Commonwealth's Advanced Planning department has noticed that divorce financial planning is becoming a hot topic with advisors, closely behind social security benefits planning.
At our 2013 National Conference, a panel of financial advisors shared their successes and challenges in building their own divorce practices. Here are five key questions—and answers—from that lively discussion among advisors considering this specialty:
1) What Is the Certified Divorce Financial Analyst (CDFA) Designation?
The CDFA is an important designation for advisors who want to start a divorce practice. In earning this designation, you'll learn to help clients understand their options and make smart financial decisions surrounding divorce—and achieve an equitable settlement. With a CDFA, your role may include advising one party's divorce lawyer, or mediating for both parties. The CDFA designation can complement the CFP® certification or ChFC®, allowing you to offer a targeted, well-defined service for divorcing clients.
2) Can I Work with Existing Clients Who Are Divorcing?
The CDFA coursework advises against working with current clients who are divorcing. This presents too many challenges since you must keep communication lines open, maintain trust, and look out for both parties' interests—all while they negotiate with each other and part ways. It's best to refer divorcing clients to vetted, competent CDFA advisors in your area. Form a strategic partnership with divorce advisors to help build your referral network. In some situations, you may also consider working with another advisor in your practice, where you each confidentially represent either party.
3) How Can I Best Work with a Divorcing Client?
Helping a client maintain perspective through the divorce process can save time and money. For example, a couple may become passionate about assets of relatively insignificant dollar value—and pursuing these assets may cost an outsize amount of money. It's important to settle matters by forming goals and negotiating, preferably out of court, before forensic accountants and other subject-matter experts need to enter the process—and fees soar.
Divorce cases also require managing the client's emotions throughout the process. Your client may be sad, angry, and possibly unwilling to communicate with the other party. Offer patience and empathy. You may encourage your client to seek third-party counseling—especially during the early stages—so he or she doesn't feel alone in handling the emotional difficulties of divorce.
4) How Can I Provide Value to the Attorney Relationship?
Family law attorneys aren't always tuned into the financial and tax implications of dividing assets. Be sure to recommend strategies for eliminating or minimizing taxes on assets—specifically on retirement assets, such as pensions and 401(k) plans. Although attorneys often are aware of the need for a qualified domestic relations order (QDRO) to divide qualified retirement plan assets without income tax consequences, they may not understand the tax concerns associated with future distributions. You can help educate the attorney about these matters while helping protect your client's post-divorce budget. The sooner you can get involved in this process—and discuss your client's pension planning and retirement vision—the easier it may be to manage the client's expectations and resolve questions.
It may prove worthwhile to study the basics of family law, including changes in the legislative environment, common negotiation practices, and legalese. If you can, sit in on meetings with attorneys and learn about your client's specific case. Not only will this help you provide the best possible divorce financial planning services—it can also strengthen a mutually beneficial referral partnership with the attorney.
Bear in mind that your client should be happy with his or her attorney's advice and performance. In rare circumstances, you may believe the attorney and client aren't a good fit for each other—or that the attorney is possibly harming the client's case. If this occurs, encourage your client to seek out another attorney for a second opinion.
5) What Are Some Best Practices for Marketing a Divorce Practice?
To help grow your divorce practice, expand networking efforts with attorneys in the family law bar. Here are a few networking tips:
- Attend bar and professional association meetings on a regular basis.
- Meet with attorneys for lunch as frequently as your schedule allows.
- Try to consistently keep your message in front of potential referrals through regular mailings.
- Advertise your divorce financial planning services in local bar association publications.
- List your services with other relevant professional organizations, such as the CDFA.
Divorcing clients will most likely research financial advisors online. So be sure to update your website frequently to ensure that it truly reflects your message—and leverage search engine optimization (SEO) so your website will be found.
If you believe specializing in divorce financial planning is the best route for you and your business, implement some strategic marketing and networking efforts to help reshape your client base. Many advisors find that this niche makes for rewarding and interesting work.
Note: This post was adapted from an article in the Commonwealth Business Review, our award-winning in-house publication. Subscribe today for in-depth coverage of our industry’s most pressing issues.
Do you have any tips for specializing in divorce planning? Share below!