It's an alarming statistic: Nearly one million marriages end in divorce each year, according to the National Center of Health Statistics. The financial consequences of a divorce, including property settlements, support payments and pensions, are significant and unique to divorcing couples. As a certified divorce financial analyst (CDFA), you can profit while helping others get through this difficult time in their lives. (To learn more, read Earn Big Bucks With A Specialized Career.)
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What is a Certified Divorce Financial Analyst?
Many people make financial mistakes during divorce that they must live with for years to come. During such a traumatic and emotional time, it can be hard for divorcing couples to see how financial issues will play out over time. Sometimes, partners in a divorce may not even fully understand what they've agreed to. Worse still, divorce settlements can be very tough to change once they've been signed and filed in court. As a result, an increasing number of divorcing couples are turning to certified divorce financial analysts for help.
A CDFA is an expert in the unique financial circumstances that surround a divorce. The professional training for the certification is focused on understanding and estimating the long-term costs of a divorce, because divorce settlements can impact a person's financial picture for a very long time.
Areas of expertise include:
- Tax consequences of divorce agreements
- The process of dividing and valuing property fairly
- Determining how much alimony and/or child support is appropriate and for how long
- Modeling the future values of retirement and pension funds
Arguably, the greatest value a CDFA provides is an educated outlook toward the future. What seems equitable today may not look so fair when projected into the future, especially after factoring in considerations like inflation, cost of living adjustments, changes in custody agreements and other issues. A CDFA uses unique software programs and solid financial expertise to ensure that today's split of assets and cash flow will still be fair and equitable for years to come.
Doesn't a Lawyer Do That?
When a couple decides to divorce, the first step they usually take is to hire a lawyer. In many states, divorce lawyers often handle every aspect of a couple's divorce, including decisions on how to split assets. However, a lawyer is trained in law, not finance. During the process of legal negotiations, proposals go back and forth between divorcing parties. It isn't long before the financial consequences of all these different proposals can get lost in the shuffle. A CDFA can help to ensure that each party's finances are protected.
However, a CDFA is never a substitute for a good divorce lawyer. Rather, CDFAs work closely with divorce lawyers to facilitate good settlements. Usually, a CDFA can save divorcing couples time and money by quickly deciphering the financial outcomes of legal settlements, thereby helping clients make sensible decisions quickly. Because CDFAs usually charge lower fees than a lawyer, it often makes good economic sense to keep a lawyer focused on the law and let a CDFA analyze the finances.
It is usually best for the divorce attorney to hire the CDFA rather than a direct hire by the divorcing couple. If a CDFA is hired by the attorney, the client-attorney privilege is preserved; if divorcing couples hire a CDFA directly, anything they say or give to that CDFA is admissible in court, which might not always serve in their best interests.
Although some individuals choose to build a practice based solely on the CDFA designation, it is more typical for professionals to instead add the CDFA designation to their other credentials. Consequently, many CDFAs are also certified financial planners (CFP), divorce mediators, or even lawyers. In this way, the CDFA helps expand a financial professional's skill set. (For related reading, see Is A Career In Financial Planning In Your Future?)
Becoming a CDFA
The CDFA designation involves a self-study course that provides training on topics such as personal vs. marital property, tax considerations, how to split the value of the family home, how to use proprietary software to illustrate the financial outcomes of various settlements and more. The program can be undertaken using different formats, from webinars to classrooms to online study. There are four modules, and a CDFA candidate will usually study one module at a time, take the associated exam and move on to the next study module. The designation can be achieved in two to six months. Because the course is specialized, candidates must have at least two years of experience in the financial or legal field.
There are currently two well-known organizations through which this unique designation can be earned. The Institute for Divorce Financial Analysts (IDFA) was the first organization established to provide the certified divorce financial analyst designation. Membership in IDFA gives a CDFA numerous benefits including a bio on the organization's website, newsletters, client leads and marketing tools to help promote new business. The Academy of Financial Divorce Practitioners is another organization through which the designation of certified financial divorce practitioner can be obtained. Essentially, the academy offers the same training as the IDFA, but differs in terms of the number of continuing education credits are required each year, which can be earned directly from the academy.
The Bottom Line
Building a successful practice as a CDFA or CFDP is easiest if you are located in a state that encourages collaborative divorce. Collaborative divorce uses a team approach to arrive at fair divorce settlements. Under this approach, various outside specialists may be brought in to resolve conflicts or conduct in-depth analysis on specific issues. Attorneys that work under a collaborative divorce model are far more willing to hire CDFAs than those who operate outside this approach, where CDFAs may be seen as competition or an added expense for clients. Do your homework before embarking on the CDFA study program to ensure your state will welcome your new business credentials. If you have a strong financial background and are looking to specialize in an area that's in demand, a CDFA or CFDP designation might be for you.
For more on divorce and finances, read Get Through Divorce With Your Finances Intact, Marriage, Divorce And The Dotted Line and Getting A Divorce? Understand The Rules Of Dividing Plan Assets.