Talk Numbers Using Tangible Assets
This time we hear from Dorie Fain, founder and CEO of Baltimore, Md.-based &Wealth. She talks about the importance of translating data into real-life scenarios for divorcing clients.
My colleagues and I work with a lot of divorcing spouses in our practice. Ideally we're able to help clients come up with a plan to settle cases and avoid going to court, so as a team we do our best to find an outcome both parties can live with.
That's not always easy. Every situation is different and things can get messy really quickly — especially when there's a lot of money involved. Since there's no formula that works for all couples, we try to present a variety of options. In the end, the decisions are always the client's, but we work closely with family law attorneys to find a number of potential solutions.
One client who had recently been told by her spouse that he wanted a divorce was trying to figure out the best place for her to live. Her husband was a high earner and took the lead on family finances, and she was struggling to understand what various dollar amounts would actually mean to her in real life. We knew she was planning to stay in the same city but move to a new house, so we came up with three different scenarios: X amount of alimony for X number of years would translate into a house in neighborhood A, Y amount for Y years would translate into neighborhood B, and Z amount for Z years would translate into neighborhood C.
Giving her these options made the negotiations real to her. In the end, she was okay with two of the neighborhoods, so she and her lawyer knew they had room to negotiate. They pushed one figure with another one as a backup. That way, even if her husband rejected the first proposal, she knew she'd have an acceptable counter-offer.
Over years of working with clients like this, I’ve learned that advising people going through a divorce requires providing a balance of both data and real-life scenarios. Data helps because emotions are running high when you're going through divorce, and it can be hard for clients to make decisions with their best financial interests in mind. For example, one thing I've seen again and again is mothers anchoring to the family home. They want to keep their children in a familiar place, and they're afraid to uproot the family at a time of distress.
Sometimes that’s the right decision — but I want to make sure my clients understand the tradeoffs if they end up having to trade liquid assets to hold onto the home. The upkeep of a home can be expensive, and on top of that it doesn't produce income, unlike the investments they might otherwise make. It's hard to think about things like electricity bills and home repairs at a moment when you're going through something so difficult, so we make sure to include all the costs in our modeling. When we attach dollar figures to different options and back it up with data, our clients can more confidently make the decisions that work best for them.
But other clients have trouble translating the numbers we give them into real-life scenarios. Jargon gets in the way as well. Even a term like "liquid assets" can be cold and abstract for some clients. So, we've learned it’s also important to translate data and jargon into more meaningful terms. We’ve come to rely on the technique we used with the woman who was figuring out her alimony situation. If a proposed divorce agreement includes a certain amount in liquid assets, we'll make sure to lay out what that money could afford in terms of new housing, transportation, her children's expenses, etc.
This is where it helps to have had in-depth conversations with your clients so you know what's most important to them. For one person, extra money for travelling might be really important, while another person might never go on vacation. You need to know what your client cares about, so you can model scenarios that are meaningful to them. Offering both data and meaningful examples can help clients feel confident in their decisions even during trying periods when it’s difficult to think straight.