Working as a Certified Divorce Financial Analyst™ (CDFA®) Professional means sitting at the intersection of finance and family law. Because of this I often find myself navigating professional grey areas.
So where do CDFA services end and tax and legal services begin?
What other limits are there on what a CDFA can do?
And how do you know if you’re asking your questions to the right member of your divorce team?
Let’s start by understanding what a CDFA is.
What is a CDFA?
A Certified Divorce Financial Analyst™ (CDFA®) Professional is a person with specialized training in the financial aspects of divorce.
To become a CDFA Professional, a person must have three years of professional experience in finance or family law and hold at least a bachelor’s degree. They must also study divorce specific content areas like Property and Taxation, Financial Analysis and Planning, and Retirement Plans and Taxation and then pass a written exam.[1]
CDFAs are also responsible for completing 30 hours of Continuing Education every two years to maintain their designation.
This means that your CDFA Pro will have a deep understanding of the financial elements of divorce and surface level understanding of family law.
Learn more about CDFAs
With this specialized training, what does a CDFA do exactly?
What does a CDFA do?
Every CDFA practice looks a little different but in general a CDFA will:
- Help build your inventory of assets and debts
- Develop valuations for difficult to value assets like pensions and stock options
- Design financial settlement scenarios
- Analys the tax implications of a given settlement scenario
- Develop a Financial Plan for one or both parties to assess long-term outcomes
- Troubleshoot financial settlements to avoid potential pitfalls
- Offer expertise on complex estates and lesser-known asset types
Every CDFA Professional will be bound by the rules and limitations of the firm where they work. Those rules may limit what they can and cannot offer their clients.
For example, some CDFA Pros are qualified to offer business valuation services. I do not offer those services in my practice because I am not qualified to do so and am prohibited from doing so by the firm where I work.
CDFA Services at Baird
Always check in with your CDFA to see which services they can and cannot offer before you hire them. Not all CDFAs are created equal.
What can’t a CDFA do?
There are two bright red lines that most CDFAs will not cross. Both red lines have exceptions.
A CDFA Professional will not give you legal advice.
Most CDFAs are not attorneys. Giving legal advice without a law license constitutes the illegal practice of law. It is also a breach of ethics since it involves offering a service which the provider is not qualified to offer.
The exception to this rule is if your CDFA is also a licensed attorney.
A CDFA Professional, who is not otherwise qualified to do so, will not give you tax advice. While not explicitly illegal, giving tax advice when not otherwise qualified is a breach of ethics and would also likely violate firm policy depending on who employs your CDFA Professional.
But there are big grey areas next to these bright red lines.
Navigating the grey area
What should you do when you have a question that falls into a grey area?
When in doubt, ask your question but be prepared for your CDFA to tell you that your question should be directed to another professional on your divorce team.
Taking a Team Approach to Divorce
Which leads to my next point: Select your CDFA Professional carefully.
You want to select a professional who can clearly articulate where their services end and those of other professionals begin. You also want to select a professional who is bound by a clear service agreement and robust code of ethics.
For example, as a Baird Financial Advisor and CDFA Professionals, my engagements with clients are governed by a written agreement, Baird’s policies, and the code of ethics for all CDFAs.
As a result, I have strong incentives to knowing my limitations and strictly adhering to those limitations for the benefit of my clients and longevity of my career.
A CDFA Professional can be a highly valuable member of your divorce team. But as with all tools, you want to make sure you are using the right tool for the right job.