NEW YORK -(Dow Jones)- When marriages break up, financial advisors need not become collateral damage.

Advisors who can help investors navigate the financial, and emotional, fallout of divorce have a good chance of retaining both spouses as clients for years to come. Those who don't respond to their clients' needs risk losing them.

"Unless you get in front of it and talk to them, you might have them leave," says Bill Stone, investment director and senior vice president at PNC Wealth Management in Pittsburgh, a unit of PNC Financial Services Group Inc. (PNC).

PNC advisors, who work in teams, offer to bring in new team members if one spouse is uncomfortable working with the same advisors as a soon-to-be-ex.

The advisors also help clients adjust to lifestyle changes brought on by divorce.

One client, for example, has decided to sell the $3 million home she received in her settlement and downsize to a $1 million home. Although this change might not classify as Greek tragedy, it will be a big adjustment for this woman, and her advisory team should be sensitive to her situation, says Sylvia Diez, a PNC vice president and team director who works with Stone.

A spouse who hasn't had much of a relationship with an advisor may be at risk of leaving, but advisors can win them over.

Daniel Dunn, senior vice president of investments and a private wealth advisor at Merrill Lynch & Co. (MER) in New York, who also has a doctorate in psychology, has reached out to the wives of several divorcing couples with whom his primary contact had been the husband.

"I try to put myself in the position of both of them," Dunn says.

He acknowledged the difficulty of their situations, asked what their concerns were and offered to help them develop financial plans. Dunn and his colleagues also allayed some of their fears by explaining their obligation to keep client information confidential. They used historical data to show the women how the team had helped their families over the years.

One of the women kept Dunn at a distance after her divorce and had him manage just half her assets, about $1.5 million. After a year or two, however, he had gained her trust and she turned over the other $1.5 million to him.

Specialized Divorce Training

A relatively small number of advisors have sought specialized divorce training to help clients and their attorneys understand the tax and financial aspects of divorce and avoid pitfalls.

About 1,800 individuals, mostly certified financial planners and certified public accountants, hold the certified divorce financial analyst designation from the Institute for Divorce Financial Analysts. Many of them sought the designation after feeling they hadn't effectively served a divorcing client, Institute President Fadi Baradihi says.

About 700 or 800 people hold the Certified Financial Divorce Practitioner designation from the Financial Divorce Association, says President Carol Ann Wilson.

Both divorce designations involve self-study classes, exams and continuing education requirements. Designees learn about matters such as tax issues surrounding alimony, child support and the division of assets, and how to withdraw money from qualified retirement plans without triggering the 10% early- withdrawal penalty - something attorneys don't always know.

Divorce-savvy advisors can also ensure neither spouse winds up on the losing end of what appears to be an even split of assets. A spouse who gets the family home in a settlement, for example, might find it costs too much to maintain and be hit with unexpected fees and taxes when she sells.

"Most attorneys do not have business backgrounds," says Sandra Morgan Little, an attorney at Little & Gilman-Tepper in Albuquerque, N.M., and former chair of the family law section of the American Bar Association. "For tax advice and income streams and how you can maximize the income that these two people have - that's probably when financial advisors are used the most."

Some large brokerage firms, including Ameriprise Financial Inc. (AMP), encourage their advisors to pursue divorce-specific training.

Shawn Parker, a senior financial advisor in Chicago with Ameriprise, participated in divorce training the firm offered years ago. She takes care to remain neutral when dealing with divorcing clients.

A client couple called her recently called to say they're getting divorced. The three of them agreed that neither spouse will ask her to withdraw or move money between accounts without the approval of the other.

Divorced clients are like new clients in that their financial situations, including assets, goals and estate-planning needs, are usually quite different from when they were married.

Women who haven't worked in years or whose husbands have handled the finances may need extra guidance. Newly single women can also be a source of new business.

A recently divorced woman came to PNC five years ago for help in managing her settlement, at the suggestion of her ex-husband, with whom she was still friendly. The woman had never even written a check, and so Diez and her colleagues taught her about money matters, helped her stick to the budget they created for her, and advised her on trust and estate plans.

The client is preparing to marry again, and so her PNC team introduced her to an attorney to draft a prenuptial agreement and directed her back to an estate- planning attorney to revise existing documents.

Diez, who attends the client's birthday parties and holiday season family events, says: "We have become such an important part of her life."

(Kristen McNamara writes about business issues facing financial advisors.)

-By Kristen McNamara, Dow Jones Newswires; 201-938-5392; kristen.mcnamara@ dowjones.com

  (END) Dow Jones Newswires
  11-21-06 1015ET
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