Advisors with rich clients facing divorce, meet the CDFA

Meet the CDFA, a certification for advisors with wealthy clients facing divorce

November 20, 2023 6:30 PM

Wedding Rings divorce papers American flag

Divorce among older Americans can devastate already complex financial lives as they approach retirement, and the rate of such divorces is rising.

The proliferation of so-called gray divorce — involving couples aged 50 and up — has also led to an increase in financial advisors seeking an industry designation that helps them add value during one of the most high-stakes and vulnerable moments in a client's life.

Carol Lee Roberts, president of the Institute for Divorce Financial Analysts — Carol Lee Roberts, the president of the Institute for Divorce Financial Analysts.

"When you have somebody who doesn't have sufficient retirement assets that were going to fund the retirement for two people, and now you're dividing that in half, it's an even smaller nest egg," said Carol Lee Roberts, the president of the Institute for Divorce Financial Analysts, which maintains the certified divorce financial analyst designation.

"On top of that, if this divorce is happening post 50 or post 60 [years old], those people have less time to go back into the workplace and re-save for retirement or replace the assets that were lost."

Becoming specialized in handling these client situations can generate reliable referrals from divorce attorneys, who can act as centers of influence — a key way to gain leads for any advisor.

"I obtained the CDFA designation five years ago because I wanted to work specifically with women, especially those overwhelmed by having to take on being the 'financial person in the household' due to divorce/widowhood," said Monica L. Dwyer, an advisor who has gained trust and many referrals from attorneys in her practice. Dwyer is the vice president and wealth advisor at Harvest Financial Advisors, an RIA in West Chester, Ohio, and she has a CFP and CDFA.

"It opened my eyes to a deep and wide niche that is being underserved."

Below, Financial Planning presents a brief guide to the CDFA.

Heartbroken elderly woman holding a wedding ring - gray divorce

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Who should get the CDFA

Advisors should consider the CDFA certification if they specialize in retirement planning and working with seniors, Roberts said, "just because that is the only demographic that has a rising rate of divorce right now."

Additionally, "People who are looking to work primarily with females or primarily with people going through transitions should also look at the CDFA."

Currently, most CDFA holders — some 67% — are women, according to a 2023 report on CDFAs from the IDFA website. This is notable, as financial planning and wealth management at large remain majority-male industries, and currently under 24% of CFPs are women. "Women often need a CDFA professional's services more than their spouses, and they look to women to help them in that time of need," the report said. Most divorces are initiated by a woman.

A majority of CDFA holders are mature in their career, with around 64% of holders being aged 50 or over. Over a third of CDFA holders have acquired the designation within the past three years.

Lili Vasileff, the president of the national Association of Divorce Financial Planners trade group, said in an interview that the financial lives of those affected by divorce have become more complicated in recent years, making the CDFA more necessary and valuable than ever.

"You have different kinds of financial investments, you have an economic impact of rising interest rates, of inflation, of rules or regulations about refinancing or buying somebody out. You have different kinds of compensation. Whether you're rewarded with restricted stock or stock options, or you have bonuses that are deferred until a future payout, you have more complicated retirement plans for high net worth individuals, you have trusts that come into play," said Vasileff, who is also president of Wealth Protection Management, a fee-only RIA based in Connecticut.

Vasileff, co-founder of the ADFP, is a CFP, CDFA and master analyst in financial forensics with a specialty in matrimonial litigation.

Why it's unique among certifications

The CDFA is unique in being a designation that focuses exclusively on divorce, and getting it allows an advisor to learn more about many areas of financial planning that would not be well-covered in the curricula of other designations, Roberts said.

"We're going to see a point where simply having your CFP is not enough. There's such a variety of niches to be served," said Roberts, who is a CFP, CDFA and certified financial transitionist.

She added that part of the growing demand for the designation in the last few years came from public demand; visitors to the IDFA's website have increasingly been using the "Find a CDFA function." "The public who now Googles everything — when they're Googling 'Can I afford to get divorce?' or 'How are my finances affected?' — they come to the institute website."

At the same time, "respect for the CDFA credential has risen" among divorce lawyers and attorneys who work in mediation and who are now coming to see CDFAs as recognized financial "neutrals," Roberts said.

"And we have been seeing over the last two to three years an increase in larger firms recognizing and accepting the CDFA credential, which has been around since 1993. Over the last two years, J.P. Morgan has put over 150 people through the CDFA program. Ameriprise is currently the largest employer of CDFA professionals," she said, adding that major broker-dealers such as Morgan Stanley, Merrill Lynch and UBS and Janney "are now recognizing the need for CDFA professionals."

One potential CDFA perk

Sylvia Guinan, senior private client advisor with Wells Fargo Advisors - 2022. — Sylvia Guinan, senior private client advisor with Wells Fargo Advisors.

"Working with divorce and matrimonial attorneys, it raises your credibility," Sylvia Guinan, a senior private client advisor at Wells Fargo Advisors, said of getting the CDFA. Guinan obtained hers over about a decade ago, she said, after she was referred a client who was undergoing divorce.

"Working through the divorce with her, I really became very passionate about being able to support somebody going through such a difficult transition. … So I found the designation and decided to pursue it."

Guinan said the information in the CDFA training was "very practical" to help her guide the client through understanding the financial implications of a divorce, and to support divorce attorneys in the process. "It makes you aware of some of the hidden things that people don't think about," she said, citing as an example the potential pitfalls for women who get a house in the settlement and may incur capital gains taxes if they later sell it.

How to get the CDFA

An advisor must have "a bachelor's degree with three years of on-the job experience or if no bachelor's degree, five years of relevant experience" to qualify for the CDFA, according to the IDFA. Relevant experience is defined as having worked in one of a few careers, including financial planning.

Additionally, candidates must study the CDFA curriculum and pass an exam. The pass rate is currently 63%, according to 2022 data from the IDFA. The curriculum covers everything from spousal support to estate planning and tax implications, to developing a new budget for life after divorce. In recent years, the curriculum has shifted to cover more about alternative dispute resolution, said Vasileff, who helped design and revise the curriculum.

The cost of certification can range from $495 for the exam only to $1,875 for a virtual classroom option that includes a weekly live call to review study materials, according to the IDFA.

Meet the CDFA, a certification for advisors with wealthy clients facing divorce

Who should get the CDFA

Why it's unique among certifications

One potential CDFA perk

How to get the CDFA

How to keep it