Portfolios & risk
Two people, one portfolio, two risk profiles
The instinct is to average them. That produces a portfolio that suits neither and leaves the actual disagreement undiscussed.
Published
It is extremely common
Two people with shared finances routinely produce meaningfully different answers on the same questionnaire, and the difference is usually stable rather than random.
Why averaging fails
It produces an allocation that is too aggressive for one and too conservative for the other. In a decline, the more cautious partner is holding something they never wanted, and the conversation that produces is worse than the one you avoided.
Separate the dimensions first
Frequently what looks like a difference in tolerance is a difference in information, or in whose income the household depends on, or in who has been through a serious decline before.
Capacity is a household calculation and is the same number for both of them. That reframing alone resolves a good proportion of these.
The disagreement is usually not about risk. It is about who feels responsible if it goes wrong.
The practical approaches
Weight toward the more cautious partner, on the basis that the constraint binds. Segment by purpose, so shorter-horizon money is held more conservatively and both can see why. Or, where accounts are separate, allow them to differ.
The conversation to have
Ask each of them separately what specifically they are worried about. The answers are usually different in kind rather than in degree, and neither has said it out loud.
Do not let one speak for both
In many couples one partner leads financial conversations. The other is still a client, will still be affected, and is frequently the one who calls during a decline.
An advisor who has never had a direct conversation with the quieter partner has a relationship with one client and a risk with the other.
Tolerance, capacity and behavior are three separate measurements, and a couple usually disagrees on only one of them. The Three Risks sets out the distinction.