News, Vision & Voice for the Advisory Community
Counsel your clients to develop a full network of professionals whose advice they can tap as needed.
December 22, 2010 — 2:45 PM UTC by Vivian Groman
The economy is improving and, once again, divorce is on the rise. While official 2010 statistics aren’t yet available, according to data compiled by online divorce forms website DivorceToday.com, statistics already show that more Americans are filing for divorce online in 2010 than in 2009. The holidays can be difficult for clients going through divorce. But whatever the time of year, divorce puts an end to the financial bond that is foundational to most marriages. It impacts a couple’s income, investing, retirement and tax picture.
It’s a traumatic event with a rather long time horizon during which your clients may find it difficult to handle day-to-day responsibilities and impossible to think about investing and financial planning decisions.
As a financial advisor, your advice will likely be tapped by your clients during the dissolution of their marriage. You’ll have discussions about investments, retirement plans and taxes. But divorce is a highly traumatic life event. It’s an opportunity for you to reach beyond your fiduciary comfort zone and provide clients with some advice on how they can better manage the entire divorce process. By showing this kind of support, you stand to deepen their level of trust in your professional relationship.
Speaking from experience
I am an Investment Advisor as well as a Certified Life Coach. I began my career as a CPA. Still, when I went through my own divorce several years ago—and in spite of all that I knew as a seasoned financial professional—I had unrealistic expectations about the process, the role of my attorney, and how best to get myself through this traumatic time.
“I have found Prince Charming to save me,” I thought after I met with my divorce lawyer for the first time. I pride myself on being an independent woman. I started working at sixteen and have had several successful careers. I was the primary bread-winner for my family, which included two children. I am self-sufficient and highly responsible. Yet, deep down, like many women, I was programmed early in life with the idea that I need to be taken of. And like a raging bull, the vulnerability I experienced during my divorce fed this irrational fear.
No matter how savvy, capable or self-sufficient your clients may be—and whether they are male or female—divorce is typically a significant life event. So when you are meeting with them throughout the year—and especially at holiday time—let them know you are there as a resource and are thinking of them. During your conversation, try to assess their needs while looking for opportunities to make helpful suggestions. Here are some that I—and many of my clients—can personally vouch for:
Caution your client—Their attorney is just an attorney.
The process of getting divorced is, in its simplest form, a legal one. Those going through the process usually consider an attorney to be essential, either to represent them or to provide good advice.
A common mistake, however, is expecting too much from an attorney. Your clients can’t count on a family law attorney to provide tax advice, investment advice or emotional support. It isn’t fair or realistic. It’s a set-up for failure. Counsel your clients to develop a full network of professionals whose advice they can tap as needed.
A Divorce Advisory Board
Suggest a “Divorce Advisory Board” for professional support: Explain the benefit of having a team of professionals who are committed to your client’s best interests. An attorney’s job is to help with legal matters, period. There are other professionals who should be tapped for other areas:
A financial advisor, especially for those new to managing their own money, can help with budgeting and determining what investments make sense for the client given the change in circumstances.
I was not new to managing money prior to my divorce, and yet during my divorce, when it came to making financial decisions, I felt frozen. Even I needed a professional to advise me. If you as an advisor have also experienced divorce, you might want to let your clients know that. It will not only assist you in supporting them, but it could become a key connector in your overall relationship.
As your client’s trusted advisor, you have an opportunity to quarterback the team, helping your client to figure out when to consult with other professionals on the Board.
A tax advisor will help with tax considerations. One question often overlooked is, if there are children involved and the couple will be sharing custody, who will deduct the children as an exemption on their tax return? Should the division of assets be adjusted for tax considerations? For example, taxable investment accounts versus tax-deferred accounts have different after tax values.
Typically divorcing people need to change designated beneficiaries, power of attorney arrangements, their wills, and, if they have one, their trust. An estate planning attorney is the preferred resource for these matters.
A personal support network is also key: Neither you nor the other “Board” members can provide the kind of emotional support often helpful to clients going through a divorce. If you feel comfortable offering personal advice, you might want to remind clients not to overlook their emotional health.
Equally as important as lawyers and advisors is another type of team, comprised of those who can provide emotional support and friendship. My experience is that with a good network in place for emotional support, I was better able to handle the many other issues I had to deal with.
A personal support network consists of friends, colleagues and family members. It might also include a counselor or a support group for individuals going through divorce. This network should be comprised of people who help one simply to feel better, without having to “fix” anything.
Financial advisors are in a unique position to help clients through a divorce. The holidays offer an opportunity to show your clients that you care about more than just their financial well- being. If you can also provide advice that will help them through this significant life change, your role in their lives will take on a whole new meaning.
Vivian Groman CPA, Senior Finance Specialist, Starmont Asset Management, LLC, San Ramon, CA was a senior vice president at Charles Schwab & Co. She also has extensive experience at Civicbank of Commerce, Genstar Corp., FNC International, and KPMG Peat Marwick. She has been licensed as a CPA and holds a BS from the Haas School of Business, University of California, Berkeley.
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