Unfortunately, it is well known that more than half of all marriages do not “live happily ever after.”
Chances are, as their advisor, you have a much more solid relationship with your clients than they do with their divorce lawyers. Therefore, offering them sound financial advice is crucial to their financial future.
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Who to Work With
Assuming your divorcing clients are a joint client account, this question will arise: Whom do you work with through the divorce? Both spouses? Just one? Neither?
The answer might lie in the state you live in. Every state has different laws pertaining to divorce. Your responsibilities as a financial professional may be dictated based on laws, so do your research.
The answer also might lie in the certifications you hold. If you hold a CFP for example, the CFP Board of Standards’ Code of Ethics and Professional Standards does not bar you from working with both spouses.
Regardless of laws and certifications, however, the bottom line is you must treat both spouses fairly and equally.
The outcome post-divorce is unknown, whether you will retain both as clients, just one or neither. Through the process though it is important to remain neutral and always put them first as clients. You have a fiduciary responsibility to both.
Some advisors feel they cannot work with both spouses, as it might feel too difficult both morally and ethically. This is understandable. If you need resources along this tumultuous journey, there is help available.
Resources to Help
There are tremendous resources and certifications available to financial advisors who serve clients navigating divorce.
The Institute for Divorce Financial Analysts (IDFA) is an organization that provides specialized training to financial professionals in both the United States and Canada on the subject of divorce. Through the IDFA, financial professionals can receive the Certified Divorce Financial Analyst (CDFA) designation. This IDFA also offers resources for the public who are searching for financial professionals to assist them.
The Academy of Financial Divorce Specialists (AFDS) is another organization that serves Canadian financial professionals and the public. Through the AFDS, financial professionals can complete training to receive the Chartered Financial Divorce Specialist (CFDS) designation.
The Association of Divorce Financial Planners (ADFP) is yet another association that provides resources for both advisors and the public.
Supporting Them Emotionally
At the onset of working with your clients going through a divorce, you should confirm that they have the mental and emotional support they need.
If they are not already doing so, encourage them to see a counselor or therapist. While some divorces may be amicable, these are few and far between. You may feel like you are a counselor at times with the emotional roller coaster they are on.
While you want to be as empathetic as possible, you also don’t want them to confuse facts with feelings. You certainly want them to view you as their financial partner, but you also want them to feel like they have control to make their own decisions. Help them to make clear and rational choices that aren’t murky due to their emotional state.
Offering Sound Financial Advice
It is no secret that the cost of divorce is expensive. The average person pays $15,500 in divorce costs. But, the harsh reality of a divorce is that two households must now survive on the same amount of money that was once supporting just one household.
While alimony and child support are among the top financial concerns, your role is also vitally important in advising your clients as it relates to the division of property and debts.
Research shows that every year about 2.8 million people go through a divorce. What’s more, in the first year post-divorce, the wife’s standard of living may go down nearly 27%, while the husband’s may increase by nearly 10 percent.
Help your clients to avoid the costly mistake of overlooking assets. Assets that are often overlooked are timeshares, tax refunds, prepaid insurance and vacation pay from companies that allow cashing out vacation or sick days.
Other costly mistakes include not getting all of the necessary documentation and paperwork your clients need. Be sure they have the necessary documents for the future, including account numbers and account balances, as well as social security statements showing earnings and expected future benefits. While this may not affect them now, it will as retirement years approach.
The Increase of Gray Divorce
While divorce is becoming less common for younger adults, it is becoming much more common for “graying” Americans who are 50-years-old and over.
Matter of fact, the divorce rate for couples over the age of 50 has nearly doubled since the 1990s.
Although couples divorcing later in life may not have the issues of child support, with older couples there can be more complicated financial situations that require careful consideration. The plans for retirement that they have been focused on for years will likely look very different post-divorce.
Financial issues for women are usually greater after a divorce than for men. Women’s lifestyles are typically impacted more than mens. Many women find themselves going back to work, living on less money and deciding to move to areas with a lower cost living.
In addition, most women start to manage their own investments for the very first time as their spouse did it for them while they were married.
Though a study from UBS shows almost all women today are involved in everyday finances such as bill paying, nearly 60% of women do not engage in the most important aspects of their finances, like investing, insurance, retirement and other long-term planning.
It should be no surprise that this same report states that 98% of divorcees encourage other women to be more involved with their finances.
There is a huge opportunity for financial advisors to empower and educate their women clients both pre- and post-divorce.
The Bottom Line
The obstacles of navigating divorce are both daunting and emotionally draining.
Serving your clients through these turbulent times will arm them to make difficult financial choices they are facing with a little more ease. And whether or not both, one or neither is still your client post-divorce, you will feel confident you served them to the very best of your ability.
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