CyberSecurity Threats Grow Under Pandemic by Advisors Magazine

ADVISORS

MAY 2020

ISSUE 96

magazine

AN INTERVIEW WITH

leeza garber cybersecurity expert

Student Loan Crisis

Preplanning to avoid debt

Small Business Fights to Survive Feeling the effects of Covid-19

Money Matters

Financial reality of divorce

Erwin E. Kantor Michael Gordon Jude Scinta L. Guerrero

CEO & Publisher Managing Editor Editor-in-Chief Writer-at-Large

Eric Daniels

Billing

Sean Rome

Creative Director

Bobby L. Hickman Bram Berkowitz Joe Innace

Feature Writer Feature Writer Business Reporter

CONTRIBUTORS & GUESTS Steven Selengut IAR, Vitaliy Katsenelson CFA, Elaine Eisenman, PhD & Susan Stautberg, Tim Sheehan

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contents may 2020 on the cover

Cybersecurity and Privacy Law Growing cyber threats during pandemic An interview with Leeza Garber, Esq.

features

Easing the Student Debt Crisis Millions of Americans with staggering loans provide opportunities for financial advisors

Covid19 Impacts Small Business Companies fighting to survive

Financial Planning and Divorce Unlikely pair work together

EXCLUSIVE INTERVIEW LEEZA GARBER, ESQ

Money Matters for Splitting Spouses The financial reality of divorce

Divorce without Lawyers Mediators can lessen financial impact

made for you

STUDENT DEBT CRISIS

4 / ADVISORS MAGAZINE

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EDITOR'S LETTER

USHERING IN 2020!

STILL PUZZLED

... by your supply chain solution?

his is the time of year that at supercharging 401(k) account jargon-lite communication matters, many businesses take performances. On page 8, check even to investors who know their inventory, reflect on the past out how company culture impacts way around financial concepts. year, and tie up loose ends. Most successful succession plans. And, As we capture trends and breaking everyone – from large corporations on page 12 we review the book, news on the economy and financial to solopreneurs – like a fresh start “Chasing the Invisible: a Doctor’s events, we’ll continue to speak with to the new year. And in this case – a Quest to Abolish the Last Unseen industry game changers to ensure new decade! Welcome 2020! Cancer Cell” by Thomas Grogan, we give you the best from the world At Advisors Magazine our MD – it tells the story of innovative of business and finance. We wish introspective work examines testing equipment needed to rapidly you – our readers – a prosperous how we will continue to deliver test tissue samples for cancer. 2020! valuable content to our readers. Financial services industry insiders As we forge ahead, we’ll share our often throw jargon around in client conversations with industry leaders meetings, newsletters, and even Happy New Year! in financial, business, economic and marketing materials – but when an entrepreneurial sectors. advisor uses such jargon, what does Our cover story, “Turbocharging the client actually hear? Advisors Streamlining supply chains throughout the automotive, retail, Retirement Plans,” features an eyeMagazine asked financial advisors pharmaceutical, pulp & paper, logistic, and food industries. opening interview with Matthew across the industry and across the Jackson a partner with 401(k)Contact Meade country for their on consultation how Willis todaythoughts for a free regarding your e-commerce, Erwin Kantor, Pulisher www.meadewillis.com Maneuver, a new online tool EDI, aimedsupply-chain to relaterequirements: to clients and why clear, (866) 369-1146 | www.meadewillis.com

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MAY 2020

by bobby l. hickman

8 / ADVISORS MAGAZINE

STUDENT DEBT SOLUTIONS

MAY 2020

INTERVIEW

Easing the Student Debt Crisis

Firm growth by helping families cope

The student debt crisis that has saddled millions of Americans with staggering loans can provide opportunities for financial advisors to help families reduce the impact of college financing.

ost mid and upper income families believe there is no alternative to paying nearly full price for private colleges. Fortunately, there are some effective strategies to help. The COVID-19 situation has also surfaced a silver lining to reduce tuition â&#x20AC;&#x201C; some welcome good news that advisors can share with their clients. Some 44.7 million U.S. adults (14.4 percent) had student loans averaging $32,731 in the third quarter of 2019, according to statistics from the U.S. Federal Reserve and the New York Federal Reserve. More than $1 trillion of outstanding loans were held by Americans ages 25-49, while 8.1 million people ages 50 and older owed more

than $316 billion. Over the past 12 years, tuition has increased by 63 percent, far outpacing inflation, according to U.S. News and World Report. Another study by industry research firm EAB indicated financial concerns led 40 percent of students to turn down their first choice for college. Sixteen years ago, when CEO Paul Celuch founded College Assistance Plus, based in in Honeoye Falls, New York, U.S. student loans totaled $200 billion. Today it reaches $1.6 trillion. Experts project the sum will pass $2 trillion by 2024. When financial advisors focus on growing assets under management, they often ADVISORS MAGAZINE / 9

$1.6

$32,731

overlook the impact of college debt, Celuch said. However, those loans can have a significant impact on how much money someone saves for retirement and when they can retire. Partnering with a college expert to address student debt provides opportunities for financial advisors to expand their businesses among parents and grandparents of high school students, according to John Decker, financial advisors’ liaison and sales consultant with College Assistance Plus. Reducing Tuition Regardless of Income Celuch uses a car-buying analogy to help families understand the process. After a student selects their preferred school, the firm recommends applying to competing schools. Students can then use financial offers from those schools to pursue a financial appeal for lower costs at their preferred college. Over the past three years, the firm has helped families land $2.5 million in additional scholarship funding. College Assistance Plus also tracks the algorithms colleges use to rate candidates. They help students tailor their applications and essays to maximize those factors. The firm also uses videoconferencing technology so students can rehearse for 10 / ADVISORS MAGAZINE

MAY 2020

interviews with department heads. Decker said most people do not realize that they can leverage lower college costs – even well-to-do families. Having worked with 5,000 clients, College Assistance Plus has developed a proprietary database detailing which colleges compete against each other for students based on factors such as geography, diversity, or majors. Celuch explains that the COVID-19 outbreak is removing many international students from enrollment numbers. As a result, colleges are responding at historically high levels to appeals from high school seniors and current college students. College Assistance Plus approaches preserving assets “in a different way” than financial advisors, Celuch said. Many people face massive student balances for decades. Those debts can reduce savings or impact the ability to buy a new home. “When you have to sell your house pay back student loans, it’s not a pretty picture,” he said. Some advisors help clients address those financial problems after the fact, Decker added. “We come in earlier to help you prevent the problem.” Decker noted that College Assistance Plus focuses on taking the

emotion out of the college process while getting the entire family on the same page. “Consultants realistically balance the college investment versus the career benefit. Balance those two things and you’ll stop this horrible runaway debt,” he said. Many financial advisors refer clients to College Assistance Plus as a way to deepen fiduciary relationships while reducing client costs and helping more families, Decker explained. The company also partners with advisors to offer seminars and webinars, helping them meet potential new clients. College debt is “a hot topic,” Decker added, so addressing the issue helps improve a firm’s financial literacy posture. Advisors are then viewed as people who want to help families educationally. He noted offering assistance with college planning can also draw more people are drawn to a firm’s website. More than 50 percent of College Assistance Plus’s new clients come from referrals, either by recent customers or, increasingly, from individual advisors. As life expectancies increase, Celuch said, more grandparents are paying for his firm’s services to help their grandchildren. The firm has also begun working with national associations of financial advisors and other non-profits to offer seminars. Guiding Parents and Students College Assistance Plus offers programs to help families create a

John Decker, Financial Advisors’ Liaison and Sales Consultant

college budget; choose the right schools and majors; prepare for admissions; and make informed financing decisions. Celuch calls the firm’s approach “payment of loans to future income.” The model creates a family budget for college that contrasts the cost of a college education with the expected career income to retire that debt. He added the firm believes that degree/income relationship should be a major factor in how much money a family borrows. “Your decision on where you should go to school should be contingent on two factors,” Celuch explained. “Do they offer the degree you want? Can you afford to go to that school?” Most people looking at schools do not link the degree with affordability, he explained. His firm helps families understand “you not going to school to get a degree; you're

going to school to launch a career.” The firm’s Career Insight Program helps high school students choose their career before they select a school. The average student changes majors three to four times, Celuch said, and 30 percent drop out in the first two years. The program helps students and parents zero in on the right career before choosing a college. Celuch said the main insight his firm provides is breaking down financial aid offers to spell out exactly what they mean to family finances. He said colleges and universities use the term “financial aid” for both scholarships and loans. When colleges “say they are going to give you a great financial aid package, 80 percent of it is loans,” he added. Student loans can impact a graduate’s finances for decades. Parent or grandparents who co-

sign loans for their children are also burdened for years. “The pain goes on forever,” Celuch said. “You can’t get rid of these loans, and they cannot be discharged in bankruptcy.” The government can also garnish Social Security benefits to recoup the cost of defaulted loans. College Assistance Plus strives to bring more transparency to the entire process of financing upper education, Decker added. “I believe we are changing the national conversation about student debt.” For more information, on College Assistance Plus visit: collegeassistanceplus.com. You can reach out to Paul Celuch at pceluch@CollegeAssitancePlus.com or Advisor Liaison John Decker at jdecker@CollegeAssistancePlus.com

ADVISORS MAGAZINE / 11

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COVER STORY

CYBER

Security threats grow during

Pandemic

covid-19 pandemic 14 / ADVISORS MAGAZINE

MAY 2020

CYBERSECURITY AND PRIVACY LAW: AN INTERVIEW WITH LEEZA GARBER, ESQ.

Working from home exposes staffers, organizations to hacking risks

he coronavirus pandemic that abruptly closed offices and forced millions of employees to begin working remotely from home has also exposed these workers and their employers to new security threats from increased global cyberattacks. “Unfortunately, COVID-19 has highlighted a lot of existing cybersecurity vulnerabilities for private business and government,” cybersecurity and privacy expert Leeza Garber said in an interview with Advisors Magazine. “Many companies were not ready to send their employees to work from their home environment,” added Garber, a lawyer, keynote speaker, and frequent on-air analyst for Fox News Channel and Fox Business Network. A recent survey by Barracuda Networks found 49 percent of businesses have encountered at least one cybersecurity incident since moving to a remote working model in 2020. Another 49 percent expect a data breach or similar incident in the near future. More than half also anticipated continuing widespread telecommuting after the crisis passes. Cyber threats have dramatically increased since the COVID-19 pandemic began earlier this year. Hackers have particularly targeted medical institutions, but threats to individuals and enterprises of all types are also spiking. ADVISORS MAGAZINE / 15

data privacy Cybersecurity group IBM X-Force reported spam related to COVID-19 rose 4,300 percent from mid-February to the end of March. Similarly, cybersecurity company RiskIQ’s spam monitoring system received 156,186 emails containing “corona” or “covid” over a three-day period in early May. IBM also stated some emails appeared to come from government agencies concerning small business emergency loans; others supposedly shared details about COVID-19 testing. Clicking on the attachment or email link triggers malware that allows hackers to steal personal data, install computer viruses, or lock down devices until a ransom is paid. “With every major event, whether it's in the United States or abroad, you see hackers and malicious actors capitalizing on the fear,” Garber said. “We're seeing it 16 / ADVISORS MAGAZINE

MAY 2020

now in terms of the coronavirus and COVID-19. It arrives in attacks where hackers are saying they have hand sanitizer, or a vaccine, or new information on the virus in your area. It may be in emails that seem to come from your supervisor or the CEO. They will contain links that have some sort of malicious aspect to them. It may also be in the form of text messages or phone calls.” The cyberattacks Garber has seen related to COVID-19 do not rely on new techniques. Methods such as phishing, malware, ransomware, and social engineering have been around for decades, she said. Now those practices are being adapted to fit current circumstances and concerns. “We see the vulnerabilities increasing, especially because hackers and malicious actors are using the fear of the pandemic to send billions of phishing emails and links to malware,” she said. “They are capitalizing

on the fear that exists for this very real physical problem, and translating it into the cyber world.” Cyber Hygiene As external threats intensified as millions of employees began working remotely on a daily basis, Garber said it became obvious that some businesses were not prepared to shift from controlled office settings to work-at-home networks. Companies typically have centralized cybersecurity programs that interact with employees and control systems

access. Some teleworkers are using company equipment from home, while others rely on personal laptops, tablets, and cell phones. All of these devices need to be locked down and secure. “Working from home calls for what I like to call ‘cyberhygiene’,” Garber said “Basically it’s the idea of being proactive and vigilant in a cyber environment. It could mean implementing best practices from your work environment at home; being aware that security problems

exist; and remaining alert – even when you are working from home, surrounded by family.” Cyberhygiene also means understanding your obligations to clients or customers, as well as continuing to follow internal policies governing privacy and confidentiality. When consulting on security and privacy systems with clients, Garber added, a review of procedures and systems should also cover legal obligations under state and federal laws, plus any relevant guidance from the relevant industry. One example of cyberhygiene at home concerns the Internet of Things: “smart” devices such as speakers, televisions, security cameras, appliances, and baby monitors. Garber said many companies have advised employees not to take confidential calls in front of a smart device. Those devices increase surface areas that cyberattackers may take advantage of, use

to surreptitiously record conversations and collect data. Best Practices for Seamless Cybersecurity Garber outlined several best practices to assist remote workers and businesses of all sizes – from solo practitioners to global multinationals – that now find themselves in a teleworking environment. Being proactive and vigilant are critical, she said, as not everyone realizes the common threats they can face. “Many of us still think that, from a personal perspective, we're not a target. We're not big enough or not interesting enough. But everybody is a target for malicious actors who are after financial, health, or other personally identifiable information. Competitors and state actors also constitute a threat vector,” she said. One practice that can cause problems is misusing social media by providing too much personal

Leeza Garber is an attorney specializing in cybersecurity and privacy law. She is an adjunct law professor at Drexel University's Kline School of Law with a focus on information privacy, and teaches at The Wharton School, University of Pennsylvania as a part-time lecturer on Internet Law, Privacy and Cybersecurity. She is a recognized expert, and presents as a panelist, moderator and keynote speaker for conferences across the United States.

ADVISORS MAGAZINE / 17

Many of us still think that, from a personal perspective, we're not a target. We're not big enough or not interesting enough. But everybody is a target for malicious actors who are after financial or health information.

detail. Garber, who is also an adjunct law professor at Drexel University’s Thomas R. Kline School of Law and a lecturer at The Wharton School at the University of Pennsylvania, advises her students and clients to Google themselves once a month to discover what information is publicly available about them. With more employees working at home and everyone connecting through social media more often, she said, some people are proactively supplying information that could erode privacy in their personal and/or professional lives. “Best practices for passwords are also important. Your need to have a different password for every type of account,” Garber said. “That’s something that we've

heard for decades. Yet, some people still take the easy route because it's a time-saver and it seems more efficient. It’s always worth taking the extra step to solidify security at the primary password level.” Make sure your home Wi-Fi connection is secure. You can encrypt your Wi-Fi connection and rename your Wi-Fi network. However, she suggests not using your own name or other personal information in your network name, as someone nearby who is trying to hack it could 18 / ADVISORS MAGAZINE

MAY 2020

leverage those details. Employees working from home also need to understand what it means to be live on camera. If you are using Zoom or another videoconferencing app, be aware of what you're actually showing on the screen. Garber cited the recent example of an ABC reporter broadcasting from home without wearing slacks – which went viral on YouTube when the camera dipped down too far. The videoconference view of your home office might show a whiteboard where you are developing corporate strategy, or there may be documents on your desk that can be read by others. She also advised Zoom users to password-protect their meetings and avoid group notifications to make sure only invited participants can access the session. Awareness should also extend to mobile devices such as smartphones and tablets, which can receive text messages and emails containing malicious links. People don’t typically think about locking down their phones, Garber said. However, having a smartphone is like carrying a mini-computer around with you. She said antivirus and anti-malware programs are available for mobile devices, and are used in many corporate environments. “Staying vigilant in a comfortable environment – that's what I call my ‘bumper sticker’ phrase right now,” Garber said. “We feel comfy at home. It's easy to forget that these cybersecurity threats are still around us 24/7 – and are, in fact, increasing regularly.”

Among companies, major problems with cybersecurity arise from not understanding the issues and budget shortfalls, she said. Sometimes businesses do not have a technical team that can install security patches and send system updates to remote workers, nor the ability to enforce policies and best practices outside the corporate network. The Barracuda survey found 40 percent of businesses polled were reducing cybersecurity budgets to cut costs during the pandemic. While each business has its own policies, systems, and schedules, Garber said, there are some general principles everyone should live by. Those include basic password security; activating security software; and installing system patches as they become available. Large companies often spend hundreds of thousands of

They may also lack coverage against the threats they do face. She said it is important to conduct an audit to understand what threats are reaching the business on a daily level; what system traffic looks like; and what vulnerabilities exist. Garber also advises that access to data and applications should be based on the principle of least privilege. “That is basically the idea that you want the least amount of people having the least amount of access for the least amount of time,” she explained. “If someone doesn't need access to a certain document or a certain part of the network, they shouldn't have access because it opens your organization to more vulnerabilities.” Garber added, “Honestly, cybersecurity practices don’t have to require super high-end, complex technology. Sometimes

“ With every major event, whether it's in the United States or abroad, you see hackers and malicious actors capitalizing on the fear,” Garber said dollars drafting security policies and buying cybersecurity insurance, she added. Remote employees still need to follow those policies to maintain privacy and security. Employers also need to ensure best practices and rules are being followed – particularly in a workfrom-home environment. Garber said she has seen a huge uptick in companies adopting various securityrelated insurance coverages. However, they may be paying a lot of money to secure threats they are not really impacted by.

it just comes down to the basics of passwords, anti-virus/antimalware software, and taking the time to think clearly before clicking.”

ADVISORS MAGAZINE / 19

FEATURE

SMALL BUSINESS IMPACT

by bobby l. hickman

FIGHTING to SURVIVE COVID-19 brings less revenue, more headaches

hen Kasey Collins Litt heard on the news in April that the Small Business Administration (SBA) had awarded all the loans in its Paycheck Protection Program (PPP), she was devastated. The owner of Kritter Keepers Club, a doggie daycare and boarding service in Marietta, Georgia, Litt had been trying for weeks to access federal money to help her keep the 11-employee business afloat during the coronavirus pandemic. She tried to apply for PPP at her multistate bank, but ended up on a waiting list because they were not ready. From an industry webinar, she learned an online portal was taking applications. So she applied through them, but had heard nothing since uploading her documentation. She also submitted a short-form for the SBA’s Economic Injury Disaster Loans (EIDL). “Again, no warm and fuzzies,” said Litt. “There was no communication whatever from anyone about whether the application had been received or was being reviewed.” She spent that day thinking, “This is the only way I can even thinking about opening back up.” Then, that evening, she received

20 / ADVISORS MAGAZINE

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an email that she had received the entire PPP amount she requested. “It was it was a miracle: I got exactly what I had asked for deposited in my bank Tuesday morning,” she said. Litt’s challenges in keeping her business operating during COVID-19 are common across the country. The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act in late March was followed three weeks later by another

$484 million in coronavirus relief. Still, shelter-at-home orders and health concerns have stalled commerce, sparking higher unemployment and less consumer spending. Banks and government agencies are swamped, and computer glitches and long wait times increase frustration. A survey by Emory University’s Goizueta Business School of more than 250 graduates of its Start:ME micro-enterprise accelerator illustrates the

challenges small business owners face: • 76% of Start:ME businesses decreased their hours significantly and/or shut down operations completely. • 82% experienced significant decrease in sales revenue. • 41% decreased the number of employees and contractors they typically employ. • 61% anticipate requiring emergency funding for ongoing business continuity. “The pandemic is affecting almost everybody in a pretty dramatic fashion,” said Brian Goebel, Goizueta’s managing director of social enterprises. “Many small business owners are seeking continuity capital support, including PPP, EIDL, philanthropic grants, or state and local government funding.” Clint Coons, founding partner at Anderson Advisors on the West

Coast, is seeing first-hand the direct impact the coronavirusdriven slowdown is having on investors and business owners across the country. “The CARES Act was a major step forward in helping individuals maintain some sense of normalcy in their business by giving them the requisite funds to at least keep their doors open and to give them a sense of security,” he said. PPP and EIDL are the major programs benefiting small businesses in the government stimulus package. The Paycheck Protection Program provides businesses a loan that will be forgiven if the company spends all the money on payroll (75%), utilities, and rent or mortgage payments over an eight-week period. EIDL, an existing SBA program typically used for natural disasters, was expanded to include businesses affected by COVID-19.

Coons said his firm has submitted applications for these programs on behalf of at least 50 percent of its clients. He added there are additional sources of assistance, including SBA Express Loans and other SBA programs; the new federal tax credit of $5,000 for up to 10 employees; money from public companies like Google and Facebook; grants; and state funding. “If you work with professionals who understand this, there are a lot of little Easter eggs out there for people to capture defined benefit and stimulate the economy,” he said. While the CARES Act programs are helping, they have also been plagued by technical glitches and vague requirements. “There’s still a lot of confusion about processes and steps, and about where to go for what programs,” Goebel said. The SBA said it processed 14 years of loans within 14 days, he noted. “It's an unprecedented situation of not enough capacity to process all the needs.” While a few Start:ME companies got money in the first two PPP rounds, he added, “There's still a need for additional ongoing capital support.” Another source of frustration with PPP was big companies receiving the lion’s share of loans of early funding when major banks prioritized applications from larger clients. “Right out of the gate we ADVISORS MAGAZINE / 21

noticed there was a problem: if you didn't have a bank account with the majority of the lenders that you want to apply through, they would not take your application,” Coons said. The way the program was structured, it was more profitable and less risky for banks to process one $10 million PPP loan for one client than ten $45,000 loans for ten clients. The second round of funding allocated $30 billion specifically for community banks and credit unions. Coons said he has long advised his clients to have relationships with both larger institutions and community banks. “I tell them it's nice to bank with the big bank because they have services that can help your business, but you always need to have a community bank on the side,” he said.

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A Forbes survey of entrepreneurs found only nine percent of their EIDL applications were funded. “The program is difficult to wrap your hands around. If you asked me today, ‘How do they determine who qualifies for what amount of money under this program?’, I couldn't tell you,” said Coons, adding that some clients have received $500,000 with no personal guarantee and no collateral. “Although the depleted EIDL received new funding, there are five million applications already in the queue.” However, these programs only provide temporary assistance until the economy reboots. The Shorenstein Center reported retail and food spending fell

8.7 percent in March, the largest one-month drop in U.S. history. Non-profit research group The Conference Board forecasts the gross domestic product will contract by 3.6 percent to 7.4 percent in 2020, depending on the speed of the economic recovery and of COVID-19 controls. The board’s most likely scenario calls for a 33 percent drop in GDP during the second

quarter and none in Q3 before rebounding in the fourth quarter. In their statement dated April 9, 2020 The Conference Board states, “A significant reduction in consumer spending is the primary driver of this weakness.” Domestic spending provides 70% of GDP. Goebel said that while members’ outlooks vary by industry, most believe they face a slow recovery. “It's hard to say if it's going to be months or if it's all going to be really easy by the first of June. There's probably more questions and uncertainty than answers at this point,” he said, adding that small business owners want to ensure they can keep employees – who are often family

members – and customers safe before reopening. Both Coons and Goebel said the current slowdown in business provides time for owners to plan how they can reshape their companies to thrive amidst new realities. Coons said Anderson Advisors is shifting from live to virtual seminars using Zoom. “I don't know if I can get people to show up at events; and if they do, having them sit six feet apart is never going to work in a seminar setting,” he said. Goebel said many companies in the Start:ME accelerator had little or no online or social media presence. Those owners are now pivoting to offer the same or similar products in a contact-less setting. “Overnight the way you interact with customers really changed,” he said. “The way they serve their customers is going to need to shift.

It does take a little bit of time.” Goebel cited an Atlanta entrepreneur who sells hair care products through local beauty salons. When salons closed, she turned to Facebook Live and Instagram. “She’s made videos tutorials on how to care and treat for your own hair. “She's meeting people where they are and answering their questions. ‘And by the way, here is where you can buy my products to help you use the techniques I’m teaching you about.’” Goebel said, adding her sales have climbed 700 percent since shelter-in-place began. Coons added, “Everyone's business is unique and you need to focus on that going forward.”

ADVISORS MAGAZINE / 23

by bobby l. hickman

DIVORCE SOLUTIONS

INTERVIEW

financial planning and divorce Unlikely pair goes together

hen most people make the painful decision to pursue divorce proceedings, the first professional they hire is an attorney. However, engaging a financial advisor with divorce expertise early on can make a significant difference in achieving a favorable outcome. Only 35 percent of women surveyed by wealth management firm Francis Financial consulted a financial professional during their divorce. However, 64 percent said they believe a financial advisor would have been helpful. The Financial Planning Institute stated 2.2 million people in the United States divorce each year – and 100 percent of proceedings include a financial settlement. “There are so many nuances that are different from traditional financial planning,” according to Meredith Dekker ChFC®, CDFA®, ADFA®, president and senior advisor at Dekker Divorce Financial Counseling. “Rules vary by state on such topics as community property versus separate property, spousal support, and child support. The Institute for Divorce Financial Advisors created the Certified Divorce Financial Advisor (CDFA) designation to help advisors understand those nuances and better support their clients,” she said. There are three major areas where Dekker helps clients. The first is ensuring a fair and equitable division of the couple’s assets. Second is cash flow: making sure clients will have enough money to support themselves.

The third is providing emotional support. “There is a lot of emotion that comes with divorce,” Dekker explained. “Attorneys often do not have time to deal with those emotions, nor do clients want to pay the attorney for that time.” For men and women alike, making a budget for life after divorce can be a dilemma. “They know what their bills are right now,” Dekker said, “but how do you make a budget after that?” She has them research expenses, such as how much leasing an apartment costs. Spouses who have been out of the workforce may also need to acquire new job skills. Developing a budget also has importance beyond client education. Financial advisors can testify during divorce proceedings. As an expert witness, Dekker must be able to defend a budget as being realistic. In many marriages, one partner deals with all the finances. If the client is not the person who handled the money, they need “the security of knowing Helping couples that the settlement they agree navigate through the on is going to help them move financial aspects of forward,” Dekker said. On the other hand, her client may be the divorce process the higher earner in the family since 2006 and feel they are giving up

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MAY 2020

some of their benefits. “So, you help them go through this emotional separation of the finances, which is very important.” Dekker also educates other professionals involved, such as attorneys who may be unaware of changing laws, and mediators. For example, when the federal tax deduction for alimony payments was eliminated in 2019, she spent considerable time educating lawyers who did not grasp how the law would impact spousal support agreements. “When you’re working with a CDFA, they look at finances with a different mindset than a financial advisor,” Dekker said, who also has non-divorce clients. For a divorcing spouse meeting with a financial advisor for the first time, Dekker suggested asking the person how they differ from a CDFA. “If the answer is there’s really not any difference,” she said, “that’s probably not the person you need to be working with.” For more information on Dekker Divorce Financial Consulting, visit: www.dekkerdivorceaz.com

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28 / ADVISORS MAGAZINE

MAY 2020

by bobby l. hickman

MONEY MATTERS TALK

INTERVIEW

DIVORCE:

THE FINANCIAL REALITY OF BREAKING-UP Money matters for each spouse

ivorce often has devastating effects on a family, both emotionally and financially. While women generally suffer more financial difficulties after a divorce, men also find themselves in a challenging position. According to the U.S. General Accounting Office, women’s income fell by average of 41 percent after divorce, versus 23 percent for males. Experts say the notion that men are better off financially after a divorce is a myth. Several studies indicate divorced spouses would each require a 30 percent increase in income to maintain their married standard of living. Research from Utah State University found divorced men experience a decrease of 10 percent to 40 percent in their living standard. The financial setback is greater among men who provided less than 80 percent of the family’s income – a common situation when both spouses work. The greatest challenges divorcing men often face are rebuilding their personal finances and getting retirement savings back on track, according to Certified Divorce Financial Analyst® James Sonneborn CFP®, partner and wealth advisor at RegentAtlantic in Morristown, New Jersey. As a CDFA®, he provides financial planning for individuals and 30 / ADVISORS MAGAZINE

James Sonneborn CFP® Partner, Wealth Advisor

Partnering for Financial Well Being From what’s on your bucket list to what keeps you up at night, you need a financial advisor who truly understands you.

MAY 2020

couples going through a dissolution of marriage, as well as wealth management, retirement planning, and estate services for all clients. “Divorce means a major shift in finances – more than most other situations one may come across in life, so it can take years to recover,” Sonneborn said. “Married couples become accustomed to a certain lifestyle that may not be attainable after divorce. Many are challenged to reprioritize spending and make other changes to maintain some semblance of their desired lifestyle.” The divorce rate among Americans over 50 years old has been rising since the 1990s. The later in life couples split-up, Sonneborn said, the more difficult

the financial challenges become. “You have fewer years to rebuild your balance sheet and retirement savings. And, when children are involved, men typically spend more money along with emotions related to being removed from the family,” he said. In recent years, financial advisors have relied on a more collaborative approach on divorce as opposed to an adversarial approach. The former brings both parties and their advisors to the negotiating table to find solutions for the family’s goals. Sonneborn has served as a neutral party in some of those sessions, but for most clients, he represents one spouse. “You think about helping individuals who are probably in the

most emotionally wrenching process in their life,” he added. With divorcing clients, Sonneborn focuses on planning for specific financial issues they will face. Much of that work involves dividing marital assets. He helps clients identify their assets – such as investments, mortgages, and student loans – update estate plans, and make sure alimony obligations can be met. “It’s creating a knowledge base that helps ensure our clients receive their equitable share within the division of assets,” he said. "That’s really the core of financial planning, but we have a laser focus on what all that means when we’re going through a divorce, and on how to help plan for a very different reality coming out of it.” One of Sonneborn’s core values is educating clients to make them

comfortable with the language of finance. In a divorce, his educational focus is on helping these clients understand their assets. “Not everybody is always in tune with the financial side of the family,” he said, adding that he ensures clients understand their personal balance sheet and anticipate their post-divorce lifestyle. “I see myself as a financial educator as well as a coach, with the primary goal of providing the knowledge, confidence, and support to make what will definitely be one of the biggest financial decisions of their lives,” he continued. “If they don’t get it right, they don’t get a doover.” When choosing a divorce financial planner, Sonneborn suggests people should determine how much experience the planner has. What services do they

offer? What aspects of the divorce will they cover? How is compensation handled: flat fee, hourly rate, or through future product sales? Is the advisor familiar with the legal framework? Is divorce an important focus for their business? The economic downturn of 2020 added more complexity for clients who are in the midst of a divorce. Assets are typically valued as of the divorce filing date which for many happened before the stock market collapse. The final disposition of assets happens on the final court date, when values are probably lower. “That whole factor is coming into negotiations during the financial crisis,” Sonneborn said. Since the stock market collapse, Sonneborn said he has spent much of his time reaching out to clients of all types about emerging financial planning opportunities. For some, the IRS waiver of requirement minimum distributions and lower asset values may offer opportunities to convert some IRA assets to Roths. Low interest rates can bring new wealth transfer strategies, while estate planning can benefit while current federal tax regulations are in place. “We’re in a situation where we just got handled a bunch of lemons,” Sonneborn added. “What lemonade can we make of it?” Clients can work with advisors to rebalance portfolios or address underperforming assets. “There are always things that can be done in a potentially bad environment like this.” For more information on RegentAtlantic, visit regentatlantic.com

ADVISORS MAGAZINE / 31

by bobby l. hickman

MEDIATION TALK

INTERVIEW

DIVORCING WITHOUT LAWYERS Mediators help couples make better financial decisions

Most couples discussions with clients planning revolved around financial to divorce issues. without using Morrison said he an attorney (or simply became a Certified considering the move) Divorce Financial Analyst can benefit from the (CDFA) so he could services of a divorce provide the most value mediator to help them to his clients. His training understand the financial and experience enable aspects of ending their him to help couples marriage. and individuals carefully In recent years, more consider the short- and than half of couples long-term financial divorcing do so without and tax implications an attorney. Divorce of ending a marriage. mediator and Certified Few divorce mediators Divorce Financial Analyst or attorneys become a John Morrison, M.A., CDFA, he added. said that in 95 percent of “Many people are not his mediation cases, the very financially savvy,” couple obtains enough he said. “I’m able to information and support help each person clearly to reach full agreement understand all their on terms of their divorce assets and debts, child without the assistance of support, and spousal lawyers. Their total cost support so they can through mediation is understand their options therefore much less than and make well-informed a traditional divorce. decisions.” After Now based completing a in in Mission master’s degree MEDIATION Viejo, California, in conflict there are two Couples who resolution, main ways have made Morrison Morrison works a decision to became with people divorce often a divorce considering or can use some mediator engaged in a assistance in sorting and opened divorce. The first everything out. is to serve as a Morrison We help Mediation, mediator to help couples divorce couples work southern in a calm, California, in out their own respectful, well2011. He soon comprehensive informed and realized that divorce empowered more than 80 agreement. way. percent of his Couples who

can reach such an agreement that covers all the issues generally do not need a lawyer, he said. Sharing his financial and tax expertise with couples in mediation also enables them to avoid going to court. The second way is helping individuals who request his input as a CDFA. Some people consult with him on the financial implications of a possible divorce, while others may seek his opinion on proposals from their spouse or the spouse’s attorney. One of Morrison’s top priorities is providing information and support for families facing real-world problems. Beyond his practice, he has written more than 100 articles on divorce and mediation that provide professional guidance to help demystify the entire

process. “A major problem within the divorce industry is its focus on high-income clients who can pay hefty fees to handle complex situations. However, many lower- and middle-class divorcing couples cannot afford lawyers and nearly all want to avoid prolonged court battles. A lot of people are living almost paycheck to paycheck, and they don’t have a lot of savings. Mediation with a qualified mediator is a great alternative for them,” Morrison said. For more information on Morrison Mediation, visit: morrisonmediation.com

ADVISORS MAGAZINE / 33

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