Couples often spend years listening to their financial planner advising them what to do with their money. However, when clients get divorced, the adviser can only present the client with the available options regarding their accounts. The client is asked to seek legal counsel to determine the best option. If an adviser tells the client what he or she should do during a divorce, then the adviser can cross the line to giving legal advice. Financial advisers are not attorneys.
A CERTIFIED FINANCIAL PLANNER™ or an adviser with a firm that is a Registered Investment Adviser has a fiduciary duty to the client. Simply, the adviser must put the client’s best interest first, above all else. With a divorce, an adviser can go from one client—the couple—to two individual clients who are looking out for themselves.
Let’s look at two common scenarios: when only one spouse is a client and when both spouses are clients of the adviser.
It is not uncommon for one spouse to handle the finances for his or her family. When that spouse engages a financial adviser, the management agreement may be with only one spouse despite both spouses jointly owning the assets under management. In this case, the adviser’s fiduciary duty is to the spouse who has signed the management agreement. The adviser cannot take directions from the non-client spouse and is limited as to how much he can discuss the accounts with the non-client spouse. This situation is relatively straightforward. If a non-client spouse wants access to joint assets, he or she will have to contact the custodian directly, leaving the adviser out.
A divorce situation becomes significantly more complicated when both spouses are clients. Both spouses may be listed on the management agreement, which may cover several accounts, including joint brokerage accounts, IRAs and other individual accounts for each spouse. For joint accounts, directions regarding the assets can be given by either spouse, and the adviser does not need the signature of the other spouse to follow through. This is why an adviser can only present divorcing clients with the available options. The adviser cannot provide advice that would be a disservice to the other spouse.
Georgia is an equitable division state when it comes to dividing marital assets. How assets are divided is often decided by the courts. The adviser’s role is often to show the potential financial result in any decision the client may make. An adviser can also ensure assets are split appropriately, taking into account cost basis, so that one spouse is not left with a greater capital gain or loss when assets are sold.
Not only is divorce difficult for the individuals involved, but it can put a couple’s financial adviser in an uncomfortable position as well. There have been situations when one spouse requests that all joint assets be moved into an account in his or her name only. Moreover, the spouse may have the authority to do so. Clients are certainly upset with their adviser when this happens, but they were made aware of this dynamic when management agreements were signed.
If you have questions regarding your financial options during a divorce, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.