Divorce can be complicated and messy, even under the best circumstances. For financial advisors, helping clients make the transition with their financial health intact can be equally fraught. In this case, it helps to understand not only how you’re uniquely positioned to help but also your limitations.
Lending Expertise
When couples decide to split, advisors can sometimes find themselves in an uncomfortable spot. They must lend their financial expertise but also approach interactions with sensitivity, clear communication, and impartiality. Your role in guiding clients through a divorce situation will be important, and it’s nothing to take lightly.
That said, here’s a basic guide to how you can effectively support clients during and after divorce while leading with professionalism and building trust.
5 Ways to Support Your Clients
1. Understand the Legal Process
If you’re new to these situations, it’s important to familiarize yourself with the process, especially in the context of financial planning. While the specifics can be dictated by the locality, there are common steps that relate to the following areas:
- Property Division: Couples might have joint assets like real estate, investment accounts, and retirement funds that they need to split.
- Alimony and Child Support: These obligations will need to be accounted for when budgeting.
- Tax Implications: Clients may need guidance on how to handle the division of assets and be prepared for filing status changes that might impact future tax liabilities.
Your expertise can only go so far. You might need to consult with a family law attorney or attend formal training on divorce financial planning to build your confidence. It’s a good idea to have these professionals in your network in case clients ask for a referral.
2. Remain Neutral and Professional
Divorce situations can be uncomfortable for all parties involved. If you’re working with both spouses, be intentional about remaining neutral. Avoid taking sides, even if you’ve connected on a deeper level with one client over the other. Emphasize that you’re there to assist them with maintaining their financial well-being during this chapter.
To maintain neutrality, do your best to create an environment where open communication and transparency are the standards. Stick to factual, data-driven conversations when discussing financial matters. Reassure both clients that your goal is to be fair and help them both win.
Positioning yourself as a neutral and caring expert is in the best interest of both parties and creates better outcomes.
3. Address Immediate Issues First
Divorces can be expensive and evoke panic about finances. Your first priority should be to help them maintain a semblance of financial order. With that in mind, you should be sure to address the following from the outset:
- Budget Review: Analyze both clients’ cash flow so they can be confident in managing current and future expenses.
- Protect Assets: Explain that clients are best served to freeze joint accounts, credit cards, or lines of credit while they’re still legally married.
- Health Insurance: Walk them through coverage changes and options for post-divorce plans.
Helping clients tackle these short-term challenges helps them bridge the gap between the present and the future.
4. Be Honest About Tax Implications
Taxes will certainly enter the equation in post-divorce finances. Certain arrangements might seem fair on the surface but could introduce complications. For this reason, educate your clients on matters such as capital gains taxes, filing status changes that could alter tax brackets and deductions, and alimony or child support taxes and their implications.
Drawing attention to these matters now can ensure they make informed decisions later down the road.
5. Lay the Foundation for Their New Financial Futures
Divorce may mark the legal end of a union, but it also represents a fresh start. Once they get their bearings, help your clients focus on building a healthy financial future independent of each other. That might mean helping them formulate a new budget, revising financial plans, updating insurance policies, and reassessing risk tolerance.
Support Your Clients, Build Stronger Relationships
More than anything, this is the occasion to instill a sense of financial autonomy in your clients while giving them space to figure out their next moves.
Are you prepared to offer the best support to your clients during life transitions like divorce? With dozens of integrations, Docupace can streamline workflows, automate processes, and ensure firms run more smoothly and efficiently. Click here to schedule a discovery call to find out more.
