There is an old joke that goes, “Marriage is like a deck of cards. In the beginning, all you need is two hearts and a diamond. But after a few years, you’re hoping for a club and a spade.” Divorce is like the legal equivalent of pulling off a band-aid that’s been stuck to your skin for too long. They are both expensive and emotionally taxing (to say the least); and currently, since the average first-marriage in the US lasts less than 8 years, probability-wise you’re likely going to end up getting familiar with settlement paperwork. This is why many Halbert Hargrove clients ask about the benefits of working with a certified divorce financial analyst (CDFA).
I was curious about the role CDFAs play and the benefits of working with a CDFA, so I invited Julia and Samantha to talk about what the job entails, and how they can help clients going through one of these significant life-events.
David Koch: How long have you been with Halbert Hargrove, and what do you enjoy most about working here?
Julia Pham: So, I have been with Halbert Hargrove going on eight years now, which is insane to me. It feels just like yesterday that I joined. My favorite part of what I do is obviously the clients. We have some awesome clients, and I love hearing everyone’s story and just building relationships over the years.
David: How about you, Samantha?
Samantha Garcia: I’ve been at Halbert Hargrove for four years and I agree with Julia that the clients are definitely the best part. We do have some amazing clients. And I think the other thing is, every situation is a little bit unique. Nobody’s situation is cookie cutter. There’s no one fixed solution for everyone.
David Koch: Let’s dive right into the Certified Divorce Financial Analyst certification, CDFA. What is a CDFA, and what is it all about?
Julia Pham: This is a professional designation earned by an advisor who has the training and expertise to help people navigate through the divorce process.
Samantha Garcia: To expand on that, CDFAs are really about the specific financial aspects of a divorce. So, you have a lawyer or a mediator helping settle who gets what, but a CDFA takes things deeper from the financial aspect, and helps ensure that both parties understand the financial ramifications of splitting assets.
David: So why would someone look for help from a CDFA?
Samantha: I think the biggest reason to hire a CDFA is to get expert help in understanding the financial ramifications of splitting assets. It’s not just about “Is it fair or equitable today?” It’s about what does that look like, say, 10 years from now or 20 years from now? Is it still going to be equitable? Are there different taxation situations that are going to throw something off? Things like that.
Julia: And so, having a CDFA on your side can help you take a step back and think long term, like Samantha said. Their counsel can help to prevent you from making any rash decisions. I’ve seen a lot of people who go through a divorce, and a lot of times it’s not a quick process. They get worn out – and towards the end, many people just want to give up and say, “Hey, you know what? I don’t even care anymore.” Having someone who has the foresight to look ahead and say, “No, you don’t want to give up on this and give the other person X, Y or Z: You could really benefit from this in the future.”
Samantha: Exactly. A big part of our role is to ensure that you don’t have regrets later. Julia alluded to this. Often, she and I end up working with clients after their divorce process is over, and they have regrets about it, saying things like, “We just wanted to get it done. We were tired, we were worn out, and we just gave in to whatever the other spouse wanted without really looking at things,” and then a year or two after things are done, they’re thinking, “I really shouldn’t have done that.”
David: When in the divorce process should you engage with a CDFA?
Julia: I would say right away, even if you only have an inkling that you’re headed down that path. You should try and engage with a CDFA just so that you can get ahead of things, weigh your options, and just to prep you for the road ahead.
Samantha: I agree. It’s really about getting in touch with a CDFA as soon as you know that you’re going to go through that process, or even have a thought that this may be on the horizon. I think it’s good to engage someone to just see what everything looks like.
David: What kinds of situations would especially require expert advice?
Samantha: Two of the biggest situations would be if you suspect your spouse might be hiding assets, or if there is a business at play. The business implications can be really complicated, and it’s really easy to hide personal things in the business. Going back to the first one, if you suspect that a spouse is hiding money, or has something on the side that you aren’t aware of, it’s really important to make sure you’re getting to the bottom of the whole situation.
Julia: I agree. With any type of partnership where there is one person in the relationship who is in the dark about the finances, having a CDFA on your side is critical. Whoever doesn’t have all that information would really benefit from working with a professional who has a background in both finance and divorce.
Samantha: And someone who can be objective. You know it’s not about what he has, or she has, but really getting to the bottom of whether you know what everything looks like, and how everything is situated without a bias to one party or the other.
I believe everyone who goes through a divorce could benefit from working with a CDFA. Of course the lawyers are in it to get their client the best settlement they can, but having a professional CDFA in the mix can help ensure that it’s not just, “What do you want vs. what do I want?” Instead, it becomes more like, “Okay, let’s look at everything. Let’s make sure you both understand all the pieces and how they fit together.” It really benefits everyone.
There will always be those highly complex situations – where I would say having a CDFA should be non-negotiable.
Julia: And can I just add that a CDFA is not a replacement for an attorney. As CDFAs, we’re not going to be giving legal advice. You still need a licensed attorney for that.
Samantha: CDFAs are really meant to partner with the mediation team or the attorneys. They’re not a replacement for either, but the mediator specializes in helping you come to a resolution and attorneys really fight for what you want. Often however, mediators and attorneys don’t quite understand the financial ramifications of splitting assets, whereas the CDFA can come alongside and partner with the team and help everyone understand the ramifications for both the short and long term.
David: Do you have any examples of common mistakes? through the divorce process?
Julia: One that I see a lot is the splitting of the house. A lot of times, for whatever reason, normally it is the wife who wants to keep the house and that’s not always the best move, because houses can be very costly assets to keep. What about you, Samantha?
Samantha: That’s the most common one that I see too. They’re willing to give up other assets to keep the house and maybe they shouldn’t. It’s such a common thing because you’re worn down, it’s a long process, and it’s emotional. One of the things I tell every client who’s going through a divorce is: It’s like you’re on a roller coaster. There are some days where you’re OK and there are other days where you’re like, I can’t believe this is happening. I just want to be done. I’m tired of going through this. It’s really important to have an advisor who can help you work through those emotions logically, and understand that yes, it’s an emotional process, but at the end of the day, you have to make logical decisions.
David: After the divorce is finalized, would you continue working with your CDFA?
Samantha: It’s really important to make sure you have a strong financial team around you who can guide you through that next step, and your CDFA may be a referral source for someone in that position.
Julia: I have clients going through divorces right now. I’m hoping that they would continue to work with me! So of course, there are instances where it would make sense.
Samantha: I think it depends on the role of the CDFA. If you’re already working with an advisor, and they’re going to be that person for you, then yes, it would be appropriate to remain working with them. But if you’re working with a CDFA specifically for the divorce process as a non-biased party, who is part of the divorce team, then you typically wouldn’t continue working with them in that instance.
David: Anything else you’d like to add about the benefits of working with a CDFA?
Julia: I’m working with a client right now who has been going through the divorce process for the last two and a half years. She and her ex each have their own separate houses, but they’re still fighting, and there have been so many times where she’s said, “I’m just going to give him what he wants,” and I keep telling her no, don’t, you’re not done yet.
David: What is your take on mediation?
Julia: Thinking of mediation in terms of mediation, you really need both parties to be pretty cooperative. I can’t say that I’ve seen a ton of people go through with mediation. I’ve seen more people have super contentious divorces than relatively painless mediations.
Samantha: My recommendation is always that if you think you can go through mediation – great! Try it if you both agree, but you should have a lawyer in your back pocket because you may need it. Hopefully you don’t, but I’ve seen more end up with lawyers, and the divorce can go on for a while.
David: What pitfalls in the divorce process have you seen that should be avoided?
Julia: My female clients who take on a house with a mortgage. They always want to try to pay down the mortgage right away, and I’m like – hold your horses! I see people running into using up their cash too quickly. They like the idea of having a hard asset that’s paid off, but sometimes that’s not always the best scenario.
Samantha: Right. You have to have a balance of liquid cash and assets. You don’t want to end up asset rich and cash poor. That doesn’t work.
David: Good point.
Samantha: One of the other things that I would advise is not to make huge life-altering decisions right away. Divorce is already a big decision, so don’t go get married to the next Joe or Suzie that you see. Be cautious as you’re making decisions, and consult with people in this highly emotional time to ensure you’re making solid decisions.
Julia: Definitely, and if you have kids who are involved, just try to keep them as the primary focus.
Samantha: And try not to bad-mouth your spouse to your kids. It’s best to just support them as you can and try to keep things as positive as possible.
David: Great! Thanks for your time and your insights!
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