Financial advisors hold considerable power in divorce files, as the advice they provide to clients can have a direct impact on how the legal process unfolds.
People going through divorces experience a number of vulnerabilities and sometimes take actions that are contrary to their financial interests. It’s up to advisors to remain emotionally detached and help clients make financially sound decisions.
Why divorcing clients are prone to making unwise decisions
Couples that decide to separate are often already emotionally overloaded from having endured several years or more in unhappy, acrimonious and sometimes even abusive relationships. Then they enter a process rooted in conflict because one spouse usually wants to pay as little as possible while the other wants to receive as much as possible. The legal system’s adversarial practices and vocabulary—lawyers are hired to “defend” and “protect” their clients against the “opponent”—only add fuel to the fire.
These emotionally charged clients now have to work with their former spouse to create their legal separation. We ask them to make decisions that will have a deep impact on their children’s lives as well as their own, and that will affect their financial futures.
Under these circumstances, most clients experience a fight-or-flight response every time they deal with their former partner, their lawyer and other advisors. Physiological reactions, including a surge of adrenaline and stress hormones, more blood to our limbs and more oxygen to our lungs, prepare us to fight or flee to a safer environment. This all happens before we can evaluate if the threat is real or imagined.
Advisors can expect their clients’ ability to think and reason to diminish. The perceived threats are many: losing the connection with their kids, fear of becoming poor, being hurt by an angry ex or having to sell their house.
This is when clients often make irrational decisions during the legal process, based on fear, shame, anger or resentment. Unfortunately, their choices and actions can have long-term, devastating effects on the entire family.
Advisors can also get triggered
Without the direct emotional involvement that clouds clients’ judgment during a divorce, advisors can guide clients to make decisions based on reason and facts. However, it’s not uncommon for advisors to also get triggered by what’s happening in their clients’ lives. For example, we may believe a client’s ex is a bully or passive-aggressive and get triggered because we grew up with a family member who exhibited these traits. Unexpectedly, advisors can slip into fight-or-flight mode themselves.
Training ourselves to avoid bringing our emotions into the fray is paramount. The last thing clients need is for professionals to become enmeshed in their emotional dramas. As advisors, we need to maintain emotional distance from our clients’ lives to objectively judge what’s best for them. Advisors can have a positive impact on the divorce’s outcome by helping them make more cerebral, and less emotional, decisions.
Here are three strategies lawyers and financial advisors can use to avoid or reduce conflict during these sensitive negotiations between clients.
- Promote empathy. Common etiquette and social techniques can encourage problem-solving and collaboration. Break the ice with small talk or personal anecdotes and serve refreshments and snacks at meetings. Use language that promotes a cooperative attitude, such as “negotiate” and “partner,” rather than “opponent” or “demand,” which can trigger negative responses.
- Demonstrate reasonableness. During negotiations, it’s helpful for lawyers, advisors and their clients to make compromises on small issues first, and to take the lead demonstrating reasonableness with the other partner. This strategy creates trust and fosters collaboration for the bigger issues. A small issue could be paying 100% of a child’s upcoming school trip, whereas the biggest issue may be long-term spousal support. When presenting a compromise, show willingness to agree with their ask first, and then make your counter-ask.
- Know when to walk away. It’s not always possible to reach an agreement. In this case, advise the client to take some time out. This allows adrenaline and cortisol, the primary stress hormone, to dissipate so they can process information less emotionally and return to negotiations more empowered, rather than accepting a bad deal.
Nathalie Boutet is a family lawyer, mediator and certified Family Enterprise Advisor™ specializing in high-net-worth families and business owners. She can be reached at firstname.lastname@example.org.