Divorce hurts. And it can be hardest on those who experience it later in life. They feel betrayed and vulnerable.
It doesn’t matter if it had been a long time coming or if both halves of the couple knew deep-down that the marriage was over. It’s always a blow — which means advisors need to drop the financial talk for awhile and just listen.
“I can’t look at someone in this scenario and say, ‘2016 was all about Brexit and so on.’ They’re going to look at me and say, ‘For me, 2016 was about my family getting pulled apart and me leaving my family cottage where all my memories were, and me being alone, and now what happens to me if I get sick?’” says Sarah Bull, partner and portfolio manager at KJ Harrison Investors in Toronto.
“There are no footings. The ground is moving under you and you don’t have control of the process — in fact, the process generally takes on a life of its own,” she adds.
At times like these, advisors need to offer reassurance without appearing to psychoanalyze their clients. Simultaneously, their fiduciary duty means advisors have to dive into those financial details, even though they won’t be the primary topic of conversation. It’s important to prepare for when the client does feel up to that crucial discussion.
In many cases, Bull says her clients (primarily women but sometimes men) receive a lump-sum settlement, and will often need to make that last for the remainder of their lives. Those assets will, of course, need to be invested to create an income stream; but, again, that conversation comes later.
Settlement sums, and related support payments, tend to be significant. So, Bull’s able to tell the majority of divorcing clients they’ll be OK financially — and is prepared to reiterate the point as many times as necessary to comfort the client.
Refocusing the lens
It’s said that a divorce has the same level of emotional impact as a death in the family, which is why Bull advises clients to reassess their wealth.
She asks them what they want the coming year to look like; talks about ideas for things they can do with their grandchildren; and finds out if they need to set up critical-care insurance or other support mechanisms that formerly had been covered jointly.
“Those are the things people are concerned about,” says Bull. “They care about the kids. In these situations, I try to get the kids involved and get them educated on investing 101. It’s important for them to get a handle on personal finances and what they mean.”
It’s all part of her process to get clients thinking about their individual wealth, as opposed to the former couple’s wealth.
“You have to come up with values around your wealth: What does this new wealth mean to you? What do you want it to do for you?” says Bull. “I know one divorcee who started taking art classes and joined a group that goes to art auctions. Her wealth has given her purpose and helped her move on with her life.”
Creating such definition can help a person transition from many of the harsher aspects of moving from a double income to a single income, and potentially saying goodbye to a home or cottage that contains family memories.
And, from a tactical standpoint, advisors must keep in mind that the stress of divorce can cause people to forget to do things — like revisit account names and beneficiary designations. Bull has, on occasion, reviewed client documents and found former spouses still listed as RRSP beneficiaries. Those details need to be changed to reflect the client’s new status.
“You also have to be really careful on who they authorize for powers of attorney for care and property,” she adds.