Advisors can lose two clients, retain
one or both. Which will you experience?

    Cicily Maton, a wealth manager in Chicago, recalls one particular divorce that's typical of the emotional trauma involved. "He was a CEO who couldn't absorb that his wife was going to divorce him. He kept thinking it would go away or she would change her mind and come to her senses," says Maton.
    Meantime, the wife's euphoria quickly turned to despair when she feared she wouldn't be able to pay her bills or maintain her lifestyle. "This is the reality of almost every divorce," says Maton, who recounts that the couple finally did divorce and went their separate ways after three years of stalling tactics by the husband.
    Maton, who has 19 years of divorce case experience, says, "One of the first things I ask of a divorcing client is, 'Do you have a therapist?' Divorce is temporary insanity."
    From antiquity to D.H. Lawrence's Lady Chatterley's Lover and beyond, divorce has been present. In the U.S., even with declines in recent years, divorce still cuts down some 30% to 35% of first-time marriages, according to U.S. Census Bureau figures. In Colorado, it's 50%. And in Scottsdale, Ariz., 62% of first marriages break up; 70% of second marriages. Nevada has the highest divorce rate. If you have not had a client divorce, chances are you will.   
    What do you do when your clients announce their intention to divorce on your watch? What are your responsibilities to both parties? What are your legal, moral and ethical obligations?
    Each state has different laws concerning divorce and the responsibilities of financial professionals. "Financial advisors would be well advised to first check the laws in their states before undertaking such duties to a client," suggests Gregg Greenstein, a Colorado divorce and family law attorney based in Boulder.
    Often the issue is one of disclosure-and here it gets tricky. Some financial advisors attempt to resolve the issue with both parties. Others elect to represent one or the other party as a certificated advocate or mediator. Still others walk away altogether, preferring not to take sides with the warring factions.
    What precisely are the rules of engagement? The Certified Financial Planner Board of Standards' Code of Ethics and Professional Practice Standards doesn't prohibit advisors from working with both parties in a divorce. While its ethics code doesn't specifically address the issue of divorce regarding the position of CFP responsibility, it does require full disclosure, meaning conflict of interest must be named and communicated to any parties involved in the business relationship. (It should be noted that the CFP Board's jurisdiction doesn't cover all advisors or RIAs, only those who hold the CFP certification.)
    Mark LaSpisa, a wealth manager in South Barrington, Ill., who has handled numerous divorce issues involving high-net-worth clients, will work with both parties when divorce occurs. According to his engagement agreement (which both parties have signed upon becoming clients) when divorce occurs all communication is shared with both; nothing is kept secret.
    "An initial appointment is scheduled with both divorcing parties to establish how the client and advisor relationship has changed and how it will proceed going forward," explains LaSpisa. Both clients are then given the opportunity to continue to work with their existing advisor, or one will be assigned to a different advisor on staff. If they select separate advisors, both parties will sign new engagement agreements working exclusively with their own advisor. "This proactive and open communication has kept both divorcing parties as clients, where in the past both clients were lost following a divorce," says LaSpisa.
    Maton doesn't back away from the challenge. "Your clients are going through the most traumatic event of their lives," she says. "If you back away, what support does that show? This is when they need you most."
    She says, "People are sometimes frozen into inaction by the trauma of the event. Women typically will react, thinking they're going to be bag ladies. It's like a roller coaster - euphoria one day, despair the next. In some cases, it's hourly."
    Not all divorce cases are dogfights. One set of Maton's clients announced they were getting divorced and wanted to do it in an amicable way. Says Maton: "Each of them expressed that they trusted me, and felt I had a grasp of their financial picture, better than any lawyer they might hire." They asked if she would help structure a financial settlement.
    "In their case, there were two major assets: a large investment account and a piece of real property of equal value." After discussing the tax implications, she says, they felt strongly one should get the account, the other the property. "We did a summary agreement and they hired a lawyer who drafted a legal document. They were divorced within a short period without a great deal of expense and emotional trauma. That's not unusual."
    Maton's modus operandi usually involves the couple coming in at the same time to discuss "what role they want me to play." She explains the potential conflicts of interest and the limits of her involvement. "I try to make them understand the emotional considerations. They're both going to get angry, suspicious and may exhibit lack of trust. I say, 'I'm not going to play any role that will interfere with the process itself or might lead to a conflict for me.' What I try to do is make clear that my role is one of neutrality."
    Maton, who has done a lot of research but has no formal training in divorce matters, says she hasn't had an occasion where a couple hasn't honored her rules. "My involvement has always been one of a facilitator, not an inhibitor. I've even had a couple of occasions where the couples were referred to me and the three of us organized the information and together found the best solution for the division of assets. In more than one occasion, both couples independently became clients following the divorce, so it was a win-win for everybody."
    In some instances, Maton works with a team of lawyers and others who may counsel the client. Mostly, acrimony has been limited because "overriding goals made them want to cooperate." She allows, however, that once "I wrote a sweet letter to each client involved withdrawing from their service."
    Despite one's best intentions, some advisors feel you can't wear both hats and be all things to all people, that is, act as an advisor giving financial advice as well as mediator in divorce disputes, specifically when it involves your own clients. Besides, it's not ethical, they maintain.
    Carol Ann Wilson, CFP, CFDP, of Boulder, is in this camp. She helped create the profession of financial divorce professional for financial planners and recommends that advisors who don't specialize in people going through a divorce can benefit from some training.
    Wilson, who has written books and lectures widely, has made divorce essentially a cottage industry in her practice. She was one of the founders of the Institute for Divorce Financial Analysts (IDFA) based in Southfield, Mich., where CFPs and CPAs can get formal training in divorce analysis through a self-study and continuing education program. Upon completion, they receive certification as a Certified Divorce Financial Analyst (CDFA). Advisors can get similar training at the Academy of Financial Divorce Practitioners in Chicago (, which Wilson also helped establish.
    The IDFA's Code of Ethics stipulates that CDFAs who maintain their financial practices should make divorce-planning recommendations independent of the financial planning relationship to alleviate the potential risk of conflict. In other words, you need to separate the two practices when advising clients going through a divorce.
    Wilson, who separates the two and believes in full disclosure, says she usually is retained by one party after the divorce process has started and so is acting as a partisan. She feels that since both husband and wife are legally the planner's clients, planners shouldn't favor one over the other because of potential legal issues that can crop up.
    Wilson cautions planners not to move money during the divorce. The reason: "They don't know which spouse is going to get which assets. Secondly, when couples file for divorce, all their assets are frozen to prevent misappropriation of funds, except for reasonable living expenses. An exception might be that they agree, for instance, that funds will be used to purchase a home for one or the other."
    Another sticky-wicket issue, she says, is that "we planners tend to tell our clients during financial planning what they should do with their money. If they are in the midst of divorce, if we tell them what they should do then we're giving legal advice, and if we're not an attorney, it can be a criminal offense."
    You also run the risk of upsetting attorneys who may feel you're poaching on their territory. "What we can say instead," says Wilson, "is if you sell the house, this could be the financial result. We can show the financial result in any decision they may make, but we can't tell them what they should do."
    Like Wilson, Joyce Pearson, CFP, CDFA, in Scottsdale, Ariz., believes strongly in separation of church and state. Otherwise, she says, you can get into difficulties.
She recounts instances where a financial advisor also trained in divorce analysis attempted to remain impartial in recommendations to his divorcing clients, but one of the parties felt the advisor hadn't remained impartial and was considering suing the advisor because of the perceived imbalance in his recommendation.
    Pearson has set up an independent company, Equitable Divorce Solutions LLC, devoted solely to the practice of divorce analysis.  "To maintain ethics, I must segregate financial planning or investment management from divorce advice and working as a divorce financial analyst. To me, it's a conflict of interest, and also a disservice to that couple."
    Another reason advisors shouldn't work with both parties going through a divorce, she says, is because "one of the individuals may want to remain with you following the divorce as a financial advisor, " and it's tough to maintain the semblance of independence under those circumstances. You also can consider resigning both clients, she says.
    Pearson says training has been essential to her practice and she learns something new every day. "The devil is in the details," she says.

Recommendations From Advisors
With Divorce Experiences
Full Disclosure. Discourage either spouse from calling you to talk about the other spouse. "Tell them you don't want to hear it," says Maton. "They should go to a therapist for that."
Always Use Agendas. Have a written agenda for each meeting. "That means you have spelled out what's going to take place," says Maton. "If at all possible, it should go to each client before the meeting."
Engagement Agreement. You should amend your engagement agreement to take account of a divorce, advises LaSpisa. "As a planner, the best time to think about your company's policy regarding a client's divorce is prior to experiencing your first real case."