Divorce is not an easy process. At the end of the day, opposing parties may emerge relieved but no one is ever really happy with the final result. There is always a sense of loss on both sides, emotionally and especially financially.
Many clients are concerned about the standard of living that they can maintain on their own. Will s/he be able to keep their home? What effect will the divorce have on his/her retirement plans? How will s/he be able to pay spousal support and live a reasonable lifestyle? That’s where I can help. My job as a Certified Divorce Financial Analyst (CDFA) is to help divorcing clients and their legal representatives to understand how the financial negotiations made today will impact the client’s financial future.
As a Certified Financial Planner (CFP) as well as a CDFA, I have intensive training on financial planning throughout a client’s life cycle with a particular emphasis on the unsettling nature of divorce. I take direction from the legal team and use the proposed support and negotiated asset division to project how the client will fare on his/her own. In the vast majority of cases, both divorcing clients will experience a reduction in their standards of living immediately after a divorce. However, by making well-informed decisions, this challenge can be temporary and the divorcing parties can begin to rebuild their net worth.
A CDFA can help educate clients on the settlements being negotiated. An informed client will make better choices when it comes to giving their legal team with direction. For example, I am commonly called upon to do projections to help a client understand whether the matrimonial home or a pension is worth fighting for. For some, maintaining the matrimonial home will have a benign affect on his/her financial position. For others, the cash flow burden of servicing a mortgage and maintaining a home is more than their salary and support payments can bear. Learning whether an asset will weaken his/her financial position upon divorce is important for the client to know – allowing the him/her client to either rethink their position or to make other concessions to realize the goal.
A legal team whose work is combined with CDFA analyses can have an extremely positive impact on a client’s divorce proceedings. Lawyers who are open to working with a CDFA have much to gain, including an expert opinion to assess important financial information. Having a CDFA on your team from the beginning of the divorce proceedings allows for easier gathering, organizing and presenting of information thus making resolutions easier to reach. This is especially true of divorces that are negotiated by collaborative means as the financial neutral can do projections for both parties in an impartial manner. Resolutions are often swifter, less acrimonious and costs can be shared between parties. In the absence of a CDFA’s analysis, clients may sacrifice or damage their financial future well being for short term satisfaction without even knowing that they did so.
Divorce or separation can undo the best-laid financial plans. Ideally, the combination of an intelligent and focused client, superior legal expertise and a personal finance expert trained in divorce will produce a resolution that will enable the client to maintain a reasonable standard of living and build a new financial future.
Monique Madan, CFP, FMA, CDFA(TM) Professional has years of experience working with individuals, couples and families and has acquired a unique and sought-after perspective on financial planning. Her mandate focuses on helping those who are ill-prepared and over-extended to ensure that they can take care of their families and sleep better at night. To contact Monique, please visit: www.moniquemadan.com