What Is a Certified Divorce Financial Analyst (CDFA)? - "Comparison Adviser" Feature

Our founder, Kristyn Carmichael, was recently interviewed by Comparison Adviser regarding what a Certified Divorce Financial Analyst (CDFA) is and how they assist during the divorce process.

1. How do CDFAs assist clients in the wake of a divorce?

CDFAs are unique in that we can help with a variety of issues during a divorce process. On a more analytical end, this could be analyzing the value of certain assets like pensions, giving opinions of asset and debt division proposals, or reviewing clients' finances for hidden funds. On a more personal note, it could be helping a client build their confidence around finance generally, helping budget and understand financial goals following the divorce, and even guiding individuals who have been financially abused. Each CDFA will be unique in the services they offer or their area of specialty. But generally, a CDFA is there to help coupes or individuals understand the options available to them during a divorce when dividing assets and debts.

2. Should everyone going through a divorce have a CDFA, or are there types of clients that require a professional more than others?

I don't recommend a CDFA for everyone, but I do recommend one when:

1. There was financial abuse in the relationship. Financial abuse typically pairs with other forms of domestic/interpersonal violence, such as physical or verbal. It is the control of money so the other spouse has little access. This could look like a set allowance, one spouse not having their own bank accounts or credit cards in their name, or one spouse not being able to access money when they see fit. These individuals are particularly vulnerable after a divorce.

2. The financially savvy spouse, who wants to confirm that their proposal meets their financial goals or needs. This tends to be individuals who understand their finances, but want an experts sign-off on the proposals they have received from their spouse or created themselves.

3. The financial "out-spouse" - i.e. the spouse that has no idea about the finances or wasn't involved in them. This is typically the wife in a hetero-sexual relationship. This spouse doesn't lack control over the finances, as with financial abuse, but hasn't been involved in the finances, typically for years or decades. They haven't had to manage money themselves, understand a budget, or learn to diversify their asset classes. This tendency is why women have a higher risk of poverty post-divorce than men.

4. High net worth individuals - the more complex the assets, the more complicated to divide. High net worth individuals have more concerns about tax implications, have assets such as investments that can be challenging to divide, and need a unique strategy to tax and financial planning. Often as a CDFA, I will pair up with the couple's CPA and financial advisor during the process so we have all bases covered.

   
   

3. What important issues do people face when going through a divorce? How can a CDFA address these?

Absolutely everyone during a divorce has to divide their assets and debts. And with assets and debts, comes the complexity of dividing them. Some issues that impact every client I work with include:

1. Real Estate -

   1. How will one spouse be removed from the mortgage (assumption or refinance)?

   2. Can one person afford to retain the home?

   3. What potential capitol gains must we be aware of?;

   4. For investment properties, what depreciation taxes may impact the property?

   5. Where is the buyout for the home coming from?

   6. What sales costs do we need to be concerned about?, etc.

2. Retirement and Investments -

   1. What is the value of a pension?

   2. What is the value of a retirement account - marital v. separate interest portions?

   3. How can specific employer benefits like Restricted Stock Units (RSU) and Employee Stock Purchase Plans (ESPP) be divided?; etc.

3. Hidden Assets -

   1. Are you concerned about hidden assets?

   2. Where are they hidden and how can we track proof of the hidden funds?

   3. What is your partner failing to disclose?; etc.

4. Budgeting -

   1. What do you need (financially) to be able to move forward and live the life you want?

   2. What kind of support is needed to supplement income? Or how much can you actually give as support and still afford your own lifestyle? etc.

CDFAs help clients navigate and solve these, amongst a number of other issues.

4. What questions should one ask during a meeting with a CDFA?

When interviewing a CDFA, it is important to understand their background and areas of expertise. Some CDFAs specialize in certain areas, while others may cover every issue across the board. In consultations, I often ask my clients what their biggest fears are about the process and what they think they need. Then we develop a plan from there. CDFA is a common designation, so it is important to understand your professional's level of expertise and understanding of the issue impacting your process.

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