How to Work with a Certified Divorce Financial Analyst
The separation of financial assets is one of the most complicated parts of the divorce process. Working with a certified divorce financial analyst (CDFA) can help you make smart, informed decisions and lighten your load as you transition to your new life.
Jennifer Taylor is a certified public accountant, certified divorce financial analyst, and founder of Square One Financial Services, Inc., based in San Clemente, California. Jennifer's personal divorce experience inspired her to help others receive easy-to-understand financial guidance during their divorce process. We chatted about what a CDFA does and how you can find and work with one.
Erin: You have been in the shoes of many of those you support. How does your divorce experience influence the way you coach your clients?
Jennifer: My experience going through a divorce is what makes me so passionate about helping others in the same situation. First and foremost, it allows me to genuinely empathize with the emotions my clients are facing. Beyond that, my firsthand experience navigating the legal process and evaluating significant financial decisions has given me an appreciation for just how complex the process can be and how overwhelming it can feel.
In my situation, I relied on an attorney solely for process guidance, completion of forms, and our marital settlement agreement, which was based on terms my ex-husband and I reached together without attorney involvement. Since we both held good jobs and had purchased a house together, we had financial implications to consider. From a math perspective, we had both contributed fairly equally to the marital estate, so it came down to what we would do with the marital home. In all transparency, it wasn't a straightforward process, as we both had an interest in keeping the home.
After some negotiation, I put together a home equity buyout proposal for my ex-husband which required me to take on significant financial risk. Part of that proposal included me refinancing my home in my name, thus having 100% of the financial burden going forward – pretty scary and stressful on top of all the other emotions I was experiencing.
Luckily, my ex-husband agreed to the proposal, and, although it resulted in some uncomfortable compromises on my end in the short term – like bringing in a roommate for a period of time – in hindsight, the risk paid off. My experience gave me tangible examples to share with clients about the realities and risks of property division. Sometimes, people have significant emotional or financial ties to marital assets, and preserving the lifestyle you've become accustomed to can pose a challenge. I hope to provide an example of what buckling down and persevering can get you if you make the right interim choices and compromises.
Erin: Do you think everyone getting a divorce needs a CDFA, or do you recommend that services like yours be used based on need?
Jennifer: Working with a certified divorce financial analyst is a cost-effective way to shield yourself from costly financial mistakes that could impact you for years to come. The financial decisions entered into the judgment become court orders and are enforceable. That said, the value a CDFA provides correlates heavily with the financial complexity that exists. Some CDFAs (like myself) offer a variety of services to address less-complex needs as well.
Some primary reasons to engage a CDFA include possession of significant illiquid assets, such as real estate or retirement plans; a significant imbalance of income earning potential that requires a financial strategy; or even a lack of clear understanding regarding what is marital property and what is not.
The list of reasons to seek CDFA guidance is long. However, if all you have are highly liquid cash-like accounts, you may be able to handle it yourself if you and your spouse can reach an agreement on what is separate property and what is marital property. My services address both situations. I provide in-depth strategic divorce financial planning packages at flat fees based on the number of assets in the marital estate, but I also provide hourly coaching and post-divorce financial budgets for those who just need a little support or guidance on focused topics. My goal is to optimize my services so clients maximize outcomes and minimize costs.
Erin: What should a person think about before selecting a CDFA? How should they find one, what questions should they ask to make sure the relationship will be a good fit, and what expectations should they have for their CDFA as they begin working with them?
Jennifer: When seeking a financial expert to assist in your divorce, make sure you are dealing with a certified divorce financial analyst. Certification is the result of significant additional divorce-specific training in addition to other common certifications, such as a CFP or CPA.
Those looking for a CDFA can search the Institute of Divorce Financial Analysts website or perform a Google search. While it's not necessary to seek a CDFA in your local area, it's helpful to seek one that works within your state jurisdiction, as they will be most familiar with state laws. With state-level expertise, many CDFAs can effectively service clients virtually with the help of modern technology like video conferencing.
A large number of CDFAs, including myself, offer free introductory strategy calls. I encourage people considering the need for financial guidance through the divorce process to schedule one of these consultations. These calls are truly commitment-free, last an average of 30 to 45 minutes, and give you a much better idea of how a CDFA can help you. The calls typically end with pricing information based on the details of the discussion. During an initial call, you should expect to do the following: 1) Discuss your financial situation, concerns, current state reality, and ideal outcome 2) G et a solid run-through of the logistics and process 3) Gain a good understanding of the CDFA's personality and fit.
A good CDFA will ask investigatory questions along the way that allow them to devise and communicate an initial strategy and provide insight into what value can be provided. A common misconception is that potential clients must be armed with detailed information during the first call. While high-level facts are helpful, the call should focus on a game plan rather than specifics.
Erin: What do you wish clients would discuss with you at the outset of your work together? Are there specific financial areas you wish people would pay more attention to from the beginning?
Jennifer: I think a big part of the fear and uncertainty of divorce sprouts from a lack of understanding about what the financial picture will look like after the dust settles. Time and time again, people ask me, " How am I going to make it?"
I find my clients are better able to manage stress and other emotions when they clearly articulate their financial priorities in terms of "must-haves" and "nice-to-haves" at the beginning of the divorce process. This should be done by each party on their own. Then, I have a one-on-one discussion with each party to address their priorities before we begin to visualize what a win-win outcome would look like.
Examples of must-haves may include the ability to cover reasonable housing expenses, childcare expenses, etc. "Nice-to-haves" may include staying in the existing family home. Once these priorities are defined, I can assess how close or far the couple is from alignment and how much of a reality check is necessary for a mutually attractive outcome.
Erin: Anything you'd like to add?
Jennifer: I'd just like to add that a high-quality, low-cost divorce is a realistic goal. With the right divorce team or resources, a win-win outcome is possible without a costly and stressful court battle.