Sex, Lies and Financial Planning

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David R. Evanson

The Career Advisor, Spring, 2004

Sex, in-laws and money are the unholy trio that can do in a marriage. In some instances it’s just one ingredient gone awry. In others, all three conspire to undermine the union. Financial advisers can often spot trouble in one camp, and have a pretty good idea which clients are going to split. Where your instincts may be far less helpful however is figuring out what you need to do to survive your clients’ divorce.

While there is an emotional dimension to your survival, initially you need to focus on legal considerations and the health of your practice.

We talked with Carol Ann Wilson, a pioneer in the nascent field of divorce planning, who is the president of the Financial Divorce Association, in Boulder, Colo., and also a pre-divorce financial analyst/consultant. Since 1985, Wilson has been teaching planners and attorneys about the financial planning aspects of divorce. Here’s her key points. .

It Takes Two. The first point to keep in mind, says Wilson, is to recognize that no matter who did what to whom or who did it first, if you created a financial plan for both the husband and the wife, then both are your clients.

“Human nature plays a role here,” says Wilson. “The planner naturally wants to work with the higher wage earner. However, if during divorce a proceeding you say to one or the other, ‘I can’t work with you,’ you are open to legal liability from the spouse who is excluded.”

What if you created a plan for the husband’s tax deferred investments that included his wife’s 401(k)? “She’s a client,” says Wilson. What if you create a financial plan for a couple, and then all of the assets are held in the husband’s name and you are paid a wrap fee? “Trickier,” says Wilson, “And these are the kind of issues that are driving attorneys crazy these days,” she says. Gray area notwithstanding, Wilson counsels: “Ere on the side of caution when trying to determine who your client is.”

Meet and Greet. As a corollary to serving both clients, you must, says Wilson, if it’s at all practical, meet with them together at all times. “If the couples are amicable it’s best to meet together,” says Wilson. “It’s good for them to hear things at the same time.”

On the other hand, if the divorcing couple literally cannot be in the same room with one another, Wilson counsels that meeting with them separately is tenable, as long as both parties are kept apprised of the meeting. “This has to be transparent in order for you to avoid trouble.”

Don’t Try This At Home. Most importantly, you must stop giving advice to your clients, says Wilson. “The word ‘should’ must be purged from your vocabulary,” she says, “as in, ‘You should split your assets this way,’ or ‘You should sell the vacation home.’

The problem says Wilson, is that even if you are dispensing what you regard as sound financial planning advice, in the midst of a divorce, it could be construed as legal advice which – fortunately or unfortunately depending on your perspective – you are not licensed to provide. “In a divorce situation,” says Wilson, “Your counsel must shift from making recommendations to providing information and insights on the ramifications of decisions they might decide to make.”

If all this seems like too much to take, Wilson says that you might consider referring your clients to a Certified Divorce Financial Analyst that can help the (un)happy couple though the process. These professionals can be found at the Institute for Divorce Financial Analysts (https://www.institutedfa.com/ReferralSearchPage.aspx ) as well as the Financial Divorce Association (http://www.fdadivorce.com/contactus.html), which was founded by Wilson. Make sure, she adds, that you have an agreement in place with the divorce specialist that makes it clear the clients come back when the divorce is over.

This introduces the question about whether you can keep husband and wife as clients after the divorce. Wilson says it’s possible, if you play the role of the consummate professional and can convince them that you can keep their affairs confidential going forward. But she adds that the seeds of discontent (with you, not the other spouse) may have been sowed long ago, if you didn’t pay careful attention to the husband and the wife. “Many women believe they will need a new financial planner after a divorce, especially if the planner always looked at the husband during meetings.”