Part Two of a three-part series
When a marriage is falling apart, it can feel like your entire life is spiraling out of control. Stephanie DeWitt, managing partner of Wachovia Securities Financial Network's Ascend Financial Consultants in Pasadena, California, says her job is to try to slow everything down.
"I try to remove as much emotion as possible," says DeWitt. If a client is caught in a firestorm of emotion, dealing with loss, sadness and often some bitterness, DeWitt strives to create a calm, non-threatening atmosphere and get the client to focus on what they have, not what they have lost.
"Believe it or not, in this day and age finances are still often not shared," she says. "If the husband has been making all the decisions and the wife suddenly needs to address her own financial issues, that's a steep hill to climb, especially when she is trying to put the rest of her life in order."
The first step, says DeWitt, is creating a detailed inventory of the client's assets. That gives them a concrete foundation and shows them the parts of their lives over which they still have total control.
"I explain to them that they now have the ability to make decisions based on their best interests," she says. "That gives the client more confidence about making decisions going forward."
Once they establish where they are financially, it makes putting the financial pieces back in place a little easier, and a little less threatening, especially for the client who isn't experienced in managing investments or making big financial decisions.
After that, DeWitt takes her clients through a mini course she calls "Investing 101." For some women she starts with the fundamentals, providing simple definitions of stocks and bonds and how the market works. Her more financially savvy clients get a refresher course, which reminds them of what they know and, again, builds their confidence.Then DeWitt works her way through the divorce settlement itself, detailing what the client will keep and what needs to be done to facilitate any transfers of property. For instance, if the client is keeping the main residence, has the title been changed?
"A housewife--someone who has not worked--has the opportunity to split the husband's retirement assets through a QDRO [qualified domestic relations order]," DeWitt explains. "The wife gets half the assets in the husband's retirement accounts, so we set up a qualified account under the wife's name and direct the transfer of those assets."Then she walks the client through a comprehensive personal balance sheet, tracking all available income, including any alimony or child support payments and investments that they will be keeping in the divorce. Expenses are listed on the other side.
If the worksheet comes out in the black, DeWitt suggests strategies to put the surplus to work in a savings and investment plan to meet her client's long-term goals. If the balance shows a negative cash flow, the advisor gives practical solutions to fill the gap, such as downsizing the home or cutting back on non-essential expenses.
"After someone has had an 18-year marriage and been living the American dream, you need to make them as financially whole as possible," she says. DeWitt's solutions keep the newly divorced client focused on the things she can do for herself.Then they go through all the administrative details that can get lost in the emotion of the divorce, such as updating the will, selecting a guardian for minor children, and making sure estate-planning issues have been resolved.
The hardest part for DeWitt is when the divorce is happening to a couple with whom she has been working.
"As an advisor, you are going through a divorce, too," she says. "It's kind of sad, and it's difficult to separate those emotions, but it's very important for me to maintain an unemotional tone."
If she is unable to do that, she will meet with one of the divorcing spouses and tell them that she can't work with them anymore.
"In a breakup, everyone loses," she says. "Except maybe an attorney."