• September 2012

Financial Planning for a Diverse Population

By Rita Cheng, CRPC®, CFP®
CEO, Blue Ocean Global Wealth

Stuart H. Armstrong II, CFP®, ChFC®, CLU®, CLTC, ADPASM Centinel Financial Group, LLC

Joshua T. Hatfield Charles, CFP®, ChFC®, CLU®, CEP®, CLTC, ADPASM
SPC Financial, Inc.

“Statistics show that the number of unmarried couples who share the same residence is on the rise,” says FPA Diversity Committee Co-Chair Rita Cheng, CFP®, CERTIFIED FINANCIAL PLANNER™ and CEO of Blue Ocean Global Wealth “Just two years ago, the number of opposite-sex couples living together jumped 13 percent, to 7.5 million, according to the US Census Bureau. The number of same-sex couples living together in 2010 also increased over the previous year—up 30 percent—from 476,000 in 2009 to about 620,000 in 2010.”

Additional research confirms that the trend is continuing to grow, which presents unique financial planning concerns to the couples, as well as challenges for their financial planners.

Members of the Financial Planning Association (FPA) have created the FPA Diversity Initiative in an effort to raise awareness and promote an environment that embraces diverse communities of consumers and professionals.

Who is included in this demographic?

Diversity Committee member Joshua T. Hatfield Charles, CFP®, CERTIFIED FINANCIAL PLANNER™ professional with SPC Financial, Inc., points out that the members of this demographic include:

  • Baby Boomers (born 1946-1964) who never married, divorced, or were widowed
  • Those who prefer companionship to marriage in order to maintain and preserve income in retirement (Social Security benefits or survivor pension benefits)
  • Gay, lesbian, bisexual, and transgender couples

The Purpose of the Survey

Stuart H. Armstrong II, CFP®, CERTIFIED FINANCIAL PLANNER™ professional with the Centinel Financial Group, LLC, and chairman of the Diversity Committee, adds: “Additional research confirms that the trend is continuing to grow, which presents unique financial planning concerns to the couples, as well as challenges for their financial planners. In an effort to raise awareness and promote an environment that embraces diverse communities of consumers and professionals, we created this survey.”

  • The survey was sent to approximately 5,500 FPA members.
  • Distribution focused on 500 members who previously indicated that they provided “nontraditional family” financial planning in their member profile and through their PlannerSearch information.
  • The survey was also sent to all of the members of the subgroup, PridePlanners, which has about 100 members.
  • We also included a random sampling of additional FPA CERTIFIED FINANCIAL PLANNER™ members to develop a well-rounded sampling of responses.

The Issue at Hand

“We realize that the financial planning industry has not responded to the changing demographics of our country,” Cheng continues. “The FPA has many stakeholders, which include the public, the financial planners, and vendors.”

“We recognize that the software industry is fragmented and has not caught up with demographic trends. Because it may be difficult for one company to take a leap of faith and develop products to serve what seems to be a niche market, it is important that we demonstrate the need.”

The Typical Workaround

Since robust software doesn’t currently exist to meet the needs of this demographic, many planners use Excel spreadsheets. While this option is useful, it requires a tremendous amount of manual data entry—and isn’t a perfect solution because it prevents planners from adopting a more integrated approached to financial planning for their clients.

Plus, if one variable is not accurate in a formula—such as planning for insurance needs, or even retirement—it could lead to an inaccurate estimate for the client, which could have financial consequences. Based on our findings (see those below), most planners surveyed say they would switch to a targeted software package to help them best assist this population.

The Long-Term Goals

The survey questions point to a number of areas that have been commented on by individual advisors in conversations with their peers.

  • What we hoped to accomplish by conducting this survey and writing this white paper is to demonstrate what planners are saying out in the community about working with clients in nontraditional demographics and to show software companies what they’d like to see.
  • The end result would provide information to software developers so that they will consider addressing the needs and concerns that financial planners are raising.
  • Armstrong notes: “With the patchwork of states that have approved some version of couples recognition—calling it either marriage, civil union, or domestic partnership—and the states extending varying levels of legal protection and rulings along those lines, the planning complexities for planners who work with unmarried couples and same-sex couples is even more daunting,” he concludes, noting that the more the software industry could jump in, the more helpful it would be.


The Findings

Following are the 10 survey questions and the results of the questionnaire, 2012 Diversity Functionality in Planning Software

1. Do you currently provide financial planning services to couples that are unmarried and/or in same-sex relationships?

  • Yes: 71.88% (184 of 256 respondents)
  • No: 25.78% (66)
  • I don’t know: 2.34% (6)

2. In the next 12 months, do you expect to start providing financial planning services to couples that are unmarried and/or in same-sex relationships?

  • Yes: 19.7% (13 of 66 respondents)
  • No: 48.49% (32)
  • I don’t know: 31.82% (21)

3. What percentage of your clients are:

  • Unmarried opposite-sex couples (not including widowed clients): mean is 7.1 (174 of 184 respondents)
  • Unmarried widowed clients who are cohabiting (including unmarried widowed clients in a same-sex relationship): mean is 3.67 (161 of 184 respondents)
  • Same-sex couples (not including widowed clients): mean is 12.68 (174 of 184 respondents)

4. Please indicate how you expect your client base to change, if at all, over the next 12 months:

  • Unmarried opposite-sex couples (not including widowed clients): no change
  • Unmarried widowed clients who are cohabiting (including unmarried widowed clients in a same-sex relationship): no change
  • Same-sex couples (not including widowed clients): increase

5. In which state or providence do the majority of your unmarried and/or same sex-couples reside? The top five, based on 186 respondents, include:

  • California: 19.02%
  • Texas: 7.61%
  • Massachusetts: 7.07%
  • Illinois: 5.44%
  • Maryland: 4.89%

6. Who is your primary planning-software vendor? The top five, based on 186 respondents, include:

  • PIEtech Inc. (MoneyGuidePro): 16.85%
  • Money Tree Software, Inc. (EasyMoney, Golden Years, Silver Financial Planner/Silver Online, Total Planning Suite): 15.22%
  • Zywave (Emerging Information Systems, Inc., EISI, NaviPlan Select, Profiles Forecaster, Profiles Professional): 14.13%
  • eMoney: 10.33%
  • Morningstar, Inc. (Morningstar Advisor Workstation, Morningstar Principia): 7.07%

7. What are the functions provided by your planning software? The top five, based on 184 respondents, include:

  • Ability to generate reports (balance sheet, asset allocation, retirement projection) on combined household members: 63.04% (116)
  • Data entry for two unmarried individuals within the same household: 56.2% (104)
  • Ability to generate reports (balance sheet, asset allocation, retirement projection) on individual members in household: 37.5% (69)
  • Transfer on death destinations for non-qualified accounts: 34.24% (63)
  • Ability to handle an asset with one ownership type, such as joint with a related/offsetting liability of a different ownership type, or an individual; and accounts for unmarried couple taxes at the federal level: 25% (46)

8. Which functions would you like your software to provide to assist you with planning for unmarried and/or same-sex couples? The top five, based on 184 respondents, include:

  • Accurate calculation of benefits for non-spouse beneficiaries for qualified plans and IRAs: 55.44% (102)
  • Allowing for different drawdown percentages on a couple’s aggregated portfolio: 52.17% (96)
  • Models the tax impact for asset transfer (estate equalization with a new couple or in the event of separation) or estate planning for unmarried and same-sex couples: 50.54% (93)
  • Data entry for two individuals who are married at the state level, but not federally: 47.83% (88)
  • Accounts for unmarried couple taxes at the federal level: 45.65% (84)

9. What workarounds do you use to accommodate software shortfalls in assisting unmarried and same-sex couple? The survey garnered nearly 100 comments; here are five of the most revealing ones:

  • “Money Tree software allows for some modeling for individual circumstances. Planning software is very long-term and not intended to be specific to the dollar for year-to-year detail.”
  • “I have to fudge the tax. No Social Security benefits for living partner. Estate-tax issues cannot be currently worked around. Have to do it basically manually.”
  • “When we have either married same-sex couples or unmarried couples, we end up having to provide individual financial plans for each person. This approach is accurate, but labor-intensive and also gives the impression that they are not a household/family, which is unfortunate. This is a huge oversight by the financial planning community and should be addressed. As DOMA (the Defense of Marriage Act) approaches being ruled unconstitutional, this issue will go away for married persons, but the issues will still be there for unmarried couples, whether they are same-sex or not.
    “We make “adjustments” by adding or subtracting expenses related to the over statement or taxes, benefits, etc. Surely not very accurate but better than not changing them at all. The federal versus state taxes is the big one, as well as assuming that the couple is married, which taxes the additional income from the lower-income partner at the higher combined income when in fact they prepare taxes separately and have their own tax-bracket issues. We do that via spreadsheets that accompany our plans and let us know the amount of adjustment that needs to be made to the cash-flow and retirement projections.
  • “Generally, I do individual plans for investments and provide manual calculations/spreadsheets for missing plan components.”
  • “I must run programs separately for same-sex couples, so it doubles the data entry effort. I also need to analyze tax issues separately. 72T withdrawals (penalty-free early withdrawals from IRAs) seem to be more common with same-sex couples and singles, and I need to work around this calculation with Money Tree. I will be moving to MoneyGuidePro in the near future. Much improvement seems needed in affordable FP software for niche advisors such as myself.”

10. Is there anything else you’d like to share? Of about 25 responses, five include:

  • “I believe the incidence of opposite-sex couples unmarried with children will dramatically increase over the next decade.”
  • “Other issues related to state income taxes for all clients. For example, if a client lives in Massachusetts, which has a state income tax, but plans to move to Florida in retirement, the plan continues to show Massachusetts state income tax even though Florida has no income tax. Most software doesn’t allow you to change the tax residency in your projections, and for unmarried couples living in different states it usually doesn’t allow a “married couple” to have two states of residency for planning purposes.
  • “Thanks—this project has been long in coming and badly needed.”
  • “I would like the ability to evaluate other issues with widowed, divorced, same-sex individuals, and same-sex couples such as: Social Security benefits, better checklist of estate planning and contingency planning documents (state specific), Medicare benefits. Also would like more flexibility, analysis, and utilization of assets held in irrevocable trusts during lifetime (rather than just after death).”
  • “I would also like software that doesn’t assume everyone has children or is married. About 25 percent of my clients have no children and are married.”
  • “Congratulations on this effort. It has been extremely frustrating so far. I applaud you for taking this on. In the past I have asked various vendors to do this but never got anywhere.”

To view all of the findings, click here to read the 2012 Diversity Software Survey Results.


About the Financial Planning Association® (FPA®)

The Financial Planning Association® (FPA®) is the largest membership organization for personal financial planning experts in the United States and includes professionals from all backgrounds and business models. FPA is an open and inclusive community that fosters the value of financial planning, and advances the practice and profession of financial planning.

As the Heart of Financial Planning™, the Financial Planning Association is dedicated to providing knowledge, advocacy, community, and leadership to all those who need, support, and deliver professional financial planning. FPA believes that everyone, no matter what their situation or economic status, can benefit greatly from the experience and advice of a competent, ethical financial planner.

  • FPA appreciates and embraces a diversity of people, ideas, skills, and life experiences, including but not limited to: age, race, ethnicity, gender, and sexual orientation.
  • FPA embraces professionals from all business/compensation models, educational backgrounds, and geographic regions to meet the unique needs of the clients they serve.
  • FPA strives to create opportunities for all people to have access to competent and ethical financial planning advice.
  • FPA values and respects the uniqueness of individuals and the varied perspectives and talents they provide.
  • FPA believes that diversity of its membership is critical to serving a diverse public, and is committed to helping create a world where everyone thrives and prospers.

For more information, visit www.fpanet.org.


Marguerita M. Cheng, CFP® is the CEO of Blue Ocean Global Wealth, which provides corporations and institutions with portfolio construction, investment due diligence, and risk-management consulting services. The firm works with families, entrepreneurs, and executives to help them identify and achieve their financial goals. As a CFP Board Ambassador, she helps educate the public, policy makers, and media about the benefits of competent, ethical financial planning.

A Financial Planning Association (FPA) National Board Member and member of the finance committee, Cheng served eight years on the Board of Directors of her alma matter, The Robert H. Smith School of Business at University of Maryland, where she collaborated to increase alumni engagement and developed asset management education programs. She is also the President of the Blue Ocean Economic Empowerment Fund.

Cheng says her greatest joy and passion is touching the lives of others so that they may achieve their “personal financial success.”

For more information, visit www.blueoceanglobalwealth.com.

Securities offered through Private Client Services, LLC. Member FINRA | SIPC. Advisory products and services offered through Blue Ocean Global Wealth, a registered investment advisor. Private Client Services, LLC and Blue Ocean Global Wealth are not affiliated entities.

Blue Ocean Global Wealth intends that this article will be viewed for informational purposes only. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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