BISA Portfolio
Industry Researchers Seek Deeper Understanding of Widow Investors
from the 6/28/2018 issue of BISA Portfolio Weekly

By Rich Blake

Sometimes life’s toughest moments are when a financial advisor’s services are needed the most. It's one of the thorny paradoxes of this profession — you’re helping people make complex decisions, which can happen during particularly difficult situations.|

Such conversations can be uncomfortable, and more often than not, the data tells us these conversations will be with a woman, age 70 or older, who has lost her husband.

According to Social Security Administration data, a man reaching age 65 today can expect to live, on average, until age 84.3. A woman turning age 65 today, on the other hand, can expect to live, on average, until age 86.7, a full two years longer.

Confronting gender-specific longevity trends while seeking out greater insights into how widow investors can be better understood, Kehrer Bielan Research & Consulting recently set out to find out everything they could about the unique needs of this large segment of the population.

"We found women in the oldest generation who become widows have different preferences, fears and behaviors," said Principal Kenneth Kehrer, noting how attitudes among widow-led households change relative to those held when it was a husband-wife household.

Tim Kehrer, who is a senior research analyst at KBR&C, recently presented, along with Larry Cohen of Strategic Business Insights, some of the study's preliminary findings at a gathering of top bank investment services executives.

Key Findings

When looking at households with over $100,000 in financial assets, older (70+) single women investors trust banks and credit unions far more than they do other types of institutions, and more than when compared to levels of trust expressed by older husband-wife households, Kehrer and Cohen told members of an industry study group assembled in Chapel Hill, North Carolina.

Nearly two-thirds of widow-led households indicated having a great deal of trust in banks and credit unions as institutions. That compares to only around 20 percent who said the same about brokerages and mutual fund companies, according to the research.

This institutional trust is good news, generally speaking, for bank and credit union advisors seeking to win or retain a widow's business while going up against a potentially crowded field. Such competing institutions include, in addition to brokerages and asset managers, insurance companies and discount brokerages.

Compared to husband-wife households, single older women are also relatively more trusting of financial planning firms, but an important of point of distinction is that the trust advantage that banks and credit unions enjoy as institutions does not necessarily transfer to the advisors that work in their branches, the research suggests.

When surveyed about trust levels in terms of one type of professional title versus another, advisors that are affiliated with banks and credit unions did not fare as well; rather, they were somewhat lagging. Only around 20 percent of older-widow-led households indicated having "a great deal of trust" in these professionals.

In terms of the type of professionals most trusted by households with female solo heads, by far it was financial planners who scored the highest with nearly 50 percent of widow-led households indicating a great deal of trust in them.

The research is incredibly timely as it comes as one of the largest transfers of wealth in history is just starting to accelerate. The Consumer Financial Decisions Group of Strategic Business Insights estimates that $5.3 trillion of the financial assets of current husband-wife households in the age segment north of 70 will be in motion. Over half of the intergenerational transfer of assets will first pass though widows. "Advisors working in financial institutions need to position themselves to retain those assets," Tim Kehrer said.

According to the research, more than two-thirds of widows change advisors after their husband dies, likely due to the finding that continuity of a relationship ranks among the top criteria for single older women, nearly as much as performance, experience and confidence level. Very few widows in the research (practically zero) wanted anything to do with discount brokers.

Unique Challenges

For the generation born in the decade just prior to and just after World War II, it's not uncommon for the husband to be more involved handling finances, retirement assets, healthcare and estate planning.

Not only are women on average going to live longer than men, thus needing to make their retirement savings stretch longer, but they are also, by virtue of living longer, going to face more health issues at a time when healthcare costs are rising.

And worse, many senior women tend to suffer a blind spot in terms of mismanaged expectations. Nationwide recently released its fourth annual Social Security survey of retirees, and found that the majority of women believe that Social Security is going to cover the bulk of retirement expenses, including healthcare. “The average American woman claiming Social Security benefits at 62 could spend about 75 percent of their monthly Social Security benefits on healthcare costs,” said Tina Ambrozy, president of sales and distribution for Nationwide. “That’s why it’s so important to consider optimizing Social Security. Too many retirees need the money, but few are maximizing their benefit.”

A small, but significant, segment (18 percent) of women think that Social Security will cover all of their expenses. "They're going into it with the wrong mind-set," Ambrozy said.

Being able to articulate a game plan for optimizing retirement income is among the most important selling points for advisors looking to gain the trust of widows, research shows. It’s important for advisors to be aware of these unique challenges for an aging population because they’ll need to be there with sound financial advice when their clients are faced with difficult decisions.