Younger people are marrying less, doing so later, and staying together longer. However, baby boomers are increasingly calling it quits.
Given their greater wealth, the stakes are higher for older Americans, who are particularly keen on hiring advisors with expertise handling divorces.
“The only demographic in the U.S. that has an increasing rate of divorce is baby boomers and frequently that’s where the high-net worth clients tend to be,” says Carol Lee Roberts, president of the Institute for Divorce Financial Analysts (IDFA), which grants the CDFA (Certified Divorce Financial Analyst) designation.
The U.S. divorce rate, which is near a 40-year low, tumbled 18% from 2008 to 2016, according to analysis by University of Maryland sociology professor Philip Cohen.
CDFAs, however, are well-positioned given that the divorce rate has doubled among those 50 and over between 1990 and 2015, and people are living longer than ever before.
With 80,000 certified financial planners in the U.S., the CDFA designation helps advisors differentiate themselves and attract clients going through a divorce, said Roberts.
Moreover, CDFAs can better compete for business from the 70% of women who leave their advisors during divorce proceedings. That number is so high because with men typically choosing advisors many women want to start with a blank slate.
Though the vast majority of financial advisors are men, CDFA says 63% of advisors bearing the CDFA designation are women. “Divorce was categorized as a women’s issue, though that has been changing of late,” says Roberts.
CDFAs are more skilled and better trained in “helping clients go through divorce,” Roberts asserts.
Divorce is a subset of Certified Financial Planning (CFP) training, but its specialists study several issues including tax implications, dividing a retirement plan, selling one’s home and dissipation, the act of trying to disguise one’s assets.
“You learn how to request five years of tax forms, which can reveal a wealth of information,” Roberts points out.
Advisors involved with divorce can grow their business through referrals from family law attorneys, by getting involved in organizations such as Second Saturday, which provides educational support for people going through divorce, social media, and ads, Roberts suggests.
Roberts acknowledges the limitations of the IDFA’s online program, which hasn’t focused on helping advisors soothe raw nerves and acrimonious feelings often triggered by an unraveling marriage. “Unfortunately, this is a weakness in our program,” Roberts said. “We are now working to address it.” The IDFA certifies CDFAs in an online study program culminating in a 150-question multiple choice test.
Pam Friedman, a wealth manager and partner of Austin, Tx.-based Silicon Hills Wealth Management, identifies herself on her website as a wealth advisor and women’s advocate. Friedman, who has written a book about divorce titled I Now Pronounce You Financially Fit, attracts divorce-related clients in equal measure through her website, past client referrals, and attorneys.
Her target market is well defined: mostly women in their forties, fifties and sixties, experiencing loss, either through divorce or widowhood, who have not been actively involved in overseeing their finances. She calls it “gray divorce, a rate twice as high of that in other groups.”
The CDFA taught her skills that transcend her CFP expertise, including “how the law looks at assets, how it affects separate property issues, how an IRA or 401(k) might be divided, what’s required to divide separate accounts, and how it varies state-by-state,” Friedman explains.
To make divorce more tolerable for clients, Friedman offers the names of therapists for psychological help. She also collaborates with attorneys and consults with business evaluators.
“When clients are feeling overwhelmed or confused, I can work with them to bring clarity to the situation…and still be there to reset their financial life and get their financial life restored.”
David Flores Wilson, a senior wealth manager at New York City-based Watts Capital, added the CDFA in 2017 to his CFA and CFP designations. He said the decision was more undertaken in the spirit of helping clients rather than marketing his services. “The CDFA offers the opportunity to add value and reduce stress of your clients,” he says.
The CDFA enriched Wilson’s understanding of taxes, asset negotiations, college debt, alimony payments, and health insurance. It also helped him learn how to separate a home between two parties and uncover hidden assets.
For divorcing clients Wilson performs a financial inventory, tallying assets and income, while studying them from numerous angles to ensure accuracy. Sometimes a spouse will fight for home ownership then later realize they can’t afford it.
Wilson emphasizes that the CDFA adds value for all his clients. “I tend to focus on life events, including getting married, having kids, buying and selling a business, and the CDFA adds another tool to my tool set that can help me provide guidance if any of my clients ever get divorced.”
Roberts concludes that demand for CDFAs should remain strong as the divorce rate for those under 50, while declining, still hovers near 30% and many CDFAs help clients with premarital planning and prenuptial agreements.