Who Gets to Keep the Financial Advisor in Divorce?
- Who keeps the financial advisor after divorce?
- Possible scenarios
- Ethics of keeping both clients
- Tips for finding a new financial advisor
- FAQ
For many couples, financial planning is crucial for their wealth building, their children's education, and retirement. When a couple gets divorced, do they each need to find a new financial advisor?
Maybe.
Dilemma: Who keeps the financial advisor after divorce?
Divorce is unquestionably one of the most demanding life transitions an individual can experience. It involves separating many shared resources, quite possibly including the family’s financial advisor.
Why might you have to get a new financial advisor in divorce? Well, a financial advisor has a duty to provide unbiased counsel to each client, regardless of their relationship status. Confidentiality is a must. Unfortunately, ethical or legal complications could arise if the advisor continues to work with both parties.
If you’re getting divorced and you both really like and trust your financial advisor, what should you do? Could you both stay on with this professional?
Possible scenarios
Three possible scenarios could follow:
Advisor severs ties with both spouses
In this scenario, the financial advisor cannot work with either party professionally anymore. The advisor will have to make this choice if working with both couples breaks confidentiality or ethical boundaries.
Advisor keeps one as a client but not the other
This scenario hinges on each spouse's financial situation and goals. Consider, for example, a situation where one spouse earns significantly more than the other. In that case, the lower-earning spouse may benefit more from staying with the existing financial advisor to establish a new financial plan.
Advisor continues working with both spouses
If the advisor continues to work with both spouses as separate clients, they must maintain full transparency while managing each client separately. No longer can they share information in a party of three. Instead, they must keep each individual’s information confidential from the other party.
Why it might not be fair for your advisor to stay with both spouses
In a situation with the potential for a conflict of interest or breach of confidentiality, it would be unfair for your financial advisor to stay with both of you.
Conflict of interest
If a financial advisor were to continue working with both spouses after a divorce, there may be situations where the goals of each party differ. This could create a conflict of interest for the advisor, who may be pressured to favor one client over the other despite their obligation to act in both clients' best interests.
Breach of confidentiality
It may not be fair for a financial advisor to stay with both spouses if it violates confidentiality. Pre-existing relationships with both parties may complicate matters in their discussions about finances, which can lead to the sharing of sensitive or confidential information between parties. A financial advisor has a responsibility to safeguard client information and maintain confidentiality. If they were to continue working with both spouses, it could be challenging to keep information confidential and prevent conflicts of interest.
7 tips for finding a new financial advisor
Finding a new financial advisor can be a daunting task. However, it’s essential to find someone who understands your personal financial goals and investment philosophy.
- Identify your financial goals. Prior to seeking a new financial advisor, clarify your financial objectives and goals. This includes aspects of your financial picture like your income, expenses, savings, and investments. Understanding what you would like to achieve financially will assist in selecting an advisor that aligns with your goals.
- Research potential advisors. Search for financial advisors through professional associations like the Certified Financial Planner Board of Standards or the National Association of Personal Financial Advisors. You can also seek recommendations from friends, family, or a lawyer.
- Check their credentials. Look for professional qualifications such as a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designation. Also find out about any licenses, registrations, or accreditations from regulatory bodies, such as the SEC or FINRA.
- Interview prospective advisors. Contact multiple advisors. Ask them about their experience, compensation, investment philosophy, and client relationships. Make sure to ask for references and check their reviews online and with the BBB.
- Consider how they are paid. Research how the advisor is paid: It may be through fees only or by commission. Many people prefer to choose a fee-only advisor, as they have no incentive to recommend specific investments or financial products.
- Look for transparency. A potential financial advisor should disclose all fees and potential conflicts of interest. Ask how they manage their code of ethics, and ask for information about any lawsuits, complaints, or disciplinary issues.
- Seek clear communication. A good financial advisor should communicate in a way that you understand. They should be clear and accessible whenever possible. They should also be reachable and provide timely responses whenever possible.
FAQ about financial planning and divorce
What is a certified divorce financial analyst?
A Certified Divorce Financial Analyst (CDFA) is a financial professional who specializes in helping individuals make informed decisions during divorce proceedings. A CDFA can assist with analyzing the financial implications of a divorce, including assessing the value of assets, tax consequences, and budget planning for each spouse. A CDFA can serve as a neutral third-party financial expert or as a consultant to one spouse or to the couple’s attorneys.
Why is financial planning important in a divorce?
It ensures that both parties can maintain financial stability and independence after the divorce. It helps in the fair distribution of assets, managing debts, and planning for future financial needs.
What should my financial goals be post-divorce?
Post-divorce financial goals should include rebuilding savings, planning for retirement, managing debts, and budgeting for new living expenses. It’s crucial to reassess and adjust your financial plan as needed.
How are investments divided in divorce?
Investment division depends on the type of account and assets within. Stocks, bonds, and mutual funds are typically split based on their value at the time of the divorce.
Hello Divorce can help you find a CDFA that fits your needs. Work with us to get support during and after your divorce.
