As Canada begins to emerge from the impact of COVID-19, an increasing number of individuals are exploring or resuming the process of separation or divorce. Many are turning to their financial advisors for guidance on navigating this life-changing event amid the financial upheaval that these past few months have caused.
Eva Sachs, a fee-only divorce financial consultant and certified divorce financial analyst (CDFA) in Toronto, says several clients paused their divorce proceedings largely due to uncertainty in the early days of the pandemic. With many facing job loss or insecurity and managing with kids at home, they felt uncomfortable making concrete financial decisions.
That began to shift toward late May as existing clients looked to get the ball rolling on the process again while others began to make early inquiries, she says.
“Psychologically, many people thought, ‘Once we get to June, everything will get back to normal.’ And as they started to realize that’s not going to happen, [they began] saying, ‘We have to move on with our lives and start making [difficult] decisions,’” Ms. Sachs says.
Jennie Weeks, senior financial planner and CDFA with Springtide North Wealth Advisory in Vancouver noticed a similar decrease in the number of individuals contacting her to discuss the subject in March and April. That reversed by early June as she received a volume of calls in a week equal to her usual monthly average from current clients and those starting to seek out resources.
“I’m getting inquiries from the couples that have active files saying, ‘Okay, we want to get back to dealing with this,’” she says.
In many cases, the effects of COVID-19 are bringing existing tensions to the surface, says Bradley Eizenga, portfolio manager at BMO Nesbitt Burns Inc. in Windsor, Ont.
“All of those problems have always been there, it’s just now we’re trying to figure out how to manage them in a different way,” he says.
For advisors, that involves looking beyond the circumstances of the pandemic to help clients navigate the core issues.
“People get stressed by [these] circumstances and it’s our job to know what the laws, rules and principles are and help people calm down to the point at which they can make intelligent decisions,” he says.
Although the increase in client inquiries about separation and divorce likely reflects pent up demand that may eventually level off, advisors and clients who choose to proceed with this route will likely be grappling with financial concerns arising from this period for months to come.
CDFAs and other advisors help clients going through the dissolution of a marriage with several issues. These include organizing their current financial situations, forecasting future scenarios, understanding potential settlement options and the effects of dividing property. Top of mind for many in the process now are questions about changes in their financial situations caused by the pandemic.
Specifically, Ms. Sachs says clients are trying to understand how income-related setbacks will be treated when calculating spousal or child support, for example, if they’re not currently working or their industry has been shut down because of COVID-19.
“The other big question they’re asking is how they’re going to be looking at valuing their assets and liabilities when there’s been such a big downturn in the markets,” she says.
It’s difficult for advisors to provide firm answers to many of these questions as some will depend on lawyers gaining a sense of the direction these issues take over time, Ms. Sachs says.
In the interim, Ms. Weeks says taking a step back has been appropriate in some cases given the implications around loss of income or business revenue and market volatility on separations. As with all wealth management clients, the focus, she says, has been on having sufficient cash flow to get through this period and to avoid selling assets when they’re down, if possible.
“Brace yourself for a little while and let’s see how you and your spouse come out of this because, for some people, there’s potential for a much bigger impact on their separation,” she says.
In addition to keeping family finances at status quo for now, alternative dispute resolution systems such as online mediation and collaborative law are also allowing some parties to have open discussions about how they can best approach their situation.
“There are going to be more interim agreements than final ones ... in terms of support, let’s say, for the next 12 months and then reviewing it when things supposedly get back to normal,” Ms. Sachs says .
Indeed, with court processes interrupted by the pandemic, clients have been inquiring about alternative processes, including the collaborative model in which neutral advisors work alongside lawyers and mental health professionals, says Kim MacDonald, advisor and CDFA at Raymond James Ltd. in Edmonton.
“With collaborative divorce and any kind of hybrid like mediation-arbitration or just mediation, these are ways that people can continue to move through their divorce without being stopped by that date in court,” says Ms. MacDonald, who expects this trend to continue after the pandemic.
“We think the backlog of cases will start to really flow over to the collaborative divorce process,” she says. “Understanding the multiple routes through a divorce is very valuable for any advisor to be able to pass on to their clients.”