What are the different types of financial advisors and who should I hire to help me?

“As a woman, what are the different types of financial advisors and who should I hire to help me?”

Many family law attorneys and therapists run into situations where their female clients need ongoing financial advice after their divorce becomes final. The ideal situation is to involve a financial advisor as early as possible during the divorce so these clients can have realistic expectations of what their new lives will look like. The advisor can also assist the client and attorney with asset selection and tax planning in the settlement process.

But what do you say when the client asks if you know a good financial advisor?

Most attorneys have professional relationships and deal with an excellent advisor for their own needs. However, in divorce situations, when you have a financially unsophisticated or disinterested client …

Where to Refer Them Is Not Always Obvious

Financial advisors fall into one of three categories:

1. The Product Salesperson – This person usually has their own or their company’s agenda in mind and would like to fit their clients into whatever products they have been trained to sell. It is a “one size fits all” approach that’s usually designed to meet the needs to the salesperson and not the client.
2. The Money Manager – The goal of the money manager is to gather assets and either make recommendations of their own or hire their firm or another management firm to invest the clients’ funds. They usually specialize in understanding the markets and trying to have an “edge” in their investment performance.
3. The Financial Planner – This individual takes a comprehensive view of clients’ finances, analyzes their cash flow needs, helps clients find appropriate legal counsel for their new estate plan and works with tax advisors to find tax-saving strategies.

For a few people, the product salesperson or the money manager might be a good choice. But many newly divorced women are dealing with money that they could never replace if managed incorrectly. So they need to take a large-scale view of their situation and reassess all aspects of their financial lives.

As a CFP® and CDFA™, I cover many issues with my clients that most product salespeople and money managers may never address. For instance:

• How will life be different after the divorce and what are realistic lifestyle expectations?
• What is the client’s tolerance for investment risk and do they understand the investments they own?
• Does the client have adequate liability coverage for their home and auto as well as a personal umbrella?
• Are there opportunities to consolidate debt or refinance mortgages to lower interest costs?
• Has the client changed beneficiaries on their legal documents, workplace insurance and retirement plans?
• Are there opportunities to reduce taxes by selling assets, establishing or funding a retirement plan, or taking deductions that may not have considered?
• Does the client understand that they can file a homestead exemption (or protest their tax assessment) to lower their property taxes?

We specialize in working with women, primarily divorced or widowed, who want guidance when making major financial decisions.

Here Are Two Hypothetical Examples*:

Hypothetical Example #1 …

Barbara is an 82-year old widow. She had a broker in the Northeast who managed her money. She had heard from the broker no more than once a year. She had a large amount of her net worth in a checking account and many of her other investments had lost a great deal of value.

We could help Barbara get her financial life in order by:

• Restructuring her portfolio so it provided potential income for her,
• Reducing her tax burden by changing many of her taxable bond positions to municipal bonds,
• Consulting with her CPA to take tax losses that could be used to offset future gains, and
• Finding a new auto insurance company that reduced her premium.

The last step was taking Barbara to meet with an estate planning attorney. Barbara had already used her lifetime gift exemption of $1 million and what’s more, if she were to pass away while an estate tax was in force, her heirs would face a huge tax liability.

So we worked with the attorney to develop a strategy to save Barbara’s heirs a significant amount in potential estate taxes.

Hypothetical Example #2 …

Mary was married to a very successful business owner but had little understanding of her husband’s business or finances. In her mid-forties, Mary had never worked with a financial advisor and had never even balanced her checkbook.

She and her divorce attorney had worked with a forensic CPA to uncover the husband’s assets. Mary needed to determine what type of lifestyle she would be able to afford on the assets she expected from her settlement. Based on her input, we devised an income plan and selected investments that allowed Mary to feel comfortable in her new lifestyle.
But that’s not all …

When Mary decided to buy a home, we could help her with:

• Negotiating the purchase price,
• Finding a mortgage lender,
• Obtaining insurance, and
• Finding an attorney to help with the closing.

Then after Mary moved into her new home, we assisted her with:

• Filing for health insurance under COBRA from her ex-husband’s company,
• Getting a wind mitigation inspection to lower her insurance premiums,
• Negotiating the purchase of a new vehicle by going to the dealership with her, and
• Filing her homestead exemption.

Mary had some significant estate planning concerns, too. It turns out her mother lived abroad and was in deteriorating health. The estate planning attorney we referred to Mary established a trust for her mother and a trust to hold Mary’s personal assets.

A Reflection on You

In selecting a financial advisor for your clients, please carefully consider where you choose to send them. The selection is a reflection upon you and will make a major impact on your clients’ financial future.

We specialize in working with female clients and understand their unique financial planning needs. None of our products are proprietary, and, as Investment Adviser Representatives of Commonwealth Financial Network, we can work on a fee basis to insure our objectivity for your clients.

Furthermore, you can have peace of mind in knowing we make investment recommendations only after we understand your clients’ current needs and long-term objectives so they have the wherewithal to survive life’s twists and turns.

Cary B. Stamp is a CERTIFIED FINANCIAL PLANNER® and Certified Divorce Financial Analyst™.  He specializes in helping independent women make informed decisions and take charge of their financial lives. Mr. Stamp is a twenty year veteran of the financial industry and practices in Palm Beach Gardens, FL.