Advising Clients Through Divorce
Going through a divorce (even the most amicable), brings about stress, anxiety, and big changes—especially financial changes.
If you have a client who is in the middle of divorce, you should know that you’ll need to strategize differently than you would with other clients. You’re going to help them stabilize their life in order to have a smooth transition to life post-divorce.
Reassure your clients that you will help them safeguard their finances while preparing for the next step in life.
Ways to Financially Guide Clients Through Divorce
- Be direct: Your client must honestly address their current situation. How much money do they have coming in? What are their expenses, assets, and liabilities? Having a clear answer to each of these topics is going to be the foundation in planning the best course of action.
- Budget: A budget is crucial in times of upheaval; your client will need to adjust their cash flow. They will experience a different budget from the one they had when they were married. Start by having them keep a record of everything they spend. Later on, you can assess if there is excess spending to determine on which areas to focus.
- Credit check: Many people don’t realize that credit scores can take a hit during divorce. Make sure your clients are aware of their credit standing. The results of a check will help determine if they need to work on rebuilding or maintaining.
- Financial housekeeping: Many necessary tasks like updating account information should be done as soon as possible after divorce. If there is a name change, your client should update all important documents; also be aware of the names on all financial accounts, even titles on assets and beneficiaries—they should reflect your client’s current status.
- Close joint accounts: All shared bank accounts or credit cards should be transferred to one person’s name, paid off, or closed. Refer to the client’s credit report to make sure no accounts are left.
- Open new accounts: Once joint accounts are closed, it is imperative that your client starts establishing credit independently by opening accounts in their own name.
- Modify will: Your client should disinherit their spouse from their will, trust, medical directive, living will, and power of attorney.
Be on the Look Out for Problems
Finances in a divorce have their own unique issues. Some common problems clients run into include:
- Unequal assets
- Hidden assets
- Inexperience with finances: This is especially common among stay at home spouses who may not have handled financial responsibilities in the past.
Personal finance isn’t easy. Divorce is an additional layer of complication. If you have experience working with clients through divorce, highlight it as a valuable asset; you can be the guide in a client’s transition to a new life.
Dealing with clients going through divorce can be complicated, even for the most experienced advisors.
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Advising Clients Through Divorce
Clients going through divorce have a unique set of needs and issues, don’t get caught without the right strategy.