Another Divorce Issue for Advisors To Consider

Statistically speaking, there’s a good chance registered investment advisors work with clients that are divorced or going through the end of marriages. Perhaps multiple clients are in those boats and no, that’s not “good” at all.

Indeed, divorce is a life-altering event for the involved parties. However, dissolutions of marriage aren’t linear. Rather, divorce takes on a variety of forms, including a fairly recent phenomenon known as “gray divorce.” Some experts define gray divorce as pertaining to couples 65 years old and up while others say it’s pertinent to the entire baby boomer generation. Either way, advisors should be aware that gray divorce is on the rise because no generation is divorcing as much as boomers are.

The reasons for that ominous statistic vary. Children are likely out of the house. One spouse may still be working while the other isn’t, perhaps paving the way for dueling lifestyles under one roof. Or maybe both spouses are retired and all that time spent together isn’t of the positive variety.

Whatever the reasons are, gray divorce is on the rise due in part to the fact that divorce no longer carries the stigma it once did for older generations.

Advisors, Be Prepared

Data confirm that advisors need to be on the ball with regards to gray divorce.

“A new analysis of divorce data from 1990 to 2021 released in July by Bowling Green State University’s National Center for Family and Marriage Research found that divorce rates for those age 45 and over rose during that period, while rates dropped for those younger than 45. The most significant increase in divorce rates was among people 65 and older: The rate tripled from 1990 to 2021,” according to AARP.

Something for advisors to consider is the fact that, in the cases of either death or divorce, there’s likely opportunity to further enhance relationships with female clients. The fact is women live longer than men, meaning there are a variety of estate planning issues to address when a husband dies. Likewise, more and more female clients want to take charge of their financial futures and wanted the related guidance, particularly following divorce.

Any divorce comes with its own set of potential financial pitfalls, but that’s particularly true with gray divorce because couples may be sharing expenses, such as children’s college loans, or have combined investment accounts. Add those points to the list of gray divorce issues advisors need to be aware of.

“College education creates different challenges for later-in-life family builders,” noted Jamie Berger and Sarah Jacobs, founders of law firm Jacobs Berger in a CNBC op-ed. “Unlike in gray divorces in years past, educational expenses might become a more pressing factor in your divorce settlement. To negotiate these terms, be sure you’re on the same page about what secondary education may include, timelines and expenses.”

Gray Divorce Economic Challenges

Divorce of any stripe can be financially messy, but in the current economic climate, gray divorce can be all the more thorny for a variety or reasons.

“Many divorces center around the division of assets, and often retirement accounts and homes are a couple’s largest ones. In booming economies, this could allow for surplus funds; however, in unstable economies, this can lead to difficult negotiations,” add Berger and Jacobs. “With rising inflation, mortgage rates skyrocketing, and roller-coaster retirement accounts, it can make those divorcing later in life stressed about how they might afford retirement.”

The point: Divorce in all forms is stressful. With the right game plan, advisors can alleviate that burden while potentially retaining two clients in the proicess.

Related: Pay Gap Highlights Need for Advisors To Work With Women