Q: I got a call from a long-time client last week asking to schedule an appointment without her husband. I try to meet with married couples together, so I asked why she wanted to meet alone. She never has before. She told me that after 25 years of marriage they were getting a divorce because she found out that her husband was unfaithful to her. And, it was not the first time. She wants me to provide financial advice on the best way to split their assets, which assets she should request and which of her assets she should protect. I always provide services to both of them as a couple. I want to help, but I am feeling very awkward and uncomfortable in the middle of this domestic dispute.
A: That uncomfortable feeling is caused by the enormous conflict of interest pressing down on your shoulders. And it was placed there — perhaps unknowingly, perhaps not — by your client who is asking you to choose sides. You would probably feel just as uncomfortable if the wayward spouse shared his indiscretions with you before his wife found out. I surely hope he did not.
Your role as the financial adviser to this couple must be to treat them equally and fairly. If you are a CFP professional providing financial planning or a NAPFA member providing services, you must act as a fiduciary. That means you must act in the best interest of both clients, and you cannot favor one client over the other. Since divorce is a zero-sum game, advice that helps one party will almost always hurt the other. Even in amicable divorces, advisers may find themselves required to make Solomon-like decisions. So what should you do?
The first thing to do is to terminate any financial planning arrangements that you are providing to the couple — and stop charging any fees related to the financial planning services. Your agreement was with the couple to help them accomplish joint goals and objectives using their combined income and assets. Since you now know that they no longer hold those same goals, you must end that relationship until after the divorce is finalized. You cannot deliver what both of your clients need right now: unbiased, objective and unconflicted advice from someone with knowledge and experience working with divorcing couples. The Association of Divorce Financial Planners (ADFP) is a good place to start looking for someone who meets that criteria. Both parties need their own adviser, and it might be best for their attorneys to hire that adviser as a consultant to the proceedings. The financial impact is potentially too great to do less.
After the divorce, you may choose to work with either spouse but you should avoid trying to work with both since there will likely be additional conflicts of interest down the road. Your job is to provide the best advice possible to your client and that could be made more difficult with the knowledge you may have of the financial affairs of an ex. Nothing lasts forever, and trying to hold onto splintered relationships may be as foolish for you as it would be for your clients.
Dan Candura is founder of the education and consulting firm, Candura Group. Write to him to submit a question. All submissions will be treated confidentially.