When a long-term marriage breaks down, it's up to advisors to ensure a clean financial break
Increased life expectancies among Canadian seniors are causing a host of interesting demographic trends. Aside from rising healthcare costs and people’s growing willingness to work past retirement, there’s an expected uptick in grey divorces, or couples separating in their 50s or 60s. In such cases, advisors have an important role to play, and they have to play it right.
“[I]t’s not a good idea for an adviser to continue working with both spouses,” Garrett Oakley, an accredited financial professional at New York-based Betterment, told the Wall Street Journal.
Though there’s no legal prohibition against it, continuing to work with both parties would likely pose ethical problems. To avoid such problems, Oakley said, it’s best for an advisor to stay on with one former spouse and endorse the other to a different advisor from the firm. “We then develop new client agreements for each person so they aren’t on a joint client agreement,” he said.
The next step is for advisors to clarify their role, particularly with regard to the limits of what they can do. “Explain that it isn’t your place to make judgment calls on how to divide assets,” Oakley said. “The actual division of assets should be left up to your clients and their lawyers.”
Once a proposed division is in place, it’s time to focus on the client’s short- and long-term financial goals, how they could be affected by the split, and proposing alternatives when necessary. As an example, Oakley said, a client who wants to keep the house but might not be able to afford it long-term might be better off just selling it and downsizing.
For older clients with more shared assets, setting boundaries and defining one’s role as a professional is especially important. “Marriage is by nature a contract, and a divorce between seniors marks the breaking of a longstanding contract (with an extra layer of emotion),” Oakley said. “As an adviser, you want both partners and their attorneys to feel that you are assessing the divorce only in terms of how it affects your client’s financial goals.”
Clients who are about to end a decades-long relationship might not be as focused on their financial affairs, like life insurance and beneficiary updates, as they should be. “These concerns may not have been top-of-mind with your client, but they are still important to address as part of a separation and planning for their new financial life going forward,” he said.
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“[I]t’s not a good idea for an adviser to continue working with both spouses,” Garrett Oakley, an accredited financial professional at New York-based Betterment, told the Wall Street Journal.
Though there’s no legal prohibition against it, continuing to work with both parties would likely pose ethical problems. To avoid such problems, Oakley said, it’s best for an advisor to stay on with one former spouse and endorse the other to a different advisor from the firm. “We then develop new client agreements for each person so they aren’t on a joint client agreement,” he said.
The next step is for advisors to clarify their role, particularly with regard to the limits of what they can do. “Explain that it isn’t your place to make judgment calls on how to divide assets,” Oakley said. “The actual division of assets should be left up to your clients and their lawyers.”
Once a proposed division is in place, it’s time to focus on the client’s short- and long-term financial goals, how they could be affected by the split, and proposing alternatives when necessary. As an example, Oakley said, a client who wants to keep the house but might not be able to afford it long-term might be better off just selling it and downsizing.
For older clients with more shared assets, setting boundaries and defining one’s role as a professional is especially important. “Marriage is by nature a contract, and a divorce between seniors marks the breaking of a longstanding contract (with an extra layer of emotion),” Oakley said. “As an adviser, you want both partners and their attorneys to feel that you are assessing the divorce only in terms of how it affects your client’s financial goals.”
Clients who are about to end a decades-long relationship might not be as focused on their financial affairs, like life insurance and beneficiary updates, as they should be. “These concerns may not have been top-of-mind with your client, but they are still important to address as part of a separation and planning for their new financial life going forward,” he said.
Related stories:
Advisors, here’s how to help single retired clients
RRSP contribution limits need to be higher – report
