As ‘Gray Divorces’ Grow, Advisers Need a Client Strategy
With life expectancy on the rise and seniors staying active for longer, there has been an increasing number of “gray divorces,” or couples separating after long-term marriages.
And when approaching the challenges that come with this type of client scenario—often seen among spouses in their 50s or 60s after their children are grown and their careers winding down—it’s important for advisers to clarify their role.
In these scenarios, it’s not a good idea for an adviser to continue working with both spouses. While there may not be legal restrictions on working with both spouses, it can pose problems ethically. Typically in cases of divorcing clients I will continue working with one former spouse and bring in a different adviser at the firm to work with the other. We then develop new client agreements for each person so they aren’t on a joint client agreement. In so doing, we try to remove any conflict of interest.
As you start to work with just one member of the divorcing couple, clarify your own role as adviser up front and try not to overstep the bounds of that role. Explain that it isn’t your place to make judgment calls on how to divide assets. The actual division of assets should be left up to your clients and their lawyers.
After there is a proposed division of assets, you can focus on your client’s short- and long-term financial goals and explaining how the split may affect those goals. For example, say your client wants to keep the house but may not be able to afford it in the long term. You can propose alternatives that may better suit their financial situation, such as selling the house and downsizing.
Drawing a line around your role is especially important with older clients who often have more shared assets. Though you may have given your clients guidance on previous life events such as paying for a wedding or college education, with divorce, legality comes into play. Marriage is by nature a contract, and a divorce between seniors marks the breaking of a longstanding contract (with an extra layer of emotion). As an adviser, you want both partners and their attorneys to feel that you are assessing the divorce only in terms of how it affects your client’s financial goals.
Once your clients understand this, you can help them focus on related financial concerns, such as long-term care insurance, life insurance and beneficiary updates. These concerns may not have been top-of-mind with your client, but they are still important to address as part of a separation and planning for their new financial life going forward.