Advisors: Losing a client after divorce or spouse’s death is likely, but not inevitable

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When a client loses a spouse to death or divorce, it’s always unhappy news. For financial advisors and wealth professionals, it can also lead to the loss of the original client relationship.

In divorce, which ends more than 40 per cent of marriages, one of the parties almost always switches advisors, and sometimes they both do, citing the desire for a fresh start.

In the case of a spouse’s death, a 2009 study from the Boston Consulting Group found that 80 per cent of Canadian women left their financial advisors within a year of their spouse’s death. Given that 80 per cent of widowed spouses are women, this can represent a major risk to your business.

Losing a client after divorce or loss of a spouse is not inevitable, however. In fact, you have the opportunity to make the relationship even stronger.

Here are some key steps you can take before, during and after the loss to help your client at a difficult time.

Preparing for client loss

Familiarize yourself with the grief process: As a financial advisor, the more help and advice you can provide, the stronger your relationship will be. Do some reading about the grief process so you can empathize with your client: Elisabeth Kübler-Ross’s Five Stages of Grief and Lois Tonken’s Egg models are good places to start. Understand that a grieving client may find decision-making hard, so be patient. Don’t take anything personally. It’s common for the grief-struck to be angry or sad that they are having to make financial decisions at a difficult time. There will be a time when they are feeling more like themselves, and they will thank you for your kindness.

Build a relationship with all family members: A 2018 McKinsey study found that in two-thirds of affluent heterosexual couples, men are the key financial decisions makers. It is not uncommon for financial advisors to have most of their dealings with only one party, which represents a major risk in case of death or divorce. Try to build a relationship with both spouses, even if initial interactions are mostly social. It can also be smart to know any adult children, since they often have a say in financial decisions, particularly if your clients are older. The time to build relationships is before the crisis occurs, and efforts in this area of often rewarded.

Connect with divorce and bereavement specialists: If they are not part of your team already, collect names of trusted realtors, insurance specialists, tax lawyers, forensic accountants, trust and estate lawyers, family lawyers, business valuators, appraisers and other such professionals. Not only will you help your clients by helping them find professionals at a difficult time, but by connecting them with a friendly network, they are less likely to be exposed to other financial advisors who might want their business. In the case of divorce, most of your HNW clients will likely work with a Certified Divorce Financial Analyst or Chartered Financial Divorce Specialist (CFDS) in addition to their legal team to help them prepare the spreadsheets needed for financial disclosure. A divorce specialist will also run financial scenarios as they discuss settlement options with their legal team. Many divorce financial professionals work as part of wealth management teams, leaving your business at risk. It’s important that you have a good working relationship with an independent, fee-based divorce financial professional or consider having someone in your office acquire that designation.

During loss

Help with the financials: The death of a spouse and divorce are both overwhelming events: They rank first and second for the most stressful life events the average person will encounter. Both events also come with a lot of paperwork, which is hard to deal with when you are grieving. Make your client’s life easier in any way you can. Let your bereaved client know that you can talk directly with other involved professionals and prepare a summary of any changes that might be required such as beneficiaries. In the case of divorce, you can let both parties know that you will do your part to make the financial disclosure process as easy as possible. Typically, each party will need a list of assets as of the date of marriage and the date of separation. If you can provide the documentation each party needs to provide their lawyers, they will be grateful.

Clear any potential conflicts of interest in divorce: In divorce, it’s important that you get a sense of how both parties want to handle things. In marriage, duties are often bifurcated, and you may be used to dealing with only one spouse. In divorce, however, both parties need to be on top of the financials, so you will likely have to meet with the spouse you know less well. Some divorces are amicable, and these clients may prefer to handle the finances as a family unit, particularly if there are trusts for children, foundation money or other investments that will remain intact post-divorce. In the case of high conflict divorce, it’s important that each party feels “considered.” People going through a divorce can be very concerned about information being shared with the other spouse. Establish clear divisions and walls within your office. Assign two different points of contact if you can. Take a note from family law firms and schedule meetings for different times to ensure no run-ins in the lobby. Never talk about the other party, even if asked directly. If one party feels you are favouring the other spouse, they will find a new advisor as soon as they can.

Be prepared for financial surprises: Most people expect there to be unpleasant surprises in divorce, such as infidelities or secret debts. There can also be surprises when someone dies. When Scholastic Inc. CEO Richard Robinson died in 2021, his family was shocked to discover that he’d left his personal assets and control of the US$1.2 billion company to his chief strategy officer and reported paramour. Have a plan in place for dealing with financial surprises. At the end of the day, most clients want to know that they, their children and their legacies will be fine. If you can assure them that even if they lose 50% of their assets in a divorce, are not receiving the inheritance they’d expected, or must pay surprise debts as part of settling an estate, you have a plan for their long-term financial security.

After loss

Provide respectful financial education: In their book Bank on Yourself, authors Ardelle Harrison and Leslie McCormick wrote that 90 per cent of women will manage their money on their own at some point. And while 80 per cent of men claim they are comfortable with financial discussions, only 31 per cent of women state the same. A 2018 report by Merrill Lynch revealed that 61 per cent of women would rather talk about their own death than money, so if you are suddenly dealing with a female client who has not been actively involved in her finances, it can be a learning curve for everyone involved. The top reason that widows cited for switching advisors was feeling disrespected and patronized in financial discussions. It’s important that you be able to bridge any financial literacy gaps in a respectful fashion. Avoid industry buzzwords and acronyms. A Merrill Lynch study discovered that 77 per cent of women see money in terms of what they can do for their families, so don’t simply rattle off information about gains and losses and management fees: tie financial results to the client’s overall goals.

Prepare a business case for keeping their business: No matter how long you’ve had a client, assume that when they are going through divorce or bereavement you may have to earn their business. Even the wealthiest of clients tend to worry about money after a major life event, and some will wonder whether someone else could do a better job of managing their wealth. Others will simply want a fresh start. Don’t assume a client will stay with you simply because it’s the path of least resistance. Make a case for why it makes sense for them to keep you as their advisor. In the case of divorce, changing advisors may mean your clients may lose out on the power of a combined portfolio such as purchasing certain products or having access to better rates. Create a plan for keeping both spouses as clients and figure out how you can keep assets in each party’s name and honour differing goals, time horizons, risk tolerances, decision making and privacy concerns. If you can create a clear path forward and articulate it, you have a better shot of keeping the business.

When your client goes through loss, you can see it as an opportunity to change the nature of your relationship. If you can be empathetic, respectful and helpful, and ease their burdens instead of adding to them, you are likely to have engaged and appreciative clients who are loyal to you for life.

Jen Lawrence, MBA, is a CDC Certified Divorce Coach®, CDC Divorce Transition and Recovery Coach™, Certified Divorce Specialist, and a Certified Divorce Financial Analyst® professional. She draws on 30 years of experience in corporate training, investment banking and management consulting. She’s the author of The Designed Divorce: How to Preserve Your Wealth and Peace of Mind in Divorce and Engage the Fox: A Business Fable About Thinking Critically and Motivating Your Team. In her private divorce coaching practice, she helps women facing high-net-worth divorce handle the process with elegance and ease. Based in Oakville, Ont., she works with clients across Canada and the U.S.