Financial Professional Gotchas

Collaborative divorce financial professionals come with various credentials and have various reasons to be in this business. I will comment on the credentials in another blog entry. Right now, I want to talk about one of the various reasons to be in the business of divorce financial advice and how that relates to the disqualification.

I am a certified public accountant (CPA) and a certified financial planner (CFP). I am licensed to give investment advice in the state of Texas. I do not have a tax practice. I work almost exclusively on collaborative cases. I do not have any interest in working with my clients after the divorce.

I have met financial professionals who manage investments for clients and who see divorce advice as a means to obtain investment portfolio clients. I can't fault their logic that one of the parties is probably going to want to find his or her own investment advisor after the divorce. But I do have an issue with the ethics and risks of this approach.

In collaborative divorce, the financial professional must be neutral. Truly neutral. A financial professional who wishes to work with one party or the other subsequent to the divorce cannot be truly neutral. The scary thought to me is that the financial professional could convince themselves and the target party that being awarded the defined contribution plan is better than being awarded the defined benefit plan. This, of course, might not be the best option for the party. But it is the option that gives the investment manager something to invest subsequent to the divorce.

As for CPAs with a tax practice, I suppose there are those who might like to have a tax client. But the financial stakes are much lower. A tax return might generate an annual fee of $500, while an investment portfolio client might generate tens of thousands of dollars in annual fees. I think this is the reason that so few CPAs look to tax preparation relationships subsequent to the divorce work. The dollars are just not material.

The bottom line is that if you are an attorney in collaborative divorces, carefully check out your financial professionals before you invite them onto a case. Know their reasons for working in this area.