Tracy S. McKenney, CFP ®, CDFA ™
What is a Financial Neutral Specialist and
Why Should I Hire One in My Divorce?
Utilizing a Financial Neutral Specialist in a divorce first became a useful and efficient tool with the advent of Collaborative Divorce. Choosing the right person to handle each area of a divorce seemed logical to Stu Webb, founder of Collaborative Divorce in 1990 - delegate to a financial specialist prepare the financials, have a divorce coach (with a therapist background) work on communication skills and emotional stress, and have an attorney prepare the legal documents and give the parties legal information. With a team of experts, the client could utilize the right person to assist in each area of the divorce, saving them money and providing a higher quality of service to the client.
The Financial Neutral Specialist fills several other critical roles in the divorce process, possibly the most important being this: Collaborative lawyers have been specially trained to take off the adversarial hat that litigating lawyers must always wear, but they continue to owe their highest obligation to their own respective clients. In contrast, a collaborative financial expert's role includes being the sole person in the room who represents the interests of neither party specifically. In many ways they double as a mediator for the process. This adds an invaluable layer of utter neutrality, as well as feedback to not only the parties themselves but their attorneys.
What's the difference between a Forensic Accountant
and a Financial Neutral Specialist?
Most of the financial specialists in the divorce arena today are Forensic Accountants and Business Valuators. These two specialists have come from the divorce litigation world. They are typically hired by either the husband's team or the wife's team (or for each domestic partner) to value a business, trace separate property or hidden accounts, create marital balance sheets, figure out the true income of a self-employed spouse, etc. They rarely are hired by both the husband and wife to come up with non-biased financial valuations. They work for one spouse and determine financial valuations that favor that the person who pays for it. They often are utilized as 'financial expert' witnesses in court.
However, some Forensic Accountants and Business Valuators are exceptions to this rule. They have been collaboratively trained and mediation trained, and can work for both spouses in a neutral manner.
A Neutral Financial Specialist is just that - neutral and so favoring neither the husband or the wife in their analysis or presentation. Their background can be Forensic Accountant, Certified Financial Planner®, or CPA. They are hired jointly by both spouses and report to both spouses in real-time, together. Their job is to gather the data and supporting documents to create financial reports on the assets, debts, income and expense for the divorcing clients. The information is released to both spouses and their respective attorneys so negotiations can occur and professional advice given on ways to divide their community property.
How do you know if a Financial Specialist is qualified?
Most financial specialists have a Certified Financial Planner® practitioner designation or a CPA designation. They first need to have a deep financial knowledge. I recommend you look for the Certified Financial Divorce Analyst™ designation, which certifies a course of further study and testing in the divorce financial specialty. Most specialists have 5+ years experience working with divorcing couples, but ask the specialist for their qualifications.
Why not have the attorney prepare the financials?
It seems logical. In the traditional litigation model, attorneys are the ones who gather all the financial data and prepare it. It has worked this way for years. However, it's not optimal. There are two downfalls with this situation: The attorney's expertise is the law, not retirement plans - and you're paying attorney rates for financial preparation which should be had for less.
What if the parties want to prepare their own financials?
There is inherent biases and lack of objectivity in the parties preparing their own financials. And there are rules on different evaluation dates for different assets. Are you familiar with these rules, and all the others?
Oftentimes it is the intent of the more financially knowledgeable spouse to come to mediation or collaborative divorce with a desire to maintain control and power over dividing the assets and determining the spousal/child support amount. While this seems like a good plan to the advantage of the strong financial partner, it usually backfires and the parties end up in litigation. It's very difficult for one spouse, who is a financial novice, to agree to anything when they're in fear and feel at a disadvantage. The process just stalls. No decisions are made; no progress achieved. The "out" spouse usually just leaves the process. Hence the value of utilizing a neutral financial specialist who gives reassurance to the informationally disadvantaged spouse that independent eyes are watching over the case, and an opportunity for that spouse to ask questions and to become financially educated. Collaborative law is about transparency and informed consent, which requires not only obtaining all pertinent data but also understanding what it means.
Utilizing a neutral financial specialist in your divorce can help both spouses mitigate the financial distrust that occurs prior and during the divorce process and help both parties reach a mutually satisfacotry property and support settlement.
Securities offered through Securities America, Inc., member FINRA/SIPC. Tracy McKenney, Registered Representative. Advisory services offered through Cooper McManus, a SEC Registered Investment Advisor. Cooper McManus and Securities America are not affiliated. Securities America and its representatives do not offer tax or legal advice. You should consult with and rely on your own independent legal and tax advisor.