Planner Evelyn Zohlen knows marital breakups can be devastating. "We respect the fact that divorces by nature are miserable," she says.
But that doesn't mean Zohlen, a planner at Inspired Financial in Huntington Beach, Calif., whose firm has 90 client families and $90 million in AUM, steers clear of clients coping with marital woes. Rather, she works hard at keeping good ties with family law attorneys who handle divorces - because these lawyers regularly send her clients.
Typically, divorce lawyers refer their clients to planners for one of two reasons: to help evaluate the finances and assets of the marriage and ascertain the best strategy in divorce negotiations or litigation, or to assist a soon-to-be or newly divorced or separated client who needs planning or wealth management services, perhaps for the first time.
Both scenarios can offer worthwhile opportunities. Zohlen generally accepts the referrals from lawyers when the prospective clients are seeking planning help, usually after the divorce decree has been issued. By contrast, Tracy B. Stewart, a financial planner in College Station, Texas, specializes in assisting soon-to-be ex-spouses in the short term, helping calculate the most advantageous approach to splitting marital assets.
But both Zohlen and Stewart - and other financial planners nationwide who have established themselves in the divorce planning niche - say building a practice specialty around divorce can be fraught. Although the notion of attorney referrals sounds helpful, the levels of bitterness and acrimony that typically surround divorce proceedings mean planners must take extra safeguards to maintain calm, cooperative relationships with both clients and their lawyers.
Some, like Stewart, say they choose carefully when picking the family law attorneys with whom they build relationships for client referrals. Because divorcing spouses make up about 60% of Stewart's practice, she takes client referrals from about 30 different family law attorneys, but she is careful about which lawyers she works with. "I don't like to work with junkyard-dog attorneys," Stewart says - referring to lawyers whose negotiating tactics leave little room for collaboration between the separating parties.
Other planners say they carefully adhere to a script that keeps the family law attorney as the lead player, deferring whenever possible to keep the lawyers happy, and generating further referrals.
To keep clients from overly fretting about ongoing money flow - and, in turn, to prevent lawyers from feeling threatened by the financial relationship - some advisors structure their compensation as a flat fee.
Many planners work with clients either before or after a divorce - but not both, to avoid any conflicts. For her part, Stewart discontinues her relationships with clients after a court has ended a marriage. "I only do divorces," she says. She works on an hourly fee basis and has no assets under management. If the divorced clients need further help, she refers them to another advisor after the divorce decree is final.
Vicki McLellan, a CFP with Equitable Divorce Resolutions in Royal Oak, Mich., also prefers to work on collaborative divorces with lawyers who have pledged to follow that route. She is usually recommended by both lawyers handling the split. She then works with both spouses, discussing their finances and the future consequences of asset-separation decisions. "We help facilitate settlement discussions," says McLellan, who works on an hourly fee-only basis and has no assets under management.
McLellan has not marketed to, "nor have I received referrals from attorneys who work on litigated divorces," she says. But some clients have contacted her, asking for help in the midst of acrimonious proceedings. One client even asked that McLellan keep his lawyer in the dark about her financial planning work.
She says she prefers to steer clear of divorces that have grown litigious. She even draws some lines in the sand about what she will and won't do for clients. "I won't go to court and I won't be an expert witness," she says.
Stacy Francis of Francis Financial in New York City uses a musical metaphor for her relationships with divorce lawyers. "The lawyers are the conductors and we are the members of the orchestra. We support the lawyers by running the numbers, but they lead," Francis says. "We are part of a team; we are not leading the team."
Francis, whose firm has 100 households as clients and $100 million in AUM, tends to work on just one side of a divorce case. She is careful to secure agreements from lawyers about any message that should be delivered to both the client and the opposing side. And she sticks to that message.
Francis works with some clients during the divorce only, charging them $350 an hour. For others, though, she helps with the divorce and then manages the client's assets after the split is final - all for a fee that equals a percentage of those assets.
SUBJECT MATTER EXPERTISE
Mark Sievers, a founding principal of Epsilon Financial Group in Fairfield, Calif., also defers to the lawyers in some regards. "They know the law," he says.
Yet to get divorce lawyers to appreciate a planner's value, Sievers recommends that CFPs "demonstrate that they have a command of a body of knowledge that the attorneys don't have." For Sievers, who has roughly $300 million in assets under management, that often boils down to the numbers - which, he says, can help the divorce lawyers "siphon off a little bit of the emotions" in the division of assets.
Sievers aims to give lawyers financial information and comparisons about some of the key assets in a divorce - such as a house - to allow the lawyers to focus on real value, as opposed to sentimental. Less emotion makes the split less difficult for clients and lawyers.
As an ultimate goal, Sievers attempts to put both sides of a divorcing couple "on sound financial footing." Sometimes making such a case cogently to a client is easier for a planner than for a lawyer, he says.
"We can tell them why one thing isn't worth risking the whole venture and stop them from clutching onto something that doesn't have anything to do with their long-term future," Sievers says.
By adding that element of practicality, Sievers says, he has maintained profitable relationships with family law attorneys - including one who has sent clients his way for 20 years.
To avoid conflicts when working on collaborative divorces, where both partners' shares of the assets are under discussion, Sievers believes planners should work on an hourly fee basis. Otherwise, he says, if advisors are going to continue to manage for one half of the couple or the other, they have a stake in maximizing the value of the assets for that side. Such an arrangement, "doesn't pass the smell test," he says. "At the very least, [it] needs to be disclosed."
If planners have an interest in the future of the assets of one side of the couple, he says, "You are not neutral, which is what you're supposed to be in such a collaborative arrangement."
Miriam Rozen, a Financial Planning contributing writer in Dallas, is a staff reporter at Texas Lawyer.