Diana Clement: Rebuilding lives after nest egg is gone

"Honey - I shrunk the nest egg." It's a story being played out around New Zealand at the moment, where one half of a couple's investment decisions have led to large investment or business losses.

Bearing a large loss on your family's behalf takes big shoulders.

Even for couples with traditional values in which the breadwinner owns the money it can be very lonely making all the investing decisions and taking all the risk - especially when hit by financial whirlwinds as we have been over the past year.

Many who find themselves in this position simply try to hide the losses or downplay them to their spouse.

Not Wall Street Journal columnist Neal Templin, who admitted to the world as well as his wife Clarissa that he'd shrunk their retirement savings by 35 per cent with the catchy headline: "Honey, I Shrunk the Nest Egg (And I'm Sorry)".

The family had fairly typical financial roles in pre-credit crunch days: she spent the money and he invested it. Clarissa kept up the deal admirably - but Templin didn't.

It would be easy to confuse stupidity with a bear market - and Templin's problem was the latter.

Stupidity would be putting all your money in one investment. A bear market is beyond everyone's control and providing the nest egg hasn't shrunk much more than the markets in general, then it's probably not worth pointing too many fingers.

If, however, one member of the couple mistook the bull market with brilliance and invested unwisely, the other may want to change the investing pattern in the future.

Most couples can remember when one has wasted precious money. But when it's all their savings, or their retirement will be severely affected, it can be difficult to overcome.

Thousands of New Zealanders have done just that in finance companies, packaged property investment companies such as Blue Chip and Merlot, and other disastrous investments such as collateralised debt obligations (CDOs). Where one put the other under pressure to invest, there may be a lot of friction now.

There is often a power imbalance in relationships when it comes to money and investing - usually caused by one member earning more.

Retired psychotherapist and author of When Money Comes Between Us Rhonda Pritchard says a study of 6000 couples in the United States found that money established the balance of power in most married, co-habiting or male homosexual relationships. The exception was lesbian couples.

She points out that control of and management of money are two different things.

Despite the growth of women's incomes, both genders, according to a British study, still believed the male had the major responsibility for providing for the family.

Where couples can run into real problems is if they don't agree on "ownership" of the money.

Pritchard says the higher-earning partner may believe the money is owned by him or her and an allowance or housekeeping money doled out.

It's not just the control of money that can lead couples not to invest as a team. There is also the issue of risk tolerances. Some people can stomach risk and even thrive on it. Others can't sleep at night if they're at risk of losing even a cent.

Understanding your risk tolerance is especially important for couples who aren't singing from the same songsheet.

Typically, says Paul Resnik, co-founder of risk profiling company FinaMetrica, women will be one standard deviation less risk-tolerant than men from the same demographic.

But that's an average and there may be a husband who is a "raging seven" on a scale of one to seven in risk tolerance and the wife is a three.

"There is no reason why they shouldn't fall in love and have five children. But there is every reason why they will prioritise [their finances] quite differently," says Resnik, whose company has risk-profiled 260,000 people in 13 countries.

But life isn't quite as simple as understanding the power relationship and your partner's risk profile.

Just because one partner is willing to take risks, it can't always be put down to recklessness.

Pritchard has seen many instances where one partner took risks due to a strong desire to provide for the family. The less risk-tolerant partner had the same desire to provide, but a different understanding of what that meant.

The old adage two heads are better than one can be of huge benefit for investing. There will be plenty of couples around New Zealand who breathed a sigh of relief that one stood up to the other and refused to invest in Blue Chip or one of the many finance companies that fell over.

There will also be couples in which one had no interest in how the family money was invested. This is both a risk to the family's nest egg and to the relationship, says Pritchard, and often leads to recriminations.

The best-case scenario is that it leads the uninterested party to become involved in the family investing.

That's what happened to Templin's wife Clarissa - who began ripping open envelopes from the financial service providers when they come.

Jeff Matthews, senior financial adviser at Spicers Wealth Management, says he is always keen for both halves of a couple to be involved in decision-making.

"There is potential for bitterness and blame if one partner chooses not to get involved. It would be very easy to point the finger afterwards."

Where couples have completely different views on investing, Matthews says the answer can be to have two portfolios - one that is balanced, along with a "punting fund" for the risk-taker to play with.

It would be easy to think that most couples will return to the status quo, once the worst of the current financial storm has passed. Not so, says Matthews. "This is a sea-change event when it comes to people's money going forward."

It's a harsh reality as well that women tend to live longer than men and many women who haven't been sufficiently involved in the family finances can find themselves out of their depth with money if widowed. They may not have planned, as well, for living on a reduced superannuation income.

Some couples can and do move on from a huge unilaterally caused financial loss. But it's not easy, says Pritchard, and requires "a new arrangement about the management of money from day one".

Financial planner Lisa Dudson, who runs Acumen, has also seen clients move on. But generally it is those who have not suffered a loss of trust. When one partner has been acting in secret, the issue can be insurmountable.

One successful strategy is to have an agreement about how much money either partner can borrow or spend without consulting the other.

"One person may be more confident about investing or know more," says Pritchard. "But that is not a reason for that person to have more say. You also need to make a commitment to have true agreement over investment decisions, not just compliance."

She recommends some couples have regular "board meetings" where they discuss money and investing.

Those regular meetings give couples a chance to talk about current and long-term financial goals, get an update of their financial position and divide responsibilities.