Retaining both spouses of a divorcing couple as clients after the divorce presents a potential conflict of interest. Referring one client to another advisor will deepen your relationship with the remaining client and prevent problems down the road.
“Any time you have a perceived benefit that’s not to the client’s best interest, you always want to be above board,” says Jim Doyle, an advisor and certified divorce financial analyst with Investors Group Inc. in Vancouver.
Discuss with clients the various options available to them and let the clients make the decisions. You will find yourself in good standing rather than in a conflict.
The following advice will help you make the right decisions when clients divorce:
> Think twice before keeping both clients
Ask yourself if it’s really worth the risk to your business and reputation to keep both of the divorcing clients.
Questions such as when to share information will arise and create conflicts, says Eva Sachs, founder and CDFA with Women in Divorce Financial in Toronto. Issues of credibility and confidentiality will arise when you continue to deal with both parties, she says, and remaining neutral is very challenging.
> Write it out beforehand
You can prevent a lot of headaches by working out details of what you would do —before a divorce happens.
As a financial planner, Doyle always drafts a letter of engagement with each of his clients. That document includes the procedure he would follow should the client couple divorce.
Even without a formal document, you should at least talk with your clients about the possibility of a separation and divorce, and what that would mean for the client/advisor relationship.
“If you’re going to try to maintain both clients through a divorce process, there are definitely going to be conflicts,” Doyle says. “It’s important to have these conversations with the clients [beforehand] and to get some guidance and direction from them.”
> Choose the best-fitting client
If you decide to work with one client, look for the partner who best fits your business.
Once you have chosen the client you would like to keep in your practice, explain to the other client why you are suggesting he or she goes to another advisor, says Sachs.
Explain to the client what a “good fit” means. And explain that the referral is about more than just an advisor you know; you believe the client’s values and goals mesh with the advisor’s views on investments and planning.
> Let the client decide
Give the client the final choice when referring him or her to another practice.
Recommend two advisors who would be a good fit for the client, suggests Sachs. Explain why you are recommending the advisors and suggest the client meet with them in person. Leave the final decision with the client.
IE