ARLINGTON, Va. ― Working with client couples can present many awkward challenges, especially if one of the partners is less financially literate than the other.

How can advisors intervene in a way that's successful? The key is to start with financial education as early in the relationship as possible, says John Lynch, the director for the Center for Research on Consumer Financial Decision Making and a professor at the University of Colorado, Boulder.

"Couples appear to divide and conquer various things in the household, and there's a lot of stuff to get done. Money is just one of them," Lynch said during a keynote at the CFP Board's annual Academic Research Colloquium.

Lynch's research explores financial decision-making and the division of responsibility of committed couples. He says that financial education only explains 0.01% of the variability among consumers' good and bad behaviors.

"If I'm the primary financial decision-maker and we've been together a long time, I'm going to spend a lot of time on task," said John Lynch, the director for the Center for Research on Consumer Financial Decision Making.
"If I'm the primary financial decision-maker and we've been together a long time, I'm going to spend a lot of time on task," said John Lynch, the director for the Center for Research on Consumer Financial Decision Making. Rachel Naft


Advisors take note: Financial education interventions are helpful early as couples fall into their respective roles, but after a delay, even long interventions have no significant influence, Lynch said. Most financial literacy, he argues, is primarily skill-based. Partners learn by doing.

That's part of why the duration of a couple’s relationship can directly affect how they manage their finances. "If I'm the primary financial decision-maker and we've been together a long time, I'm going to spend a lot of time on task," Lynch said.

Lynch surveyed people in committed relationships about how they handle money and how long they've been together. Respondents were asked to fill out a 13-step financial literacy scale regarding standard demographics including age, race, sex, salary, etc.

When couples said they split the responsibility for household finances, both partners' financial literacy grew slightly over time. However, when one partner was solely responsible, his or her financial literacy grew exponentially over time. Those who had no responsibility at all saw a decline in financial literacy.

As it happens, Lynch said, this isn't immediately obvious to people. "As couples are together, they're divvying up these roles and becoming more comfortable with what they know and have no idea this is happening," he said. He noted that within the first five years of a relationship, there was no statistical association between how much partners knew in financial literacy and how responsible they were.

Lynch notes that the job selection process within a relationship is random often, a partner who makes less ends up managing most of the finances by default.

“Even if I don't have any real skill in a domain, I might have comparative advantage because I'm worse at something else," he said. "What I want to argue to you is that you can become the money person just because you're bad at other stuff."

Over time, partners who are less financially literate are likely to stay that way, Lynch said. They're generally less inclined to search for ways to learn once the roles are set in place. "Once you're cast in these roles, you and your partner are on different trajectories for the rest of your lives" when it comes to financial literacy, he said.

"Those patterns affect your ability to make financial decisions on your own and it does it directly via changes in your motivation to search."

Is this bad? Not necessarily in so far as the relationship is going well, Lynch said. But relationships end. That said, when a partner dies or there's a split, people are likely to reach out to advisors for help.

"I think even though this pattern I describe is not necessarily dysfunctional when you're together, it's super risky" in the event a couple stops being together, Lynch says. While these roles can be convenient in the moment, it's important for advisors to intervene early to make sure that couples have a contingency plan.

"You can't let people be ignorant forever... you need a plan for the transition," said Lynch. "Same thing is true for financial advisors: Couples have no intuition whatsoever that they're becoming more different in what they know."

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