A new guide published by the CFP Board of Standards is intended to help CFP® professionals manage financial situations in which marital conflicts are involved. It is called The Divorce Guide: Navigating Divorce and Other Conflicts With Married Clients.
The board notes that CFP® professionals often work with couples as they begin planning their finances, but also must be prepared for any conflicts of interest that may arise during the time the couples are together, including divorce.
The Divorce Guide is aimed at helping financial planners recognize, fully disclose and properly manage conflicts of interest that arise in marital financial planning engagements, while adhering to CFP Board’s Code of Ethics and Standards of Conduct.
“Working with a CFP® professional is often the first step couples take in building their financial future together,” said CFP Board CEO Kevin R. Keller, CAE. “But life can change. Divorce or conflicts of interest can arise, and CFP® professionals must be prepared with a clear plan to continue acting in each client’s best interest. This new guide helps them do exactly that.”
The CFP Board said a conflict of interest can arise when a CFP® professional working on financial planning with a married couple has duties to one spouse that are against the interests of the other spouse. The Divorce Guide will help CFP® professionals manage those conflicts (including when the clients intend to divorce) while satisfying other important ethical obligations, such as the Duty of Confidentiality.
“The guide focuses on the most common sources of conflicts of interest with married clients — separate property and an intent to divorce,” the CFP Board said. “It applies the Code and Standards to important divorce-related factual situations and explains CFP® professionals’ options to continue working with one or both clients after they pursue a divorce.”
The guide helps planners prepare for the potential for conflicts to arise and steps to take after learning that clients intend to divorce, including a comprehensive checklist.
Under the standards in the new CFP guide, CFP professionals must disclose potential conflicts, obtain informed consent from both clients, and avoid sharing confidences or giving advice that disadvantages one spouse. If advisors lack the training to navigate complex divorce issues, such as tracing separate property, valuing pensions, or understanding qualified domestic relations orders, they are expected to refer clients to a CDFA or other qualified specialist.
For example, when it comes to separate property, a conflict of interest will arise when a CFP® professional recommends whether to keep the property separate or convert the property to marital property. In that circumstance, the CFP® professional has duties to one Client that are adverse to the other.
Another example given involves requests for confidentiality. A CFP® professional may learn of the intent to divorce from only one spouse, who requests that the CFP® professional keep that information confidential from the other spouse. In this circumstance, the CFP® professional must maintain the confidentiality of the disclosing spouse’s intent and terminate the engagement if the intent to divorce is not disclosed to the other spouse within a reasonable period.
Hyman Cotter PC represents advisors, brokers and other financial professional in all matters involving the CFP Board, including CFP Board investigations. Headquartered in Chicago, our securities attorneys represent clients nationwide. For more information relating to CFP Board investigations and discipline or other matters, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a free consultation
