Key Principles to a Divorce and Mediation Practice
Some key principles that are the foundation to this divorce financial planning practice:
1. Effort is continuously made to eliminate all real or perceived conflicts of interest.
When Bob first opened his practice, it was believed that he could work with clients during divorce, and when the divorce was finalized, that he would continue to work with those clients post-divorce as their Financial Advisor.
Today, Bob’s practice is built on the premise that if he works with you as your divorce advocate, divorce neutral or as a mediator, he will typically complete the divorce process with you, but not retain you as a client. If Bob is going to give you advice in how or what to negotiate from your marriage, indirectly that may alter the potential compensation he could earn from you as the client post-divorce. As some assets have fees charged on asset value, and as only certain assets can be charged a fee, it could be inappropriate for Bob to recommend his client look to negotiate the retention of certain assets knowing it could potentially affect the “post divorce value” of that client relative to the amount of fees he as their Financial Advisor could charge in the future. To solve this ethical dilemma, with rare exception, Bob’s relationship ends with his divorce clients when the divorce process is finalized.
2. Divorce is a time when you also look forward, not just backwards.
In negotiating a divorce, it is important to understand how you as the client are in the financial position you are in as a currently married couple. Translation, what is the value of the wealth generated during the marriage. Assets will include traditional assets such as homes, cars, retirement plans and brokerage accounts as well as less understood items such as pension plan payments, cash value of insurance policies and any and all other assets owned by the couple.
Once we can apply a value to every asset owned by the couple, the next round of decisions involving asset division, spousal support, child support, and others require a financial planning approach that allows the client to look forward in time. Financial fear is oftentimes overwhelming to clients. Not seeing one’s quality of life post divorce leads to emotional discussions that often lead nowhere in efforts to resolve a case. A client’s ability to understand what is expected of them post divorce, and the quality of life they will have can often dictate the amount of time and therefore cost needed to settle. Until one’s financial direction is fully understood by the client, making a decision to settle can oftentimes be simply too difficult to make.
3. Divorce is an ugly situation that has to be that way…..not necessarily.
There are a few different approaches to divorce. Divorce can be completed in a “Collaborative manner”. For those who are interested in this, please click on “International Association of Collaborative Professionals” on the home page. The process can be more of a traditional approach where information is gathered in a relatively cooperative manner and is therefore referred to as a “Cooperative Divorce”. Lastly, communication can break down and clients can ask a judge through a trial process to decide for them the terms of their divorce. Control over one’s destiny in the negotiation process is a founding principal to Bob’s practice, but Bob has played the role of expert witness in a court room setting if and when necessary.
4. Is there anything I as the client can do to control our cost of divorce?
Access to information in order to make informed decisions is important. For clients to assess their financial future, it is important that all financial information be shared freely. Discovery is a process where each side of a case feels they have acquired sufficient information to make informed decisions. For couples who hold information from one another, the cost of divorce can escalate. For couples who are unable to settle their case and need a judge to decide, their cost will escalate greatly. Bringing substantial emotion to the process tends to increase the total cost to divorce. Remember, your team of professionals are paid for their time to work on your behalf. Unlike some states, the state of Florida does not factor in the fault of one side or the other in terms of why a couple is divorcing. Although it is difficult to ignore, the emotion of a divorce is oftentimes the singularly largest reason the cost escalates. The client’s ability to limit or control that emotion and therefore professional time spent resolving their matter is oftentimes the singularly largest contributor to reducing the cost of a divorce.
5. Is there anything I need to do for myself to prepare for divorce?
There a few steps to consider:
Divorce can be expensive. Access to cash or credit in order to pay one’s team of professionals can not be ignored. Most professionals work on a retainer basis. As a financial advocate to clients, a typical recommendation is that the client secure access to cash upwards of six to nine months of living expenses plus the legal and financial advocate fees estimated by the professionals chosen. Credit cards are oftentimes cut off by the majority wage earner and may not be available when needed by both parties to pay the cost of divorce. Understanding if one is an “Authorized User” versus an “Owner” of each credit card will often dictate who in the marriage controls access to credit. Prior use of a card has no bearing on the ownership of the credit relationship.
Financial information is important. Gathering financial information is an important step. Understanding one’s current financial position is key to moving forward in the divorce. Much information is available online and can oftentimes be downloaded into software such as Quicken or QuickBooks. This can be an efficient way to gather data and is important to moving the process forward. Tax returns also provide substantial historical information about clients.
Divorce rarely moves quickly. Be Patient. Prepare accordingly. Divorce is rarely going to happen in a short period of time given the number of decisions that need to be agreed to. Both parties oftentimes look to seek ways to control the process. As a result, there is an emotional drain that takes place. Viewing one’s case more as a “marathon” and less like a “sprint” will start the client in a frame of mind that is likely to pay dividends to them as they go through the process.
It takes a village to raise a child. It can take a team of professionals to divorce wisely. Choosing your team who will support you in a divorce may be one of the smartest decisions you as the client can make. Oftentimes, decisions that involve children can best be sorted through using an experienced mental health professional with strong experience in drafting Parenting Plans. Financial decisions can often best be navigated by the financial professional who has training, education, experience and expertise in divorce. The legal process clearly is in the court of the attorney.
We perform surgery or build homes using a variety of specialists who each bring specific types of expertise. Divorce can be equally complex. Having the team in place to manage the process may oftentimes be the most efficient way to accomplish the desired end goal while producing optimal results.