At this critical juncture, what's called for is a financial adviser -- probably a new one -- and not just your attorney, for money planning advice.
If you and your spouse are headed to Divorceville, it’s often necessary to have someone – or some people – in your corner, looking out for your best interests. Although hiring an attorney seems the most obvious choice, contracting with a financial adviser is often equally as important.
Hiring a financial adviser is critical if you have been married for a long time or you’re part of a high-net-worth household, according to MarketWatch. While some people do seek out the help of a financial adviser, it’s often after the divorce, when many financial matters – short-term cash needs, insurance, child support, trusts and retirement – have already been finalized.
And relying on an attorney to counsel you on financial matters could end up costing you.
“Too many people rely on an attorney to assist them in dividing assets, without having a clear financial plan that takes in all of the future needs — college plans, home maintenance, retirement income needs, insurance, long-term care, Social Security, and more,” MarketWatch explains.
If you already have a financial planner, one you’ve shared with your spouse, you may also want to divorce that adviser and hire somebody else. Although it’s legal for a financial adviser to advise opposing parties in a divorce, it creates a conflict of interest, or an awkward situation at the very least.
“You want your financial adviser to represent your interests, and your interests alone,” MarketWatch explained.
There are several divorce scenarios where hiring a new financial planner is especially important, including this one: “Some women, particularly in older generations, may not have been part of the budgeting or bill-paying process while married,” MarketWatch explained. “They need the education a financial planner can provide to be prepared to go out on their own.”
Getting a divorce is often a stressful and emotional time, which makes hiring objective professionals all the more important.
“One of the biggest reasons people should work with a financial planner is so that they don’t make emotional mistakes,” Richard Wald, managing director of Merrill Lynch Global Wealth Management, told U.S. News & World Report.
Wald said an example of a costly emotional mistake in a divorce could be when one partner feels attached to a family home and insists on keeping it as part of a divorce settlement. Although that situation isn’t inherently bad, it could be an expensive mistake if the partner agreed to keep the home and as a result, ended up losing out on retirement savings that could prove to be much more valuable in the long run.
It’s important to do your homework before you hire a financial adviser. While word-of-mouth recommendations are typically the best way to find a good adviser, the Financial Planning Association can also help. MarketWatch said:
There are different types of advisers. Some are fee-only; others charge by assets under management. Some manage money; others provide only advice. A few also specialize in financial planning during a divorce, working with your divorce attorney to make sure you are protected.
For more details, and questions you should ask when shopping for an adviser, check out “How to Choose the Right Financial Adviser.”
Are you divorced or going through a divorce? What’s your experience in dividing the property and financial assets? Share your comments below or on our Facebook page.