To paraphrase Tolstoy, all happy couples are alike, but everyone's divorce is hard in its own way. No one's path through a divorce is the same, not even for the two halves of a former couple. The challenges women face during and after divorce are different from those faced by men, especially when finances are concerned.
"The stereotypes exist for a reason," says Nancy Hetrick, a certified divorce financial analyst and founder of Smarter Divorce Solutions in Phoenix. "In the vast majority of 20-plus-year marriages, the women have delegated fin management to the husbands. Not because they aren't capable; it's just the way things worked out."
According to UBS's 2019 Own Your Worth report, 58% of women globally defer to their spouses to manage critical, long-term financial decisions, says Paula Mogan, senior vice president of Wealth Management at UBS in Massachusetts.
This can leave a financial advisor's female clients with a steep hill to climb in terms of reconstructing her financial life post-divorce. She'll likely need to adjust her investment strategy and acquire new skills to manage her newly independent lifestyle. She'll also need you, as her advisor, to be a planner, educator and financial advocate.
Think Short and Long Term
First things first: You need to ensure her immediate financial needs are taken care of. For women, who often end up with illiquid assets like the home or investments that can't be sold without tax consequences, this may require finding sources of short-term liquidity.
"A short-term funding vehicle such as a home equity line of credit or investment credit line may fit nicely to resolve short-term cash needs without disrupting their investment strategy," says Kathleen Stewart, a wealth strategist with BNY Mellon Wealth Management in the Pittsburgh area.
Divorce financial planning is about taking care of short-term needs without sacrificing long-term goals. To this end, you and your client need to look beyond the settlement for sources of long-term income.
"Advisors should caution their clients not to focus too narrowly on the property settlement," Stewart says. "Taking a balanced approach to long-term planning for the lifestyle she wants five or more years after divorce can assist female clients tremendously."
She encourages financial advisors to consider both the property divorced wives will receive through the settlement and "her own abilities, talents and resources" when looking for long-term income. While initially, she may need to rely solely on the assets acquired through the divorce to cover expenses, eventually she'll likely need to turn to her own resources for financial support.
For example, she "may need to develop her skills to either advance in her career or obtain requisite education to start a new one," Stewart says. Setting expectations early in the divorce process about what it will take to maintain her lifestyle long term can help her obtain a fair settlement.
Include Financial Education With the Financial Planning
Divorce can leave women "emotionally drained, often paralyzed by fear of the unknown and how they will survive financially," Mogan says. "Having worked with many women who find themselves faced with divorce, being patient, empathetic and guiding them through a sound financial plan is critical to helping them understand what they will need to survive."
You may start by doing a deep dive on her spending and help her categorize where her money is going. And during the process, take time to assess her comfort level with money management.
"We work with a lot of clients where the wife may end up with a $2 million settlement but hasn't paid a bill in 20 years," Hetrick says.
With a divorcée, it's important to recognize where she is in terms of financial literacy and where she needs to be. Then help her craft a step-by-step plan to get from here to there. Smarter Divorce Solutions has a financial coach who does financial empowerment sessions on the basics of money management.
When women have a plan for recovery and moving forward, it gives them a sense of security and helps them feel safer throughout the divorce process, Hetrick says.
Be Patient and Go Slowly
One of the most frustrating consequences of divorce for women may be losing the ability to quickly process and make decisions.
"Where when you're faced with divorce, the brain goes into fight, flight or freeze," Hetrick says. "The amygdala fires up, and when that happens, it takes away energy from the frontal cortex where" rational decision-making occurs.
"We call it divorce brain," she says. Your client may not be making decisions or remember things like she normally does.
"It's our role to slow things down and help them come up with systems that will help them," Hetrick says. Encourage her to take notes or write things down. Instead of globalizing, go through things one step at a time to prevent overload.
"Women tend to process," says Susan Bradley, founder of the Sudden Money Institute and Financial Transitionist Institute, which focuses on life transitions. "They want to understand before they make a decision, and it's sometimes paralyzing because it's hard for them to get their normal executive functioning at its peak" during a divorce.
This is where breaking the conversation down comes into play. Take it one topic at a time.
The presettlement document is often a behemoth of copies, projections, account statements and forms. "We train certified financial transitionists to take each of those topics and do a clear, one-page overview," Bradley says.
Having a visual aid to look at and return to can help divorcées process what you're saying. And when women can process and regain their confidence, they make great decision-makers.
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