The most important thing a financial advisor can do for clients who divorced after decades of marriage is to listen, said Kimberly Foss, president and CEO of Empyrion Wealth Management.
“They are going through emotional trauma. Sitting in front of them with charts and graphs and looking at their numbers of how they are going to have a Monte Carlo and not having to worry about outliving their income is just not the time for that,” said Foss, who spoke yesterday at the Invest in Women virtual conference sponsored by Financial Advisor. “At this point in time, a reflection on what went wrong in the relationship, what’s important, what would they do differently, looking forward to the next level.”
Foss, who participated on a panel titled, "Gray Divorce and Re-Partnering: What You Need To Know," said these are delicate questions and advisors have to somewhat be in tune with their clients to have these kinds of conversations. But it is important to have them six to 12 months after a divorce, she said.
She added that the emotional aspect has become a big component when dealing with divorce, especially with women because they have a higher sense of emotion and are in a fight-or-flight mode. “You have to understand how to get in through a sympathetic and empathetic way so you could calm them and then their logical brain can step in,” she said.
Research has shown that women in their 60s are instigating most of the divorces, she said. The divorce rate, which includes those 50 and older, has doubled since the 1990s, according to data from the U.S. Census.
Carol Lee Roberts, president of the Institute for Divorce Financial Analysts, said advisors can spend hours discussing the technical issues involved in a divorce, but they must realize that there are a lot of communication and emotional issues involved. And she said it is for that reason she added a certified financial transitionist (CeFT), a person who helps people navigate through major life events, to her CDFA designation.
“I was so drawn to that because it’s great that we are comfortable with spread sheets, and we can do cash flow analysis … but if the client is in a situation that is so fraught with emotions, they are not going to follow where we are leading,” she said.
As with the emotional aspect of a divorce, the panelist said advisors need to broach the following topics with clients to avoid big pitfalls:
Alimony Payments Or Other Streams Of Payments
Individuals in the process of divorce always set up some stream of payment from one spouse to the other, Roberts explained. She said it’s important to guarantee that stream of income with life and disability insurance. But she said oftentimes, the discussion starts but is not finished. “You have this lovely settlement, and everything is in place as it should be, but the income stream is supposed to be guaranteed by life insurance or disability insurance and the person waits until after the divorce to apply for the insurance. Well, what if the individual is uninsurable or what if the insurance rates are so high that it makes it impractical to insure the individual?” she said. If the divorce has been finalized, it’s a difficult problem to solve, she added.
Long-Term Care
Married couples frequently assume that their long-term-care provider is going to be their spouse. But once the divorce discussion begins, that probably isn’t going to happen anymore, Roberts said. So, you need to get an alternative to the spouse providing the long-term care. Roberts said discussing long-term care and applying for it prior to divorce can be beneficial to the couple. Foss noted that it has become more expensive to secure long-term-care insurance. Advisors, she said, should urge clients that have a divorce pending or thinking about it to get long-term care insurance as soon as possible.