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5 Things Divorce Planners Need to Know

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More and more financial advisors are doing something they don’t normally do: focus on the past. 

As planners continue to join the niche market of divorce financial planning, many find that new clients who start out simply seeking their help in navigating a divorce end up transferring significant new assets into the practice after the divorce is over.

“It’s not a traditional prospecting tool but it is a prospecting tool,” says Justin Reckers, CEO of Pacific Divorce Management, who has fully embraced the niche of divorce financial planning.
In the last 18 months, Reckers has gained $30 million in new assets under management that came directly from clients that stuck with him after their divorce.

Most of these new clients had little knowledge of their finances and did not have a positive relationship with their previous financial advisor. Over 80 percent of these new clients are women, says Reckers, who explains that most men already have a relationship with the couple’s financial advisor and don’t seek any more assistance during a divorce.

That’s why women are more likely to seek outside help during a divorce, and why they’re a profitable market niche after the divorce is final.

Reckers explains what advisors need to know if they want to keep these new clients after the divorce is finalized:


Advisors who assist one party in a divorce require a deep understanding of negotiation tactics and skills far beyond those required for traditional advising, according to Reckers. This is because there is a third party – the other spouse - that has a conflicting agenda.

“We are with our clients at the point of negotiating the largest financial transaction of their lives,” he says. “It is critical the settlement be structured correctly and negotiated with expert guidance or clients risk not getting the best deal.”

Planners need to work with their client’s divorce lawyers and the legal representation for the other party as well, says Reckers. In many divorce cases, the couple chooses to work toward a settlement and skips the courtroom altogether. When this happens, planners must bring expert negotiating skills to the table their client might end up with a significant loss. For instance, Reckers explains that if his client doesn’t respond to an initial offer, a follow-up offer will usually come shortly afterward, more often than not with better numbers for both spouses, he says. Waiting is sometimes the best negotiating tool.


While the average client may need guidance when it comes to managing money, a client facing a divorce is in need of much more coaching.

“Decision making can be difficult or darn near impossible for many individuals faced with the uncertainty of their financial future,” he says. “Instead of levying advice as a traditional advisor would do, the divorce financial planner must be an architect of financial decision-making for clients and assist them in thinking strategically.”

For planners this means brainstorming and developing a pros and cons list regarding the changes that occur after a divorce takes place, says Reckers.

A situation where such thinking is helpful would be in a situation in which a client is a part-owner, with his or her soon-to-be-ex-spouse, in a company. The client might be having a hard time deciding whether to sell his or her stock and leave the company. A divorce planner would evaluate the end-game for both scenarios: if the person remains a majority shareholder in the company, he or she could see a huge gain if the business is bought out, Reckers explains. However, the couple will still be in constant contact because of the business, which some people might find an untenable situation. And, says Reckers, “what if that business goes bankrupt? Was it worth the risk?”

With divorce clients focusing on the proceeding, it is vital that planners keep their client’s mind on what the financial future, and their life, looks like, Reckers says.


Divorce financial planners often take part in forensic accounting to ensure that no money is hidden from either party. According to Reckers, this requires planners to look for misappropriated funds, to assist an attorney in financial matters of the divorce case and make determinations of income and expenses.

“The vast majority of my clients post-divorce are women that have an advisor who works with the husband or who didn’t have a relationship with the wife,” Reckers says. “Many fear that their husbands colluded with advisors to hide assets.”

While an accountant can fulfill this role, Reckers advises planners to pick up this skill. It makes them more attractive to a potential client who doesn’t want more hired help, he says. “It comes down to needing only one person,” he says. Also, forensic accountants often only look backward and lack the experience of advising a client post-divorce, according to Reckers. 


“There are significant tax and pension law issues pertinent to divorce that would otherwise be outside the day-to-day practices of an advisor,” Reckers says. Advisors that are knowledgeable about tax law can help create options for their clients.

For instance, the IRS Code 1041 specifically states that monetary transactions between spouses and former spouses are tax-exempt. However, in order to avoid a potential “gift tax,” a judge must rule that the transfer of the money – at once or over time – is pursuant to the divorce.

Therefore, a man who owes his ex-wife $100,000 can pay her $10,000 for the next 10 years without either of the parties getting hit by taxes on the money provided that the transaction is viewed as part of the divorce, Reckers explains. Planners can ensure that money is paid by requesting a promissory note, demanding that collateral be provided and in some cases taking out a life insurance policy on the spouse that is required to pay the money.


For most advisors thinking strategically comes naturally. However, in divorce financial planning, advisors must think offensively because every dollar a client will receive is one lost by the former spouse. “The reality is that you are negotiating against someone,” Reckers says. “Everything we do negatively affects someone.”

If one spouse is in charge of the finances for the home, it is likely that this person will stick with the planner the couple is already using, Reckers says. He goes on to explain that this is when some advisors might try to help their client hide assets from the other spouse.

However, a good divorce financial planner will recognize the lack of information provided, he says. An even better advisor will strategically work with their client’s legal representation to have the financial information given to them as part of formal discovery for the case.

“We need the lawyer’s help,” he says. “We need them to say ‘In front of a judge this might not work.’”

Reckers is hosting a two-day course at Texas Tech. titled “Financial Intricacies of Divorce and Introduction to Strategies for Assisting Individuals and Couples During and After a Divorce.” The 12-hour seminar will take place on Jan. 24 and 25 with the goal of teaching advisors and students the specifics of how to go about financial planning for a divorce.



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