Editor's Note: This article is from "Speaking From Experience,” an occasional series from RBC Wealth Management—U.S. featuring advisors who discuss how a unique financial or personal situation they’ve experienced impacts how they advise clients.
So much of what we do as financial advisors involves families in that we plan together with a family to grow and secure their wealth for the future. Sometimes, however, that planning shifts to building financial stability for a life apart.
While the divorce rate has ebbed slightly in recent years, the fact is that a high percentage of marriages end in divorce. Difficult under any circumstance, divorce becomes even more legally complex as assets grow. For my own clients – many of whom are women – it can be especially hard to navigate with seemingly endless questions to consider, and no small amount of financial vulnerability.
One silver lining: divorce is no longer a taboo to talk about. When I became one of Boston’s first Certified Divorce Financial Analysts (CDFAs) decades ago, things were very different. I had previously provided legal and tax advice as an attorney, and for many individuals, that was where you would begin and end divorce: with lawyers. In those days, few wealth managers would even embrace this growing demand. But today, the cost of a post-marriage life—and, for many, raising children at the same time—has skyrocketed in certain ways.
For those reasons, many of our clients at RBC Wealth Management—U.S. are now highly proactive about the financial ramifications and the execution of this difficult decision. Here are some of the financial considerations they are making:
Prioritizing Cashflow
It used to be that retaining ownership of hard assets, houses in particular, was paramount. Today, that’s not always the case. The balance sheet of assets and liabilities remains, of course, one of the first things women discuss with us. However, the more important consideration may well be their cashflow—derived through their personal income, alimony, child support, investment income and the like.
While many wealth management clients will come to divorce with significant net worth or assets, it is often confusion or lack of preparation around cashflow that leads to regret—or not being able to make ends meet—six months down the line.
There are a number of reasons why. More women are marrying and divorcing later, so they are more concerned about their retirement and long-term care. Healthcare, as we all know, has exploded as a cost, and insurance isn’t always guaranteed through an ex-spouse who may remarry, unexpectedly become unemployed, or even pass away. How, post-divorce, will they pay for this major expense?
There are also lifestyle and investment choices to consider. Some younger clients simply haven’t lived through market downturns and don’t really consider the cost of their travel or other lavish choices. Part of our job as financial advisors is to give our clients a bit of a reality check to make sure they are planning not only for today, but many years into the future.