Couples on the verge of a divorce may be in for a rude awakening. Once the papers are signed, clients may be shocked to find that their current way of life is unsustainable. As their financial advisor, you can have a hand in helping them prepare for the transition, so they will have the foresight to adjust their plans.
Although your divorcing clients shouldn’t expect to lean on you for emotional support, you can still offer that sobering perspective they need, says Judy Byle-Jones, certified divorce financial analyst and founder of Thorns & Roses in Toronto.
Says Eva Sachs, divorce financial consultant and co-founder of Mutual Solutions in Toronto, you’re there to give clients a “reality check” on the hard choices ahead of them.
The following are tips on how you can help clients brace for life after divorce:
> Offer a detailed “lifestyle analysis”
You can help minimize the degree of uncertainty divorcing couples face. Sit down with clients to draft budgets and run projections on the impact the divorce will have on their financial outlook, Byle-Jones says.
Without the safety net of a dual income, clients may have to alter spending habits in order to retire comfortably, or if they are paying for their child’s university education.
“As painful as budgets are, they’re usually quite eye-opening,” says Sachs, adding that most people are open to setting priorities to mitigate the financial fallout of a divorce.
Suddenly, Sachs says, they’re more conscious of the little expenses that add up, such as Internet or cellphone bills and insurance and car payments. The goal is for clients to feel confident that they can manage their expenses independently, especially if one spouse has traditionally been in charge of the finances.
> Fine-tune the settlement
Ensure that the couple is in complete agreement with the financial obligations in the settlement. For example, you might start with a rough outline of how much spousal support will be given, but have yet to settle on the length of that commitment, Sachs says.
Your role can also demand creative solutions to help clients accept the terms for dividing assets, she says. Sachs cites an example of a couple with children who ended up retaining joint ownership of the house. They made that decision because neither former spouse could afford to hang on to it separately, yet they wanted to avoid uprooting the children from the home.
> Connect them to specialists
After a divorce, there’s often a change in the couple’s tax brackets and insurance needs, so they should be aware of those implications to get a full financial picture. Be ready to offer up specialists your clients can contact for advice that is beyond your area of expertise.
Byle-Jones often refers clients to business valuators and tax accountants when required by her clients.
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