Stephanie Vokral is the co-founder of Critical Transitions Wealth Advisors and the founder of The Financial Knot, a financial planning practice for people going through divorce. After her own divorce in 2004, she built a career helping clients untangle shared finances, split assets and support fairly, and picture what life looks like afterward. In this episode of Footnotes, John Barnes talks with her about how divorce math really works, what "you're going to be okay" means in dollars, and how women and millennials are changing financial advice. If you own a company worth between $5 million and $50 million, the section on business ownership in a divorce is worth your time.
Why call a divorce planning practice The Financial Knot?
Stephanie says most of her public marketing runs through The Financial Knot because the niche is so specific. When people marry, their finances, children and house are all tied together, and in a divorce her team helps untie that knot. The two biggest financial categories in a divorce are splitting assets and support, and she works with clients on both. She also runs Critical Transitions Wealth Advisors, the wealth management practice where clients continue after the divorce is final.
"Divorce is a transaction and it is a business."
Stephanie Vokral
How are assets divided in a divorce, and what do people miss?
The legal standard is equitable distribution, which is not always a 50/50 split, and Stephanie tells clients up front that nobody will feel it is fair. Her job, she says, is to make it equitable and to show the client what they will have the day after the divorce and what that looks like 15 or 20 years later, through retirement. In her view, the attorney, the CPA and the forensic accountant each play a part, but no one else in the process helps the client understand which split is smartest for their situation. She is clear that she is not an attorney, and that she works alongside the client's lawyer and CPA.
Many clients do not know what they own. In a marriage, the person who handles the money naturally opens the accounts and buys the property in their own name, which does not mean anything improper is going on. A big part of the work is sorting marital property from separate property, such as an inheritance that stayed in its own account. Restricted stock units, stock options and other deferred compensation require coverture fractions and similar calculations to work out what is marital. And for owners, she adds, a business is marital property, which is a hard conversation for anyone who never brought a spouse to work.
What does "you're going to be okay" mean?
Stephanie goes through credit card and bank statements to understand a client's real expenses, then builds a financial plan that shows what they are likely to receive in the divorce and where their income will come from afterward. For her, okay means being able to pay the bills, having a bright future, and not running out of money in retirement. Sometimes the honest answer is that at the current spending rate the money will run out, and then the conversation turns to what spending limits look like. She also asks about goals such as travel, going back to school or paying for children's college, because income is the big concern, right alongside air.
How does her own divorce shape the work?
Stephanie says her experience is a fuel for compassion. Divorce comes with a brain fog, so she helps clients get organized, whether that means a list, a plan or a patient response to a late-night email. Her team often receives five to ten emails in a morning from one client, and she understands why. Much of what her firm does is give attorneys a better client, one who can see what they are likely to get and can make decisions. She adds that in the divorce process most people simply want someone to listen.
"People just want to be heard."
Stephanie Vokral
What happens after the divorce is final?
Through Critical Transitions Wealth Advisors, clients get a high-touch first year: setting up new accounts, putting bills on auto draft, building a budget and a simple review habit, and returning to their attorneys to redo their estate plans. Stephanie also holds what she calls a vision meeting, where clients decide what they want their lives to look like, whether that is starting a business, traveling or supporting a cause. Her own cause is working to end human trafficking in the Midlands, and she works with the Central Carolina Community Foundation on clients' charitable goals. She also notes that her firm works with many widows, and she cites a statistic that 70 percent of baby boomer women will experience widowhood.
How are women and millennials changing financial advice?
Stephanie says the industry has a poor history of serving women, and that in the South women of the Gen X and baby boomer generations still often hold a traditional role in which they were not the primary breadwinner or the household's financial manager. Divorce also looks different by region: more litigious in the South, more mediation-based out West. Millennial women, she says, are the most educated female generation in history. They often bring their own assets and businesses into a marriage, sometimes with a prenuptial agreement, and they expect to understand the technical side of the math: why a number was calculated a certain way. Many are business owners, so valuing the business correctly matters a great deal.
What this means for your own business
Three lessons stand out for owners. First, whatever happens in your personal life, your company is likely to be part of the financial picture, so knowing what it is worth, supported by clean and current numbers, protects you in any big life transition. Second, the right advisor looks past the transaction to the life after it: what the money has to do for you in 5, 10 or 20 years. Third, most owners benefit from a plan that connects the business to their personal wealth rather than treating them as separate. That is the work we do in business valuation services and owner wealth planning. If you want to know what your company is worth today, talk to us about your numbers.
Topics in this episode: Valuation · Owner Wealth
Read the transcript
Show the full transcript (auto-generated, lightly cleaned; speakers not labeled)
Hey, welcome to Footnotes. Today we're going to be talking to Stephanie Vokral. She's the co-founder of Critical Transitions Wealth Advisors as well as The Financial Knot. Stephanie's been in the financial services business for quite some time but has discovered a particular niche with a group of people who really need help thinking through really complex financial issues. Check it out. Today we're here with Stephanie Vokral. We've known Stephanie for a long time, but she is the founder of Critical Transitions Wealth Advisors and also The Financial Knot. Stephanie, it's good to have you on Footnotes, thanks for agreeing to do this. One of the things I think right off the bat, when you think about the two businesses you have founded, one of them is explanatory as to what you're doing, but your primary business, The Financial Knot, is an unusual name. How did you get started with that?
Most of the advertising people see is The Financial Knot, because it is such a niche that we tend to do most of our public marketing through it. It is a business where we work with clients to do financial planning through their divorce. I went through my own divorce in 2004, a very painful, very emotional time, and there's a saying that you find your passion when you go through really tough waters. For me, I'm incredibly passionate about assisting people through that process because it is such a tough emotional spot. The Financial Knot is exactly what it sounds like. When you're married, your finances, your kids, your house, everything is mixed into that marriage, and in divorce we help untie that knot, and hopefully we do it in a way that brings peace to the process. It's a time when people are really anxious about their finances. People don't like uncertainty and change. We're naturally wired to push back on change, and it brings up our defenses. So The Financial Knot helps my clients untie the finances, the things owned jointly, and how we split assets. Divorce is about splitting assets and support, the two largest financial categories, and that's what we do.
When people think about that split, is it always 50/50? What do some of your clients see and go through in untying the knot?
The law is, and I'm not an attorney, full disclosure, equitable distribution. That's a nebulous term, and nobody feels like it's fair. I always tell clients going in that it's going to stink and you're not going to feel like it's fair, but we're going to make it equitable. We're going to make it so you understand what you have now, what you have the day after your divorce is finalized, and then what this looks like 15 or 20 years after your divorce, through retirement. Divorce is a transaction and it is a business. People don't like to hear that, but there are people who will profit off of divorce if you're not careful, so you do have to find the right professionals. When we're looking at splitting assets and what's fair and equitable, we're the only person in the transaction of divorce who helps clients understand how this is going to affect them in the future. Not the attorney, not the CPA you might hire to value a business or find out what your spouse's income is, or a forensic CPA who helps you understand whether someone is hiding assets. Nobody in the transaction helps a client understand what the smartest split is for their situation, or what life will look like after divorce. That's our job. We have clients who hire us who have complicated financials and want to understand that, and many times we're working with their attorney, and sometimes with their CPA as well.
So you're guiding them through a process that takes time, but you're also teaching them. One of the first things you said is they have to understand what they have. Do you find people sometimes don't have that understanding up front?
Absolutely. It's not always that they've been married to someone who is purposefully hiding assets or doing anything illegal. Over time, if you're the primary financial person in the marriage, you naturally put accounts, property and cars in your name. In the dynamics of divorce, if you have a non-financial spouse, someone who doesn't think about it or care about it much, or who finds finances stressful, it can be tough to talk about finances in the marriage, so that person might not understand the financial side or have assets in their name. Through their attorney, or if they're using a more amicable process, and many times attorneys agree to work together, we find out that information and help them get an assessment of what is marital property. Sometimes in a marriage you have separate property: if you inherited an asset during the marriage, or before you got married, and you never used that money during the marriage and it stayed in a separate account, it may still be separate property. Where it gets complex is with things like restricted stock units and stock options. We have to use coverture fractions and all kinds of fancy calculations to help clients understand what part is marital and what's non-marital. And if you're a business owner, that becomes a conversation that feels uncomfortable, because you naturally don't feel like you took that spouse to work with you every day, but businesses are marital property, and that's hard.
You mentioned your own divorce some years ago helped you understand, in real life, what your clients are going through. How does it thread through your professional experience?
There's a lot of emotion behind it. For me, it is a fuel for compassion. Some advisors say, yes, I can help my client through a divorce, but there's a lot of specific knowledge you have to understand about the divorce math. The other piece is compassion, and if you've never been through it, it's really hard to put yourself in that person's shoes. I'll give you an example. We had a client who, every time she thinks of something financial, sends us an email. It doesn't matter if it's the middle of the night, or what it's about, or whether it makes any sense. Some days we get to work and have, and I'm not kidding, five to ten emails about things she has thought of. A normal advisor would get really frustrated with that, but we understand, because when I went through my divorce it was brain fog. You have so many things going on. I'm a Gen Xer, so I have to make my list and write everything down. If you're not Gen X, you're probably putting a list in your phone, but organizing makes you feel better, so we try to help clients get organized to ease that brain fog. Largely, what we do is try to give attorneys a better client, so they can make decisions. I find that giving a client a financial plan where they can see what they're probably getting in the divorce, and then, as they get closer to settling, what it's going to look like afterward and where their income is going to come from, helps them know they're going to be okay. We do a lot of work on their expenses, going through credit card statements and bank statements, so we can tell a client they're going to be okay. Because I've been through that, and I know people going through that, that's really all they want to understand at the end of the day.
In my day job I'm an advisor too, and our clients are a bit different, but that aspect of telling a client they're going to be okay is important. What does okay usually mean for your client?
Great question. It means they're going to be able to pay their bills, that they have a bright future, that they're not going to run out of money at some point. Occasionally I have clients where I have to say, if you continue your current spending rate, you will run out of money after the divorce. So it's helping them define what that looks like. Typically it means they know what they can spend, they're not going to run out of money in retirement, and they're potentially going to get an asset they really like, whether it's the marital home or the beach condo, first-world problems, right? But they get the understanding that they're going to be okay by understanding their spending limits and their assets. We also talk about goals for the future. Do you want to travel every year? Sometimes they want to go back to school, or make sure their kids' college is paid for. It depends on the client, but the big one is income. We all got to survive.
It's right there with air, money and air in this country.
Yes, there's no way around that.
Shifting gears, you and I have known each other a while, and we've had conversations about women in financial services. Not all of your clients are women, you have a gender-neutral practice, but when we talk about the financial services industry and women intersecting, it's usually not so great.
We have a bad history of serving the female population, and I can certainly speak to that. Because I belong to some national divorce financial planning groups and mastermind groups all over the U.S. and internationally, I have a good understanding of the different regions. Divorce is very different in different regions of the U.S. In the South it's much more litigious, shocker, and still very oriented around attorneys. Out in California, out West, it's very much alternative dispute resolution, like mediation, people working together to do their own divorce agreements. To circle back to the gender issue, in the South I find that women are still in a more historical, traditional role. They have not been the primary breadwinner, they don't understand the finances, and that's okay. Millennial women are very different, and I can speak to that in a minute. But I'm a Gen Xer and my mom is a baby boomer, and those are the two demographics I work with a lot. It's still a very traditional, historic role that women play in the South, so they naturally navigate to our practice because they need our services. It's not always the case, we do have men who hire us, but because we're all female, we tend to have a lot of female clients.
It seems like over the last decade, when financial services and consumers are talked about, it's not just people who have money in a generic sense. Women who have money is a category now. It's not a new category, but the industry seems to be waking up to it, certainly in marketing.
Oh my, for sure. I try to educate my clients that divorce sometimes is a windfall for them, and they're going to come into a lot of money, so be very wise about who you talk to. People will approach you, and it might shock you. I've had clients cry to me because they feel like everybody wants their money. One client said her cleaning lady told her that her husband is a financial advisor, and she said everywhere she turns, people are trying to get her to move her money to them, and she was offended by that. The financial industry has capitalized on, or at least markets to, women as a demographic now, and it can feel a little predatory to them at times. For us, women gain a huge amount of trust working with us through the divorce process, and it's very natural for them to want to work with us after the divorce. At Critical Transitions Wealth Advisors we work with clients post-divorce. We help them establish new accounts for the wealth they have, but we're very high touch. We help them work out their settlement agreement, set up bill payment systems so their bills are on auto draft, understand why they need a budget and how it fits into their everyday lives, and establish a system, like every third Saturday, of taking an hour to review your spending and see if you're in line with your budget. Some people have never had anybody walk through that with them. We're very high touch especially in that first year. We get them to attorneys to redo their estate planning. There's so much we do for clients within that first year.
So on the front end, with The Financial Knot, it's before or while the transaction of divorce is happening, and post-transaction, that's where Critical Transitions picks up and continues, really for the rest of their life.
Absolutely. They had a financial identity that was combined with another person, and now they have a financial identity that is just their own, and they have to figure that out, often with dependent children in the equation. The exciting thing we try to do for clients is have what we call a vision meeting. You've got all this wealth after the transaction, or sometimes before, depending on a client's state of mind. Some clients say, oh yeah, let's talk about this, and some are just having a hard time getting out of bed every day, understandably. I would love for it to happen during the process so it can be included in the financial plan. The vision meeting is to help clients understand what they want this to look like. This is yours now. The goal is obviously not to run out of money, and to do things like travel, but I have women, and men, who want to start businesses. The women we work with tend to have to figure it out more because they have historically had the more traditional role. Sometimes they find a charitable vision. Mine is to eradicate human trafficking in the Midlands, and that resonates with women. One client is very passionate about animals, and we're working with Central Carolina Community Foundation to help her establish a vision and some specific charities.
When you think about the people you work with, these are truly critical transitions. What's next for the practice? You've built a business out of it, and there's certainly a demand.
We're very excited about the growth. When you start a business, I don't know that I ever got into this thinking I wanted to build an empire. You have to figure out whether you're going to have a lifestyle practice or a business. We have such a powerful message and the work we're doing is such good work. It's very healing for our clients. There are more people who want to speak out about what they've been through and want a platform, so we're looking at a lot of different things. We have several partnerships we're looking at, one on a more national platform that came about in the last two weeks that I'm really excited about. We're looking to expand into Charleston and Greenville in particular. Currently we're involved with a statewide divorce group, Vesta Divorce, a platform where we encourage clients to work collaboratively with the professionals they work with. I have a team of professionals I work with through Vesta Divorce, and we do a lot of free online webinars to educate people about the process of divorce. We're also hiring, which as you know is a process, and we could do a whole separate show on that.
That's the cue for every business owner to go, oh boy. A lot of the conversations we have on Footnotes involve a personal story driving a business idea. I love it when people tell those stories, because many people have an experience they've been through that they've become an expert in, for better or worse. It's interesting when people can turn something hurtful and painful, a tectonic shift in someone's life, into something good.
For sure. At Critical Transitions Wealth Advisors we do a lot of work with widowers and widows, which is another major life transition. One statistic I heard the other day is that 70 percent of baby boomer women will experience being a widow. It's huge. That's another reason women gravitate toward our practice. We get a lot of those clients too and have a lot of compassion for that process.
It's cool to be in a helping profession. We're not doctors or surgeons, but you learn almost everything about someone when you start talking about their finances.
Absolutely. So many things get swirled into those conversations that are not just calculations or laws, and you really get into someone's experience almost in a way that a doctor would. It's a different venue. Sometimes they have somebody who listens to them for the first time, and it's very powerful. The thing I find in divorces is that most of the time people just want to be heard, to tell their story. They mistakenly think an attorney or a judge will care, and I don't mean that ugly. It's like a doctor who deals with cancer patients all day: you're just another person who has cancer to them. You want to think the doctor is compassionate, but the number one complaint is their bedside manner. It can be the same in the litigation process. We're the ones who let clients tell their stories, and that can be very powerful.
You mentioned millennials earlier and said we'd come back to it. What are you seeing among millennial women?
Oh my goodness, where do I start? They are the most educated female generation in the history of the world. They're getting more education than men now, post K-12, college and beyond. What's different about that generation in divorces is that many times they brought their own assets to the marriage. You're helping a couple through a prenup agreement, working with the attorney to look at it, making sure property is separated correctly and that you don't commingle separate assets with marital assets. It's a very different demographic. Many of them are business owners, so helping them make sure the business has been valued appropriately and handled the right way is huge.
Do they have a different expectation of you as an advisor than other generations?
They are much more technical. They want more information, which is great. They can provide a lot more of the information we need about their finances, and they're proficient at accessing information online. Some run circles around me and can show me how to find information. Their expectation is not so much for us to help them know what they have right now. It's to help them understand what this will look like going forward once the transaction is done. They want to understand the technicals: why did you calculate it that way, tell me about the fraction you used here and what it means. I've actually had one ask me that. They rely less on us to just give them the answer, and they want to understand how we got to that answer.
Great. Thanks for sharing all that and for doing the interview. I think this is relevant and will help a lot of people.
Absolutely. Thank you for having me.