When a client couple is facing divorce, their decisions may affect not only their financial future, but their financial advisor as well.
That’s something Karen Stewart, founder of Fairway Divorce Solutions, a mediation firm in Calgary, noticed frequently when she was a stockbroker and owner of a wealth management firm. Stewart started Fairway eight years ago because she had seen repeatedly how a couple’s assets could become depleted as a result of a “messy” divorce.
Legal fees can put a big dent in family assets, and financial advisors are often prevented from acting in their clients’ best interests because the couple’s accounts can be frozen. And then there is the high probability that at least one member of the couple will start looking for another advisor.
Dealing with divorcing clients requires tact and sensitivity. Stewart offers the following suggestions for advisors working with clients who are going through a divorce:
> Establish relationships with both partners of all client couples
A lopsided balance of power over financial decision-making for any couple, Stewart says, can spell problems for you.
If you are meeting with only one spouse in a couple, you need to take action to include the other spouse, Stewart says. In fact, she recommends advisors meet with each member of the couple independently, to further ensure that both sides of the financial story are understood. “I want both my clients to be empowered about their assets,” she says.
> Encourage mediation
Let your divorcing clients know of the possible ramifications of prolonged divorce proceedings, and encourage them to consider a lower-cost alternative.
Divorce is an emotional experience for clients, but it’s a good idea to let them know that the way they manage money during this time will be have a direct impact on the quality of their lifestyle afterwards, says Stewart: “They may never make up what they lose in a divorce.”
A messy divorce can take a big chunk out of family assets. Directing clients to mediation can reduce costs and increase the likelihood that the couple will continue working with you as individuals. Mediation firms such as Fairway (which has offices across Canada), work with lawyers, accountants and financial advisors to help clients arrange an equitable divorce.
> Show compassion
There’s no harm in making sure your clients know you care about what they’re going through. There can be a “don’t ask, don’t pry” policy in the industry, she says, and clients facing divorce often deal with a high level of fear and low trust.
Your clients may be reluctant to open up to you because they worry that what they say will go back to their soon-to-be ex. Let your clients know that you are willing to make arrangements with someone else in your firm to serve these clients. The payoff — satisfied and trusting clients — makes this offer worthwhile.