Finding the actual number of marriages that result in divorce is no easy task.
Every organization or agency that tries has so many caveats that the statistics are questionable. But, the American Psychological Association says it’s somewhere around 40–50%. Whatever the number of divorces it is, the only one that counts is yours.
If that’s the path one is about to take, several misconceptions exist that can end up costing divorcees more than necessary. Yet, some basic research could avoid excess costs altogether.
What are the most common divorce misconceptions?
While there may be countless misconceptions about divorce, three of them account for the most significant amount of damage.
Misconception #1 — The first step in the divorce process is to retain a family law attorney. This might seem logical since it’s a family issue, and you do need an attorney. But, after child custody issues, financial issues make up the most substantial — and most emotional — part of what needs to be negotiated, divided, and settled. Besides, these are the issues that can tear marriages apart and may be primary causes of divorce in the first place.
Family law attorneys will have attended law school, but rarely do they also become financial experts. Even if one is an expert, an attorney cannot testify on your behalf.
A lawyer’s job is to help divide the assets and work toward the best possible agreement. The viewpoint is of a freeze-frame moment in time: at the divorce. Yet many of the agreements being decided during separation or divorce can benefit from forward-looking projections. And this is likely not the specialty of an attorney.
Financial advisors, on the other hand, are in the business of forward-planning. They focus on understanding the financial complexities and knowing how individual elements fit into a complete picture. More and more people are looking to financial advisors as their first step in the divorce process. See our page financial advisor for divorce for more information of how we can help.
Misconception #2 — Legal counsel should be selected based on some arbitrary success rate. Actually, building the right “team” is what ensures overall success. By starting with a financial advisor to identify the basics of a specific situation, that person can help select the most suitable attorney. Attorneys approach divorce from all different angles — with different specialties — and input from a financial advisor can help one approach a selection thoughtfully.
HCR Wealth Advisors has witnessed again and again how having the right team of professionals makes each participant in the process feel supported. The result can be less antagonism and a more satisfying outcome-wise.
Misconception #3 — Mediation is the best option because it is more holistic and will work out cheaper. That may be true sometimes, but not always. A person may only know if mediation is an option after having a discussion with a financial advisor, to identify all the assets that are in play and to establish specific goals.
A significant cause of divorce is the total breakdown in communications. This, in turn, leads to the inability of two people to agree on any critical issues. And these are two things required to make mediation a success. In their absence, mediation procedures can drag out and ultimately fail.
What role can a financial advisor play in a divorce?
A registered investment advisory firm can play a pivotal role in avoiding the three misconceptions.
In the case of HCR Wealth Advisors, during its 30-year history, its central goal has been to help clients navigate through life’s transitions. Divorce is one of those transitions, one where HCR’s expertise can make the difference between one being able to move ahead after a successful divorce — or not.
Unlike those professionals who bill by the hour, HCR works on an annual fee that is based on the assets the client has under management with the firm. (Regardless of the amount of service you might require as a client.) HCR feels this is the way to deliver the best possible service to its clients.
HCR Wealth Advisors undertakes significant analysis and preparation to help clients through a divorce. They will:
- Help recommend legal counsel based on one’s precise financial situation.
- Spend time with their clients to help them understand the divorce process.
- Help with the division of assets after the divorce agreement is signed.
- Build a financial plan going forward based on the divorce decree.
What support do people need while going through a divorce?
Mental, physical, and emotional well-being are critical during the divorce process. While it might seem contradictory, it is the time to put oneself first. Emotional support is probably one’s greatest ally. If in need to see a therapist, do so. Get out into nature if it nurtures you. Connect with family and friends who love and like you.
The number of practical issues that have to be dealt with is endless. A person will want to have everything in order, so they are prepared for life after divorce. Stay informed regarding the divorce process. Be clear about values and strategies when communicating with your financial advisor and with your attorney. Doing so will make it easier for them to provide the most valuable advice and service.
Short-term and long-term goals are going to change dramatically as a result of the divorce process. People have to reexamine their financial future with a whole new set of facts that will be very different from what they were as a married person. Having a financial advisor as a trusted ally as a person goes through this reality check can help to ensure that there are no surprises.
In the end, divorce is an expense for both parties. Each person has to engage and pay professionals. And additional expenses will be created by living in two separate residences. Certain tax benefits will be forfeited — those related to being married. All of these elements have to be factored into a new budget that reflects smart decisions at a time when money — and other resources — could be reduced.
So, what are the key takeaways of using a financial advisor for divorce proceedings?
Besides making the most of the divorce negotiations, as a financial advisor, HCR can help people with the financial planning needed to be sure they are prepared for the future. By being involved from the outset, it can help establish a clear understanding of current and future financial situations.
The process of divorce-oriented financial planning focuses specifically on developing personal and business financial strategies that can help achieve the best divorce settlement for unique situations.
If children are involved, an advisory firm can factor in the long-term costs of raising and educating them. It can help assess if living conditions are optimum for a new financial reality. It can identify how families will be affected by taxes, both during any working years and in retirement. And it can make the most of the investment resources available as planning for retirement begins.
Having the support of a financial advisor enables one to enter the divorce process with all the tools and knowledge needed to make informed decisions about the future. Those who do this will be able to make the very best of what could otherwise be a challenging life event.
About HCR Wealth Advisors — The mission of HCR Wealth Advisors is to establish lifelong relationships with each client and to be available as its clients go through the many transitions in life. Divorce is one of those transitions. Its hands-on advisory practice includes in-house analysis and comprehensive advisory services such as financial planning.
Originally published at http://nyctalk.org/ on July 8, 2020.
*This article is for informational purposes only and should not be considered investment advice.