If a couple tells you they’re divorcing, you can help reduce their financial stress.
But don’t offer advice on how they should split assets. It is your job to facilitate the division of some of their assets, but don’t start that process until you receive a signed separation agreement or a court order, says Sandra Mews, owner of Sandra Mews & Associates in Sudbury, Ont. (see “3 tips for clients,” below). You also need to co-operate with their lawyers, who may request your assistance gathering information, including each spouse’s dependants, beneficiaries and assets. You also have to decide whether to keep both or only one of the ex-spouses as clients.
If you keep one client
Mews says it’s best to continue advising only one spouse. “At our office, it’s necessary for one of the spouses to move to another advisor. We explain why keeping both of them creates a conflict of interest, and most couples understand. They usually agree on who needs me more.” And although it’s never happened, if a couple did fight to keep her, she’d still move the client who had fewer needs for her services to another advisor at her firm; and she’d summarize the client’s history and financial needs as part of the transfer.
The client who stays goes through the KYC process all over again, as if he were a brand new client. If he’s reluctant to redo the paperwork, Mews tells him that his financial needs must be reviewed because his marital status has changed. And, to protect his privacy and ensure his ex-spouse doesn’t have access to his information, she advises him to change his account username and password.
“Ex-spouses [shouldn’t] have any access to clients’ accounts unless [they’ve] remained joint by mutual consent,” she says.
Divorced clients who have a business together may choose to remain partners after their separation, she says. “[But] it’s very rare for us to keep both parties. If a separated couple retain[s] a business together, and continue[s] working together for the benefit of their livelihood, they [can] agree that their joint corporate investment assets and policies should remain with us.”
But that account is classified as corporate, so Mews would only offer personal investment advice to one client.
She notes, “Couples’ joint account RESPs often stay as well. Any joint accounts will be changed so that both parties must sign for redemption” (e.g., to withdraw money or alter investments). Or, she’ll follow the instructions set out by the separation agreement.
If you keep both clients
Susan Nardi, co-founder of Sound Financial Strategies in Sudbury, Ont., typically keeps both spouses.
During a separation, she takes steps to protect each spouse’s privacy and to simplify their financial statements. “When a couple announces they’re separating or that they’ve divorced, we go into our internal database and we de-link accounts that are listed as from the same household.” During this process, which takes one to two days, clients don’t have online account access. Once a couple’s assets are divided as per their separation agreement, their individual account information remains the same, but their investment needs are reviewed. And they get individual statements, rather than household statements. She adds, “On statements going forward, spouses can both see joint accounts but not the other spouse’s information.”
Often, Nardi says, couples who have joint cash accounts will separate them as part of the divorce process. But, if ex-partners maintain joint ownership of kids’ accounts, parents will sometimes need to attend joint meetings to discuss them. “But we [typically] do the account reviews separately and provide both parties with the same joint information.”
And, Nardi avoids scheduling regular reviews and appointments of formerly married clients on the same day.
3 tips for clients
Before receiving signed separation agreements, advisors can suggest divorcing spouses take the following steps:
- List individual and joint assets, and debts prior to meeting lawyers and mediators.
- Create short-term budgets to keep track of spending during the separation, and draft individual long-term budgets based on expected post-divorce needs.
- Discuss how they’ll cover shared bills, such as mortgage payments or child-related expenses, during their separation. Sandra Mews, owner of Sandra Mews & Associates, says they can earmark portions of their incomes, or withdraw from a joint bank account that remains open for those purposes.
Katie Keir is assistant editor of Advisor Group.
Originally published in Advisor's Edge
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