The Portfolio Doctor

By David Cruise and Alison Griffiths
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Let's talk about financial resolutions. Tomorrow, with bellies and heads aching from the effort of putting 2006 to bed and bringing 2007 to life, you will be far too busy making pledges about exercise and diet and time management to even consider your money. So, right now while you're savoring your morning coffee or tea and thinking about the evening ahead, spend a moment considering a single New Year's vow - this one is for couples only.

Increasingly, we are seeing couples who have no grasp of each other's money including what they have, what they make and what they spend it on. Why is this? We know about our partner's physical health, hobbies, taste in clothes, food preferences and how (or if) they fold laundry. We know the names of friends and enemies and we usually have a good idea about when our dearly beloved has done something stupid.

But money is the Great Couples' Divide - especially when it comes to investments. This is something to change for 2007.

In all societies, pairing up creates a formidable economic unit. It doesn't matter whether one partner is a stay-at-home parent or a duo is childless, the couple is the most important element of any economy. As we live longer and longer, the impact of that unit extends further into the future. If the financial health of the couple is shaky, we all loose on a macro level.

On a micro level, if you don't know the what and how of your partner's savings and investments, your own financial health, years into the future, may be at risk.

The well being issue could be ameliorated somewhat if Jim Flaherty's promise to allow income splitting - something that is long overdue - comes to pass. But you don't want to have to take advantage of income splitting because your partner's retirement nest egg got wiped out in a commodity bet.

Getting together on investing is all too easy to delay until tomorrow. Most people put the majority of their savings into RRSPs. Others simply depend on an employer plan and do nothing else. Either way, unless you are in your sixties, drawing out the money seems to be a long way down the road. We can get together on investments later, the reasoning goes … much later. In the meantime, there are so many other things to deal with as a couple, such as who did or didn't leave the toilet seat up and how you are raising your kids.

Interestingly, we think couples are much more likely to talk about debt and spending than investments. That is because debt and spending are immediate whereas investing has a time horizon that can seem endless, even when you are in middle age.

Here's how to get over the Great Couples' Divide. Start with each other's work-related pension investments. These days, unless you work for the government or are a teacher, you probably have a defined contribution pension plan, whereby your employer matches your pension contributions up to a certain amount. The resulting sum is then administered by a third party. (If one or both of you are self-employed, then you'll have to move to the RRSP stage of this resolution.)

That's step one. But how is the money invested? If it is in some kind of group plan, what kinds of investments are made by the plan manager? A reader recently discovered that the pension money from him and his employer was simply lodged in a cash account in his name - similar to a bank RRSP savings account.

When he joined the firm he had the option of a self-directed account or a group plan. He was too busy getting to know his new job to make the choice so the pension money, seven years worth, was simply funneled into a pension savings account. Ironically, the news wasn't all bad as his money, safely nestled in an interest bearing savings account, weathered the tech meltdown, the loonie's rise and the income trusticide fairly well.

But the point is, neither he nor his wife knew where his hard earned money was going and how his investments, or lack of them, were faring from one year to the next. They simply had faith that someone was taking care of things.

The purpose of this financial voyage of discovery is knowledge. You may not understand the machinations of a pension fund manager but you will certainly come to understand where each of you stands. Without that knowledge how can you make decisions about what to do with other disposable income? Open a spousal RRSP? Contribute more or less to an educational savings plan? Pay down debt?

The next step on the resolution agenda may be trickier. We want you to get up close and personal with each other's RRSP investment statements. We're betting that if the average couple were stopped on the street and we popped the question, "Do you know what is inside your partner's investment accounts?", the answer would likely fall somewhere between dunno and don't know.

But think of this. It is actually easier to examine what your spouse holds and the performance of those investments, than it is to look at your own. The reason has to do with emotion. Money is emotional. You might be dismayed to learn that Mabel, wife of 25 years, is a veritable Evel Knievel of the stock market, but you can usually treat the losses and gains a little more dispassionately than if it is your own, ill-conceived flight of fancy.

Ask your partner to explain every investment in his or her account. This will be a little like a session with Sue Johanson of Sex with Sue fame. You may encounter embarrassment and resistance, but press on. The reason for this step in the journey is to ferret out, and hopefully repair, the gaps in each other's investment literacy.

You may also be tempted to smack your better half if you hear something like, "Geez, hon, I don't know what Humungous Global Alternative Strategies is and I don't remember why I bought it. It can't possibly be worth half of what I paid for it. That must be a typo!"

We are proposing only one investment resolution to couples for 2007 but it is a biggie. Now off you go, get dressed and prepare to celebrate, be it cocooning at home or dancing the night away.

Next year, let us know if the resolution worked for you.