Working with a financial neutral throughout the collaborative divorce process can help divorcing couples make the right financial decisions.
By: Gina Gallo, CFP®, CDFA™
Working as a Collaborative Team member, the financial neutral’s objective is to provide financial assistance as requested with the goal of assisting the clients in achieving what they perceive as their best possible outcome under the circumstances. In fact, that is one of the questions I ask at a first meeting: “Tell me what would be the ideal financial outcome for you in this divorce?” Based on the answer, the neutral can then better navigate a course of action to find compromise. The Interdisciplinary Model calls for one of the neutrals to facilitate the meeting. More times than not, the neutral leads the meeting and defers to the “coach” when necessary to navigate through the non-financial issues. I have found that divorcing couples take
The Interdisciplinary Model calls for one of the neutrals to facilitate the meeting. More times than not, the neutral leads the meeting and defers to the “coach” when necessary to navigate through the non-financial issues. I have found that divorcing couples take not-so-positive news better from a neutral and even feel inclined to follow through more often when requests come from an impartial person. Occasionally, a breakdown of the process can occur when one of the attorneys takes charge. A client who is not represented by a take-charge attorney can go into a shutdown mode and feel bullied.
The role of the financial neutral starts with fact gathering. They will meet with the parties individually before the first team session to talk with them about their expectations, gather data about their current financial lifestyle, and understand their expectations for their post-financial lifestyle. The financial affidavit is crucial with respect to dividing assets and liabilities. By communicating with the client one-on-one, the neutral is able to better understand their needs and come up with solutions to meet those needs. All data is quantified in economic terms to prepare the parties and help them make decisions about equitable settlement. Some of the illustrations typically include:
- Current cash flow
- Standard of living, budgets
- Future needs
- Costs of raising a child or children
- Future career prospects
- Rehabilitation/education costs
- Relative value of assets (income producing vs. non-income producing)
- Tax consequences of settlement options
- Settlement options comparisons
- Federal income tax estimates
- Present value or future value calculations (pensions or alimony)
The involvement of the financial neutral can be useful in all cases – even when there are only debts and no assets. Neutrals often guide the one household finances into two, whether it is sharing assets or liabilities. Neutrals offer projections and considerations. I often ask, “Have you considered this?” as a non-threatening way of having a client embrace something that may be new or uncomfortable. By acting as financial professionals and providing unbiased options, the Collaborative Team provides the divorcing couple another source to help them achieve the best financial outcome they can at a very difficult time.
Keep in mind some of the benefits of using a financial neutral:
- Complete objectivity by not working for one spouse, rather both.
- Levels the playing field by assisting both the “financial savvy spouse” as well as the “non-financial savvy spouse.”
- Reduce the expense of discovery costs by collecting data through individual meetings.
- Guides both spouses in transitioning from funding one household to two.
- Increased access to financial information can eliminate bias.
Gina Gallo, CFP®, CDFA™ is a fee-based Certified Financial Planner™ and President of Gallo & Russell. She can be contacted at 321-242-8200 or by email at ggallo@lasallest.com or ggallo@galloandrussell.com. Ms. Gallo is a Registered Representative of LaSalle St. Securities LLC (LSS), Member FINRA/SIPC. She is an Investment Advisor Representative of LaSalle St. Investment Advisors LLC (LSIA) and Gallo & Russell Inc, Registered Investment Advisors. LSS is affiliated with LSIA. Gallo & Russell Inc is not affiliated with LSS or LSIA.
