Managing Finances After Divorce: An Interview with Chris Wiegand
Chris Wiegand is a financial advisor at Newbridge Wealth Management in Pennsylvania. Chris works with a variety of clients as they work on managing finances after divorce. Some of his clients are entering retirement and others that have just started to think about their financial future. Newbridge is a holistic fee-only firm that educates and empowers its clients to make smart financial decisions.
Chris was interviewed by Divorceify Co-founder, Casey Shevin.
Casey Shevin: You have worked with a lot of divorce clients in your practice. What are some of the more common financial mistakes that you see people make when it comes to divorce property division?
Chris Wiegand: In every situation, there are assets that are more valuable than others on the family balance sheet. You want to target the assets that are going to be most beneficial to you in the long run – the ones that have higher expected rates of return, things like that. But it’s completely understandable to be tied emotionally to certain assets, and that’s a common mistake. You should think about what’s going to deliver the best chance of financial security in the long run and target those assets.
Shevin: In my experience, there is often one person in a marriage who is emotionally invested in the marital home and doesn’t want to give it up – do you see that in your practice?
Wiegand: The house is a biggie, of course. First of all, if there’s no immediate way to afford the carrying cost of the house, you have to know that there’s a reasonable path to get you to that affordability level. You also have to consider the expenses related to maintaining a house on an annual basis. Are they going to change after your divorce? Did your spouse do things around the house that are no longer going to be done, then you have to pay for them to get done or do them on your own? Don’t forget the issue of maintenance. I’m uncomfortable when I see a client spending more than 50% of their net income on the carrying cost — you have to have some cushion there.
Then you have to think about the fact that you’re acquiring an illiquid asset. In doing so, you’re probably foregoing liquid assets that are going to have higher rates of return over time. You should even consider neighborhood trends and price movements and what direction that’s going, you want some degree of confidence that the value of your house is at least going to be sustained and grow with inflation.
You have to circle back to all the areas of your financial agreement where there is sentimentality. Regarding the marital home, there might be a feeling that you would prefer not to displace yourself and upset the apple cart, even though divorce does mean a new start. You need to weigh that desire against the affordability. It’s not necessarily a bad idea to stay in the marital home because it provides continuity for you and the kids, and you stay in the school district etc. But as the financial advisor, I take it upon myself to bring my clients to a rational decision. That sometimes takes a little time because nerves can be really frayed during the negotiation process.
Shevin: What do you do when your clients are anticipating a budget shortfall after divorce?
Wiegand: If our client has been out of work, sometimes divorce means they need to return to work. We’re big proponents of leveraging your network to get free career coaching, versus having to pay for it; getting the resume ready, preparing for interviews, and networking with other people. Then, pointing the client towards a certain career choice. Giving them straight advice on what’s likely to happen. What the income level is likely to be. What benefits are likely. We help clients identify what they need and then plan around it.
Shevin: Why should a divorce client come to you when they start negotiating their financial settlement, instead of at the end when they had a chunk of cash that they need to figure out how to handle?
Wiegand: We serve as a sounding board during the negotiation process, so our clients can feel 100% confident that they are arguing for the right things. This leads to easier management of finances after the divorce is final.
Shevin: Do you ever strategize directly with your client’s divorce lawyer?
Wiegand: Yes. We interface with divorce attorneys directly and we can act as a liaison between the attorney and the client, the mutual client. We are good at explaining financial concepts to our clients. For example, tax ramifications of divorce have changed dramatically in the last year and that has changed the negotiation process. From the tax standpoint, you don’t want to make any mistakes. We’ve also sat down and done tax return projections with people, to see what their tax return it’s going to look like as an individual after divorce.
Shevin: What a valuable service. Divorce clients can really gain so much from seeking advice from a financial advisor when they begin negotiating their financial settlement.
Wiegand: My approach is to forge long-term relationships. Getting through a divorce, that’s just the beginning for us. We’re trying to put them in an advantageous position coming out of their divorce. We’re not as interested in making lots of money in a transactional way early on. You want to make the most with what you got, and not overextend yourself right off the bat. We’re interested in earning our fees in the long term, not really during the divorce itself.
Shevin: Should a client come to you with a vision of what kind of lifestyle they want at retirement and ask you to work backward from there? Is that useful?
Wiegand: Absolutely. But you’re going to have a much better chance of success if you do it in shorter stages. We tend to set five-year goals with our clients. If you just plug in age and time horizon and preferences, everyone’s going to end up in the same investment design. Investing should be much less robotic than what is actually done with most people nowadays. We have initial conversations about long-term planning. We’re sitting down. We’re plugging information into the software. We’re making forecasts, but we’re also setting goals for shorter time horizons.