The Complications of Marriage Break-ups, What we Can/Cannot Do

In our profession, we have the privilege of getting to know clients really well over many years. Many times, we meet new clients when they are single, and with time, we get to meet new spouses, children, and often parents. But unfortunately, from this front-row seat of ours, we sometimes share in the sadness of marriage breakups too. No one signs up for this when they get married, but it is an unfortunate reality for many marriages over time. 

Given that we have developed strong relationships with our clients, it is not uncommon for us to be asked to be part of an individual’s financial planning analysis when they are navigating through the separation/divorce process. This request is understandable given that we have often been through a lot with them already. They trust us and we know them personally. But, as much as this is understandable, what we can/cannot do as their financial advisor is not so easy. 

Simply put, we are obligated to remain impartial, unbiased, and objective in the advice we give to clients. The hard part is that until there is an official Separation/ Divorce Agreement, we are caught in a potential conflict of interest between the two spouses if we get involved. Our neutral position can easily be misperceived if we were to meet with one spouse alone. 

As soon as we learn that a separation has taken place, we are obligated to provide service to each spouse individually. This means that we can no longer share information between spouses without signed consent. It does not matter if it is investment statements or an individual conversation; we are obligated to treat each spouse separately. 

This is, of course, where our client relationships become complicated. We cannot be seen as giving financial planning advice to one spouse because it can easily be misconstrued as though we are trying to ‘take something away’ from the other spouse. And yet, we want to be helpful…in many cases, these people have become good friends. 

As a result, to avoid any conflicts of interest, it is not uncommon for an advisor to give financial planning advice while both spouses are in the room. It is also not uncommon for advisors to refer one or both spouses to other advisors to allow them to work through their planning needs without compromising a single advisor’s position with either spouse. 

But as much as these options exist, it is very hard to give any decent financial advice until a Separation/Divorce Agreement has been signed by both parties. Until then, neither party really knows what spousal/child support will be required, who will own/live in the family home, what investment/RRSP/pension divisions will be required, what costs either one will face with new living arrangements, and without these items officially known, there is not really any quality advice we can give to move forward. 

Yes, there are general guidelines within provincial legislation, but everything is negotiable. And this is where professional legal advice is required. 

From a professional perspective, during the separation/divorce process, we remain involved in the management of each individual’s investments and/or insurance programs. If we see that portfolio adjustments are required, we will be in touch. If premiums need to be paid, we will connect. Any ongoing service of financial instruments is where we will remain diligent and involved so that nothing falls by the wayside during the negotiating process. 

Then, when a Separation/Divorce Agreement has been signed and implemented, we are easily able to pick up the relationship with each spouse on an individual basis. New planning then begins and often new plans are drafted and implemented. When done properly and objectively, it is not uncommon for both spouses to remain clients with the same advisor. The difference is simply that we meet with them separately in the future . 

Should you have any questions about this in relation to your situation, please do not hesitate to call or email your advisory team.