What is a CDFA®?
The benefits of including a Certified Divorce Financial Analyst® in a divorce.
By Brian Watson, CFP®, CDFA®, and Brittney Olinger, CIMA®, CDFA®
Many financial professionals are strong in their fields, yet very few have specialized training in divorce[i]. A Certified Divorce Financial Analyst® professional goes through a rigorous training program to become skilled in analyzing and providing expertise on financial issues related to divorce. Their role is to illuminate financial blind spots that may be missed during the negotiation process in order to add value to clients and take pressure off the legal team. By doing this, a CDFA® helps someone going through a divorce fully understand how their financial decisions made today can impact their future financial situation before their divorce agreement is finalized.
What is the difference between a CDFA® and a divorce attorney?
If a marriage ends, as greater than 40% of marriages do[ii], many people find themselves under tremendous stress and concern over the unknown of how their new future will look. A divorce attorney helps a couple negotiate the legal considerations of their divorce, including the financial terms and a parenting plan if children are involved.
A CDFA® plays a complementary role to the divorce attorney. The CDFA® is trained to provide an individual or couple the clarity needed, specifically with financial issues, so they can make decisions and move forward confidently with their lives. The CDFA® advises on the financial position a proposed settlement would put someone in, both in the short term as well as the long term. The CDFA® helps answer questions such as “will I be okay long term if I agree to this?” Additionally, a CDFA® provides objective advice, which can prevent someone from agreeing to financial terms they may regret later on.
Who needs a CDFA®?
There are few times more critical to assess your financial gameplan than during a divorce. The higher the divorcing couple’s net worth, the more important it may be to have a CDFA® involved in the divorce process. During a high net worth divorce, consequences to financial decisions get magnified due to the high dollar amounts involved. Bad financial decisions become worse and worse over time. Conversely, good financial decisions can provide an increasing level of financial security in the years to come. For example, a couple may decide to split assets evenly and be content since they are receiving half. However, not all assets are the same. You can have two assets that have the same value, but in reality, one asset may be better for one party versus the other. For example, one spouse who needs access to money prior to age 59.5 may prefer more cash and non-retirement investments, while another spouse who is savvy with real estate and doesn’t need liquidity may prefer real estate holdings. Analyzing different investment accounts may make one more desirable over another. These and many other financial issues are ones divorce attorneys may not always be equipped to think through appropriately.
Divorce attorneys who work with a CDFA® realize the importance of having one on the team[iii][iv]. Not only does a CDFA® work to take pressure off the legal team in terms of understanding and analyzing all the financial details, but the CDFA® can also provide much-needed behavioral advice to someone when they have one chance to get it right. Ultimately, a fair divorce agreement is greatly impacted by whether good decisions are made. Thus, having adequate help with both the legal and financial decisions can help set someone up for their best chance at future success.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.