In previous columns, we’ve examined how a variety of independent advisors–from solo practices to firms with offices in several cities–use outside specialists to provide the best service for clients. While the management and selection of teams varies, flexibility and matching client needs with the right expert are constant themes.
One of the most emotionally and financially challenging events for financial advisors is the divorce of a client–or worse, the divorce of a couple when you’ve worked closely with both parties. When analyzing the client situation in the stages before a divorce settlement, advisors have learned that the division of assets is not a simple case of dividing everything by two. The subtleties of financial settlement in divorce render it a specialty beyond what most financial planners handle on a daily basis.
Getting the Details
Carol Ann Wilson is a CFP and a CFDP–Certified Financial Divorce Practitioner–in Longmont, Colorado, who has specialized in this area for decades and is the founder of the Institute for Certified Divorce Planners. She’s found over the years that even divorce attorneys need help in understanding the financial side of divorce, such as using the tax code to benefit their clients.
Wilson recalls one case where an overlooked detail about the husband’s job perqs completely changed the attorney and client’s understanding of the case. The wife had already moved to Colorado, while the husband was back east as the CEO of a major corporation. As Wilson tried to assemble a list of assets, the client’s attorney stated that he didn’t believe the husband’s corporation had a defined benefit plan. Wilson knew otherwise and requested that the attorney ask the question directly and probe deeper. As it turned out, the husband did have substantial assets through the plan. Since the attorney hadn’t asked about the plan previously, the husband wasn’t volunteering any additional information.
Wilson had another case where an attorney with whom she had collaborated several times called about a $45 million case. The attorney said that the husband was offering his client $8 million. “Don’t you think that that’s enough? She doesn’t need more than that,” the attorney told her. Wilson told him that half would be a place to start negotiating and it wasn’t just about need. It was about the couple’s history together and the history of the accumulation and growth of their assets.
“Often, the husband is either the CEO or a top executive of a large corporation, and is making anywhere from half to $1 million annually and they have millions in assets,” Wilson says.
“He’s usually the one that’s pretty tuned in to their financial situation.”
When Wilson shows wives graphs of their future finances, they often don’t understand why their net worths cannot go up the same as their husbands. Wilson explains that, after the divorce is final, the husband will continue earning a great deal of money, which will increase his net worth. The wife will never have that earning potential–unless she has her own career.
Defining True Value