Divorce Process: When Do You Need A Financial Planner?
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Divorce can leave you emotionally and financially a mess. No matter who or what caused the split, it can take a long time to heal and move forward. Many individuals seek out a variety of professional services to help them through the various difficulties that arise. We hire an attorney to provide legal counsel, and may seek the services of a licensed family counselor or therapist to help with the emotional fallout of a dissolved marriage. We discussed in several articles that your divorce team is an important compilation of professionals that each provide a specific service to clients at the beginning, middle, or final stages of a divorce process. Now that proceedings have come to and end, when do you need a financial planner? The answer is simple; as you recover from a taxing experience like divorce, it’s more important than ever to work with a caring professional to map out your future, and discuss strategies to ensure your future goals are addressed.
What To Look For In A Financial Planner
Now that you have decided on working with a financial planner, the next consideration is in regard to what qualities you are looking for in a financial planner. Prior to your divorce you may not have had a reason to utilize a professional planner, or perhaps your ex-spouse was in charge of the finances and now that responsibility lies with you. Either way, if this is the first time you are reaching out to a financial planner, managing expectations with the kind of services provided is a critical step in finding the right planner for you. The following is a brief list of questions to ask yourself before making a selection:
- Many firms often have in-office appointments available to their clients, but some have moved toward online only consultations. Do you want face-to-face appointments?
- What are you looking to discuss or learn about in your first consultation?
- How often do you want to have your portfolio assessed?
- What risk level are you comfortable with in regard to investment strategies that may be recommended when working toward specific goals?
- What kind of qualifications should your financial planner hold? (i.e. CFP®, CFA®, ChFC®)
- How important to you that they derive most of their compensation from commissions vs other types of compensation? (i.e. fee-based, flat fee, or hourly)
- Are you looking to build a long term relationship with your planner or are you looking for quick answers? If long term, when does this person plan to retire?
General Practitioners Versus Specialists
There are a variety of health care professionals you may entrust with your personal care over the course of your lifetime. You may see a doctor who practices general family medicine once a year, and then depending on your overall health you may require appointments with specialists. If you have a heart condition, you probably engage the services of a cardiologist -someone who specializes in heart diseases- more so than a general practitioner. While both professionals are highly qualified in their field, it is their field that offers the difference in daily working knowledge. Both doctors can probably diagnose something as common as a heart attack and recommend emergency care, but the cardiologist is most likely more qualified to look deeper into a problem and understand the root cause.
It is no different in the fields relating to financial planning. Working with a CERTIFIED FINANCIAL PLANNER™ (CFP®) is like going to see a specialist for your particular financial care needs. Especially after a divorce, you may have new fears regarding your finances and feel as if you are treading water month to month. As previously discussed, adjusting to a new budget can be overwhelming. If at this new stage of your life, you’re only interested in a retirement plan, you can probably see any general financial professional that works with retirement plans and investments. They should be knowledgable and capable of helping establish a retirement plan for you. But if you are more interested in reviewing your entire financial picture (i.e. paying off the mortgage, saving towards multiple goals, having the right protection in place, and tax planning), consider working with a specialist, like a CFP®.
A Goal Without A Plan Is Just A Wish
It seems like anyone with a securities license, or certification, and a financial planning software package can put together a retirement projection or basic investment strategies. However, retirement planning and investment strategies are only branches of financial planning. It is for this reason investors should better understand what kind of help they need when working toward their financial goals.
One of the most important qualities a financial planner should have is the ability to assess a situation from many lenses (i.e. the collective impact of portfolio risk, tax strategies, estate planning, and protection concepts on a financial plan’s outcome). For example, part of a CERTIFIED FINANCIAL PLANNER™’s training is rooted in helping you assess where you are today, where you want to be in the future, and how your resources today can help you pursue your goals in both the short and long term. When you sit down with a financial planner, they will take the time to inquire about various aspects of your life, to include, but not limited to:
- Managing and paying off debt.
- Paying for higher education expenses for you or your children.
- Prioritizing short term goals with long term goals to make sure cash flow is directed to the most appropriate place.
- How to finance a home purchase.
- Tax strategies for rebalancing your portfolio, exercising stock options, or saving into the most appropriate investment accounts.
- What types of insurance coverage is needed to protect you or your family in case a catastrophe happens.
- Planning for other future concerns such as retirement or senior care.
Remember, a goal without a plan is just a wish. Too often people have big hopes and aspirations, or maybe just want to have stability in their life. Without written financial goals it is hard to keep yourself accountable. To this end, make sure your financial planner knows all of your hopes, aspirations, concerns, and nightmares in order to help you plan for the unknown and hold you accountable.
Working with a CFP®, or another qualified financial planner, to determine your short and long term financial goals is an integral step in managing your newly single cash flow and savings plans. Taking charge of your financial future after a divorce is not only critical for a healthy financial forecast, but also in your day-to-day life. It is important to note, not all of the goals we set are as far off as retirement so it is vital you do not push your finances off. You may need a lot of guidance as you adjust to life after divorce and learn to change or reprioritize your spending habits. Even though it may be scary, a knowledgable and qualified financial planner can help empower you to take on the challenges of your new financial freedom.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy assures success or protects against loss.