As part of Commonwealth's Advanced Planning team, I can tell you that divorce financial planning is becoming a hot topic among our advisors. Like them, you may be wondering if this could be a potential route for your business. To shed some light on this niche opportunity, read on for five common questions (and answers) that we get from advisors considering this specialty.
1) Do I Need the Certified Divorce Financial Analyst (CDFA) Designation?
If you want to start a divorce practice, the CDFA is important. By earning this designation, you'll be well positioned to help clients understand their options, plan for the financial impact of divorce, and achieve an equitable settlement. It can serve as a complement your other designations (e.g., the CFP® certification or ChFC®), allowing you to offer a targeted, well-defined service for divorcing clients. Plus, it gives you the skill set to advise one party's divorce lawyer or serve as a mediator for both parties.
2) How Do I Help a Divorcing Client?
To save time and money for your clients during the divorce process, a key role for you is to help them maintain perspective. It's common for a divorcing couple to become passionate about assets, even if they are of insignificant value—and pursuing these assets may cost a significant amount of money. So before forensic accountants and other subject-matter experts enter the process—and fees really start to soar—help settle matters by establishing goals and negotiating, preferably out of court.
Your clients may also need your help in managing their emotions. They may be sad, angry, and possibly unwilling to communicate with the other party, and you should offer patience and empathy. You might even take it a step further and 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 that often come with divorce.
3) My Existing Clients Are Divorcing: Can I Work with Them?
The CDFA coursework advises against working with current clients who are divorcing. This scenario would present many challenges, as your role is to keep communication lines open, maintain trust, and look out for both parties' interests—all while they negotiate with each other and part ways.
Instead, best practice is to refer divorcing clients to vetted, competent CDFA advisors in your area. Sometimes, it may be appropriate to work with another advisor in your practice, in which case you would each confidentially represent either party.
4) What Value Do I Provide to the Attorney?
You can add real value by recommending strategies to the attorney for eliminating or minimizing taxes on assets—specifically on retirement assets, such as pensions and 401(k)s. You can also help educate the attorney about tax matters while helping protect your client's post-divorce budget. Specifically, although attorneys are often aware of the need for a qualified domestic relations order to divide qualified retirement plan assets without income tax consequences, they may not understand the tax concerns associated with future distributions. 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.
One key point here: Your client should be satisfied with his or her attorney's advice and performance. If you believe the attorney and client aren't a good fit—or that the attorney is possibly harming the client's case—encourage your client to seek out another attorney for a second opinion.
5) How Do I Grow My Divorce Financial Planning Practice?
To help grow your divorce practice, you'll want to expand your networking efforts to include attorneys in the family law bar. Here are a few tips for getting started:
- Attend bar and professional association meetings.
- Advertise your divorce financial planning services in local bar association publications.
- List your services with other relevant professional organizations, such as the CDFA.
- Join professional groups on LinkedIn.
If given the opportunity, you might also sit in on meetings with attorneys and learn about your client's specific case. This will help you provide the best possible divorce financial planning services, plus strengthen your strategic partnerships with divorce advisors and build your referral network.
Finally, keep in mind that individuals who are divorcing will 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 so your website will be found.
Do you have any questions about specializing in divorce planning? Share below!
Editor's Note: This post was originally published in May 2014, but we've updated it to bring you more relevant and timely information.