5 Min Read
* Divorce financial planning certification broadens services
* Advisers say training lures loyal clients
* Some banks, wealth managers wary of liability
By Andrea Hopkins
TORONTO, Sept 30 (Reuters) - Faisal Karmali had been a financial adviser for 10 years when he decided to add divorce financial planning to his toolkit. Since then, his practice has surged, with new clients seeking advice at what may be the most financially fraught time of their lives.
"I started off with a couple of existing clients going through divorce, and now it is all new clients coming to me," said Karmali, an adviser at Popowich Karmali Advisory Group in Calgary, Alberta.
Karmali completed the course work and exams for his Certified Divorce Financial Analyst (CDFA) qualification in 2006 after a few clients went through a "really bad" experience and he decided to educate himself so that he could improve the service he offered.
Seven years later, his firm gets steady referrals from other professionals involved in divorce who need an expert on the financial side, and he said about 60 percent of his new clients transfer their accounts to him after their divorce settlement, even when they had a previous adviser.
Going through a divorce is an emotional, high-need time, and good financial advice from a professional will win loyalty. With the designation still relatively rare among financial advisers, the training can pay off for advisers who are prepared to go the extra mile when clients may be at their most vulnerable.
"The biggest financial impact on any person's life is separation or divorce," said Debbie Hartzman, an adviser at Professional Investments in Kingston, Ontario, and the woman who brought the CDFA training course to Canada.
"It's the biggest single thing that is going to change your prospective planning going forward. As a certified financial planner, I realized how important this information was."
Hartzman reworked U.S.-based material aimed at financial planners to cover Canadian property and family practices, training advisers in Canada on how to evaluate divorce settlements, calculate budgets for spousal or child support, and analyze how a settlement will play out over time.
While lawyers focus on the legalities of divorce, planners with training use software to evaluate settlements, including tax implications and the economics behind the division of assets, Hartzman said.
Lawyers are typically involved in a settlement, but they often don't know whether a lump sum is better than periodic payments, or whether a lot of money over a short period is better than less money for longer. That's analysis that a CDFA can provide.
"I've seen such terrible attempts at budgets by lawyers," said Sharon Numerow, a CDFA at Alberta Divorce Finances in Calgary. "I decided it was a missing niche in the market. There was no one really to help people. Lawyers aren't equipped to do it, nor is it really their first love."
Which is not to say the legal world embraced the idea of financial planners offering advice during a divorce. In the early days of the Canadian designation, the Law Society of Ontario pursued Hartzman, accusing her of practicing law without a license.
She eventually won them over, but Diana Shepherd, marketing director at the Institute for Divorce Financial Analysts, said Canadian banks and wealth management firms still sometimes balk at their advisers using the CDFA in practice.
They worry about the liability of their advisers offering what may seem like legal advice during divorce, and about advisers winning access to more investible assets, and thus more commissions or fees, because of a settlement they recommended.
But Shepherd said the CDFA prepares advisers for that, training them to have clear division between those clients they are helping through a divorce and those who need investment advice.
Hartzman said experience has taught her to refer clients to colleagues for portfolio-management services during those periods she is working on their divorces to avoid any conflict of interest.
"You can't act in your normal capacity if you are dealing with someone who is going through separation and divorce," Hartzman said. "You can only do financial planning towards the goal of separation, can't take any investible assets."
While adding the skill will likely bring in new clients, those who do a lot of divorce financial analysis warn that the work is as exhausting as it is rewarding.
Financial advisers typically empathize with their clients when they walk them through retirement planning and provide them with financial advice. With divorce, more distance is needed because clients are already emotional.
"To deal with people going through divorce, it's almost like estate work. Someone who has just lost somebody," Numerow said. "If you are not prepared to deal with that side of somebody, there can be huge burnout."