divorced women who are taking control of their finances for the first time, according to a report from Spectrem.

Wealth managers need to take note of the behavior of widowed and divorced women who are taking control of their finances for the first time, according to a report from Spectrem Group.

About 41 per cent of first marriages end in divorce, and even more second and third marriages, the report says. About 7 per cent of millionaire households and 9 per cent of ultra high net worth households (with $5 million+) are divorced. Meanwhile, around 700,000 – 800,000 women are widowed each year, according to US Census data. Spectrem says around 7 per cent of millionaires are widows and 12 per cent of UHNW individuals.

The average age of millionaire widows is 70 and the average age of millionaire divorcees is 62. The average age of UHNW widows is 72, and for divorcees it’s 63. One thing the report notes is that most of these widows are retired, as are around three-quarters of UHNW divorcees. However, around half of millionaire divorcees are still in work.

Attitudes

The risk profile of an average male investor is quite similar to that of a divorced woman, the survey found. Slightly more men said they are “aggressive” while more divorced women are “moderate,” but the differences aren’t striking. However, widows expressed markedly more conservatism in their risk tolerance, with nearly a third saying they are conservative compared to just 15 per cent of men.

Again, wealthy individuals displayed similar attitudes when it came to involvement in their finances. Around 59 per cent of men like to be involved in the day-to-day management of their investors, compared to 47 per cent of divorced women, and 52 per cent of widows.

However, digging deeper, Spectrem found that the majority of widows were involved in day-to-day management because they are worried about their finances, not because they enjoy it.

Concerns

Most wealthy divorcees (86 per cent) and widows (88 per cent) feel they can maintain their standard of living despite the recession, but well over half of both groups are concerned about tax rises.

Most do not have major worries about debt levels, although some do. Among widows, 27 per cent are between mildly and very concerned. The figure for divorcees is much higher, at 41 per cent. Costs due to a divorce, the death of a spouse, a loss of income and unexpected medical bills are some of the causes of debt that worry these individuals. Educational costs also rank highly for divorcees, who are likely to still have children in the education system.

Advisor dependent

Fewer widows and divorcees are self-directed investors than men, according to the survey. For men, the figure is around 34 per cent, compared to 21 per cent for divorcees and 20 per cent of widows. Meanwhile, 29 per cent of widows and divorcees regularly consult with an investment advisor but make their own final decisions, and 21 per cent of widows and 16 per cent of divorcees describe themselves as “dependent” on their advisor.

Widows are in general happy with the service they have received from financial institutions and advisors since the death of their spouse, with only 13 per cent saying they have not received help and good counsel.

Online

The survey found that both widows and divorcees are active online, paying bills, reading blogs, and using Facebook, LinkedIn and Twitter. Because divorcees are more likely to be in work, they are more present on LinkedIn, while widows are more active on Facebook and Twitter, perhaps because they have more free time, the report says. Not many divorcees or widows use these platforms for financial information, however. On the other hand, around one-fifth of both groups rely on social media to keep in touch with people.

“If their older female investors are using these channels, it can be assumed that younger female investors have similar or greater expectations. Advisors should use Facebook and Twitter as platforms for highlighting expertise and proactively suggesting financial behaviors,” said Spectrem.