When clients are going through a divorce, you can help by being a voice of calm, logical advice.
“[Divorce creates] a highly-charged emotional time,” says Caroline Dabu, vice president and head of retirement and financial planning strategy with Bank of Montreal in Toronto. A logical viewpoint and clear advice can solidify your relationship and help the clients make the right financial decisions.
Here are four points to keep in mind when working with divorcing clients:
> Avoid conflict
Be aware of potential conflicts of interest when a client couple tells you they are divorcing.
If you have been dealing with both partners, you may now be in a precarious situation, says Dabu. If each spouse has a separate account with you, then it’s vital to treat them as completely separate clients. Alternatively, if they have a joint account, both must be present when discussing anything related to their finances .
Consider working with one client and referring the other to a colleague.
> Take stock
While you don’t need to know all the details of your clients’ daily budget, ask them to look at their overall financial picture.
Divorcing clients should take inventory of all their accounts, says Dabu. Have them look at the assets accumulated before and during the marriage and gather the accompanying documentation, such as bank statements.
> Update the will
Clients in the midst of divorce should update their wills and powers of attorney, says Dabu.
Those updates often get overlooked during the separation and divorce proceedings, she says, but it’s important that the paperwork is completed to avoid problems later on.
As well, make sure clients update the beneficiaries for their various accounts, such as RRSPs and other assets.
> Consider taxes
Remind your clients about the tax consequences of divorce.
The clients will not be able to file their taxes as a couple, says Dabu, which means they will no longer qualify for benefits such as the spousal credit and pension-income splitting. As well, only one spouse will be eligible for credits such as the child tax credit or child care expenses.
It might also be appropriate, she says, to recommend that the clients speak with a tax advisor.