The Importance of a Financial Advisor After Death or Divorce

11/15/2021 - By Mark Hemby, CFA

Sometimes in life, we’re faced with challenging transitions. Few are as difficult as divorce or the death of a spouse. During these challenging times, a competent financial advisor can be invaluable.

How can a financial advisor help?

A myriad of financial questions arises when households are in transition: How do the bills get paid? Should I pay off the mortgage? How many different accounts do I own, and where are they? Do I have enough money to meet my expense needs?

The financial advisor is an objective professional trained to develop strategies to provide structure in the present and discipline in the future. The initial step is a financial “to-do” list for now, next and later. Creating a budget that includes building adequate emergency savings is also a critical step. A financial advisor can help develop short-term and long-term financial goals. Short-term goals might include moving from the current residence or making home improvements. Longer-term goals include planning for a child’s education or planning for retirement. An immediate goal should be updating your Will and account beneficiaries.

Once a comprehensive “to-do” list is made and goals are established, a financial advisor can help prioritize which goals come first. A common mistake is putting retirement goals on the back burner. For those younger or middle-aged, retirement savings should be treated like any other household bill. If a person has employer retirement benefits, are they being maximized given their budget? For someone already in retirement, understanding how the transition affects pension benefits, social security, etc. is critical in planning for future living expenses.

Risk is always an important consideration. Understanding risk and how much is appropriate is difficult for anyone. Some individuals seek security but being too conservative in the investment portfolio can potentially deprive you of a comfortable living later in life. On the other hand, aggressive risk-takers can be reckless and require a dose of prudence. In either case, a financial advisor helps you recognize where you currently are and whether you need to make changes to your risk profile.

Financial advisors will encourage you to become active participants in the financial planning process. Like a personal trainer encourages you to exercise and eat healthy, a financial advisor guides you on proper estate planning. If you haven’t addressed your own estate, they can recommend competent estate planners. Additionally, planning for elder care is a difficult thing to consider, but a good financial advisor will encourage you to address it as well.

What questions should you ask when selecting a financial advisor?

What is the financial advisor’s investment philosophy?
How is the financial advisor compensated, fees or commission?
Does the financial advisor have a fiduciary duty or a suitability duty? A fiduciary must act in the client’s best interest, while some financial advisors are only required to sell suitable products.
Are the fees or commissions fully disclosed?
Is the portfolio managed in a tax-efficient manner?
What professional designations does the financial advisor hold?
Do you trust the advisor?

If you find yourself in one of life’s difficult transitions, seeking out competent and trustworthy advice is the first step in getting back to a “new normal.” You can start here.

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About the Author | Mark Hemby, CFA

Mark is a financial advisor for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. He holds a Chartered Financial Analyst (CFA®) designation and as part of our investment advisory group, he works with clients to develop and implement investment strategies to achieve financial freedom while also ensuring their goals and objectives are aligned. Mark has over 15 years of experience in investment banking working with individuals and organizations to manage their portfolios and coordinate investment activities. In addition to his experience with fixed income trading and sales, Mark owned and operated his own business in Alabama.