In this PODCAST
- Engaging High-Net-Worth Divorce Attorneys, Advisors, and Support
- Understanding and Dividing Assets in Ultra-High-Net Worth Divorces: Expanding Beyond Your Financial Advisor
- Social and Emotional Support
- Five Things to Look For in a Financial Advisor During an Ultra-High-Net Worth Divorce
- Red Flags to Catch When Assembling Your Team
Will: Welcome to our mini-series podcast on ultra-high-net-worth divorces. My name is Will Amerine, and I’m here today with my colleague, Martim Oliveira.
Will: We’re going to break this topic down into three separate components. We’ll first discuss the team that needs to be assembled in order to support somebody going through a divorce of this type, the second will cover the strategy and planning involved, and finally, the emotional component of the divorce process.
So, today our focus will be on putting your team together. Martim, let’s jump in.
ENGAGING HIGH-NET-WORTH DIVORCE ATTORNEYS, ADVISORS, AND SUPPORT
Will: In your experience, when is the best time for an individual to start assembling their support team as they embark on their divorce? And who should be on that team?
Martim: First and foremost, the thing that needs to be emphasized here is that the team is an absolutely critical component of this and can be engaged as early as you can manage. I think that speaks for itself. We probably don’t need to go into that too much, but these are the individuals who are going to advise you, carry you, and support you throughout the process.
In terms of team components, there really are three different types of team members who we can look at: legal, financial, and emotional support or therapeutic.
Let’s start with the legal team. Obviously, when people think of divorce, they typically think family law, so the first thing that comes to mind is the legal team.
Well, interestingly enough, the family law attorney is usually only one component of the team. There can be other types of legal experts. Some of this depends on the assets and specific objects of litigation, so there are often complex assets that are going to require corporate attorneys.
You might have plans in place that require trust and estate attorneys. You can have foundations that require not-for-profit attorneys. You can have real estate that require transactional and real estate attorneys. So, traditionally when you think of divorce, you think of family law attorney, but there very well could be other attorneys that come into the picture.
Will: Martim, specifically in divorces of high-net worth individuals, the trust and estate plan can come into play.
Can you give just a little insight or a high point on why it’s so important to have a trust and estate attorney involved in the process?
Martim: Typically for ultra-high-net-worth individuals and families with substantial assets, you do have complex planning that goes hand-in-hand with these assets. And the content of that planning, the strategies that were originally involved in developing those plans combined with the irrevocability of that planning — all of that then becomes the object of evaluation by a trust and estate attorney. Some of these plans are irrevocable, some are not. Divorce is a negotiating process and it’s very likely there’ll be some negotiating around the estate plan, so a competent trust and estate attorney is always important.
UNDERSTANDING AND DIVIDING ASSETS IN ULTRA-HIGH-NET WORTH DIVORCES: EXPANDING BEYOND YOUR FINANCIAL ADVISOR
Will: The next component of the team that you talked about covers the financial aspects of the divorce — the financial and wealth advisory. And in your experience, what are the topics that you should be thinking about as you approach that component?
Martim: The most important thing on the financial side is understanding the assets and liabilities that constitute the family balance sheet — and this is often ignored. Now, in the majority of cases where the family balance sheet may not be complex, a rather unsophisticated financial approach to it may be sufficient.
However, when you’re dealing with extremely complex assets and liabilities, there is a need to have a financial team that is both robust and experienced with these types of effects.
The second component of the financial aspect, of course, is the strategic financial planning, which we’ll dive into deeper in our next session. At least one question that every client has as they navigate the divorce process is, What can I afford, in terms of what’s left for me at the end of the divorce process? Other questions include, How will getting divorced impact my lifestyle? How will it impact the lifestyle of my children and of my family?
Naturally, a significant amount of planning should be done prior to enduring divorce negotiations to be able to fully understand what that financial picture looks like. That planning will, in and of itself, also inform negotiations.
But it’s not all about the balance sheet, nor is it all about the planning. There are other financial experts who need to be included as well. These specialists include individuals, such as CPAs for tax matters, appraisal companies to appraise different properties, forensic accountants where there is a discrepancy between what each party understands as being the fair market value of certain assets or cash flows that may have taken place between different companies.
So the financial team, again, like the legal team, is much broader than the just family law attorney. The financial team has to be much broader than what is typically known as the financial advisor.
Will: Martim, the saying that always comes to my mind with regard to the financial aspects of a divorce is, a dollar is not a dollar. When you think about some of the things that we’ve been involved in, this starts to make a lot of sense. In one example, maybe one of the spouses wants to keep control of the house. It means a lot to them and they want to buy their partner out of their 50%. Well, what they may not be considering is the cost of upkeep for that asset. And whether or not the base of assets supports that being a smart negotiation. So having those type of conversations and modeling these things out becomes very important.
SOCIAL AND EMOTIONAL SUPPORT
Will: Another thing I’d like to ask you about is the therapeutic side of the divorce, the emotional component, if you will. It so often seems that this is overlooked, yet we find it to be somewhat of a cornerstone to a successful process. Will you touch on that just a little bit?
Martim: One of the most demanding aspects of any divorce is what’s asked of each party in terms of making decisions. When a couple is divorcing, what’s layered on top of the existing stress and on top of the disruption that’s already occurring, is an enormous demand to make good, rational decisions based on available information — the presentation of which can feel overwhelming in itself. It would be a mistake for the parties in the divorce proceeding to ignore the amount of stress and the impacts of that stress on them as they’re asked to make these types of decisions.
So having the tools and having the individuals who can provide support along the way is important. These will typically be psychologists, or trained professionals that can provide the framework and the tools that support each person as they’re going through what is a very, very demanding time in their lives.
Will: We’ll go into that in more detail on our third podcast, but when we think about all of these issues I think it becomes very important that we find those people sooner rather than later.
FIVE THINGS TO LOOK FOR IN A FINANCIAL ADVISOR DURING AN ULTRA-HIGH-NET WORTH DIVORCE
Will: When searching for advisors, what are the critical factors a person might look for to determine whether that provider is a good fit for them?
Martim: The area of ultra-high-net-worth divorce is unique and in some respects, highly specialized. And we’ve talked a little bit about the different disciplines and the different types of advisors who should constitute the team.
I think there are five different elements to look for when you’re selecting any individual to constitute the team. The first is experience. It’s absolutely essential that the individual has done work in this area and confirm that they have a track record of working in the field. Further, they should be able to demonstrate that track record, and that could come in the form of references or that could be an endorsement that the individual receives from a third party. Experience is really necessary.
As a backdrop to that you have expertise — training in the area by way of academic credentials and professional certifications. The ability to demonstrate that as an advisor, you have a solid, long-term grasp of the discipline is absolutely critical.
The next three elements are a little bit intangible, the first one being trust. You have to be able to trust this person. They have to inspire trust from the very moment that you meet them. Now trust is gained over time, but I think that most of us have a good intuition when we first meet an individual in terms of assessing signals that demonstrate that there is a likelihood that we are going to trust them over the long term.
The next one is chemistry. We’ve all spent time with brilliant individuals with a lot of experience who are highly trustworthy and that we would not spend more than five minutes with — that we just don’t click with. Having chemistry is essential, especially as you’re going through a period of high stress.
The final consideration is resources. There are a lot of very competent players in these various disciplines that may work at firms that simply don’t have the resources to take one additional client. In other instances, a person or a firm might not have the trusted resources available to address the needs of your case adequately. So ask about who supports you. Ask questions like, What team do you have around you? How many people will be involved in my case? What happens when you’re tied up dealing with another matter? Is there, what I would call, a second chair to deal with my matter? I cannot stress enough that resources really, really matter here.
Will: That’s such an excellent point. Thank you for talking about that.
RED FLAGS TO CATCH WHEN ASSEMBLING YOUR TEAM
Will: As we wrap up our first podcast about putting the team together and who you should consider, are there any red flags that you’d like to make the audience aware of, so that they can shift gears quickly and maybe find a new part of that team? What red flags would be cause for concern for you if you were hiring these individuals?
Martim: The five characteristics that I mentioned you’re looking for them to be present. So by implication, if they’re absent any of those fives should be red flags. Again, those things are expertise, experience, trust, chemistry, and resources.
But there is another intangible area that I think is significant. There should be a red flag where there is a misalignment of values between you and the advisor. This likely falls between the categories of trust and chemistry. But if you’ve done your research, taken your time, and really thought through the process I would say that at the end of the day, if something doesn’t sit right with you — pay attention to that.
Again, these are individuals that are going to navigate a very stressful time in your life with you. They have to be there for you. It’s likely they’re going to be there for a while, so it’s really important that they be the right individuals for you.
Will: Couldn’t agree more. Thank you for your time, it was a great discussion. In our next podcast, we will look at the planning strategy and tactics of an ultra-high-net-worth divorce. Thank you all for joining.