After the couple walked down the aisle, their advisor walked them through their finances. But when that couple decides they’re headed for Splitsville, who gets the advisor in the breakup?
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That’s just one of several tricky aspects advisors face when married clients split.
Though statistically speaking divorce is
And beyond the emotional toll, divorce can be a
The challenge for advisors is that a divorcing couple
“As soon as they realize they’re going to divorce, that’s two clients now,” said Shearin.
That shift can create conflicts of interest and complicate how advisors manage communication and service between spouses. Advisors say recognizing those dynamics early is key.
Managing conflicts and communication after interests diverge
For advisors, one of the first challenges can be the imbalance in client relationships. One spouse may have a stronger relationship with the advisor than the other.
“It’s usually the party who’s better invested in the investments,” Shearin said.
That imbalance can become pronounced during separation, when one spouse may attempt to engage the advisor without the other present. Advisors need to be careful about how information is shared; what once was routine communication can become a conflict of interest.
“When a couple announces a split, I’m clear from that point forward I will only have communication with them both going forward,” said Stephanie Kerns, an advisor with Sacramento, California-based
And advisors should consider, for “the spouse who wasn’t as active, how does that make them feel?” said Shearin.
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Steering the financial uncoupling
Some advisors with divorce training, such as the
Cris Caruso of Laurel, Maryland-based
“You both get somebody new or decide collectively who wants to continue to work with me and maybe who doesn’t,” she said.
Under the right circumstances, an advisor can maintain a neutral relationship with both parties.
“If it is collaborative and there’s a clear division and they’re on the same page, there’s a case where I can walk them through it with their attorneys and be neutral and fair,” Caruso said.
But that arrangement is not always possible. In more contentious situations, advisors may need to step back from serving one or both spouses.
“I have to really step back and examine what is going to be in the best interest of these clients,” said Caruso. Sometimes, she reaches the conclusion that “I cannot fairly or ethically be involved with and advise both people,” she said.
Tap outside expertise when needed, and stay in your lane
Divorce can introduce complexity outside traditional advisory work, hence the usefulness of certifications like the CDFA. But referrals to other professionals can be crucial. An advisor’s
Advisors need to remember they are not divorce attorneys and should not give legal advice, Kerns said. Similarly, divorce attorneys are not financial advisors. The two sets of professionals often work together as part of a team seeking a smooth dissolution.
“If you don’t have experience in divorce, make sure you pull in support, whether it’s other financial advisors with that experience or an attorney,” said Kerns. “These are delicate situations and you want to make sure you get it right for yourself and for the client.”
