Investments 

How to give financial advice on divorce

  • Learn what kind of financial advice couples who are getting divorced need and the role of an adviser to agree a financial settlement.
  • Be able to understand some of the issues that come when an adviser's clients divorce.
  • Comprehend what divorce means for pensions and some of the pitfalls around pensions to avoid.
CPD
Approx.40min
How to give financial advice on divorce

Some 42 per cent of marriages in England and Wales end in divorce, according to the Office for National Statistics, most commonly in the first 10 years, with the peak age for divorce being the late 40s for men and early 40s for women.

A trend is increasing numbers of older couples divorcing, with the over 60s making up 9 per cent of the 107,071 divorces which took place in 2016, a rise of 4.3 per cent on the previous year. Pension freedoms open up new solutions for financial settlements for these 'silver splitters'.

Resolution, the professional membership organisation for family lawyers, estimates that the need for financial advice to support their work for couples divorcing and separating is worth £500m a year.

Currently, only 42 financial advisers have gained the Resolution accreditation and they are all very busy.

Whether you wish to put in the work to become accredited as a single joint expert witness capable of giving an expert opinion to the courts; wish to offer local family lawyers support in understanding the financial aspects of divorce; or simply want to support existing clients when they are splitting up, an understanding of the law, process and pitfalls of designing and agreeing a financial settlement is essential.

Background law and process

Wherever possible the courts prefer to arrive at a financial settlement between the couple which has been agreed by them. This simply requires the court to endorse the agreement, called a consent order.

Generally, the court will seek to achieve equality between the couple, ideally with a clean break, a principle established in White v White (2001). It may take account of the length of the marriage and the assets accrued during the marriage.

Provision of suitable housing, income support and education and maintenance of any children of the marriage will also be agreed.

One option without recourse to litigation or court proceedings is known as Collaborative Family law.

Taking the collaborative approach, each party instructs their own lawyer who, through Resolution, is trained in working collaboratively. All parties have a commitment to avoid litigation and sign a written agreement to meet face-to-face and work together to reach agreement without going to court. There is a mutual aim of seeking a fair settlement. 

Should the collaborative approach not be suitable or possible, the couple may opt for mediation to resolve matters.

This will involve a specially trained mediator who will seek to gain agreement between the parties. In most instances this is a prerequisite before court proceedings can commence if both parties feel that neither the collaborative or mediation approach will work and resort to the third option, which is litigation.

Should they fail to achieve agreement, an application to the court may be made to hear evidence and then a financial order is drafted which is binding on both parties.

Ethical issues when advising a divorcing couple

Existing clients

CPD
Approx.40min
  1. Those over the age of 60 made up what percentage of divorces in 2016?

  2. In what scenario can an adviser act as a financial neutral, offering guidance and not advice?

  3. Older divorcees may find what more appealing, according to Ms Ingram?

  4. Upon divorce, pensions can be divided three ways. Which of these is the odd one out?

  5. The basic state pension can be shared. True or false?

  6. Pension freedoms can help some silver splitters access funds from their pension to do what?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Learn what kind of financial advice couples who are getting divorced need and the role of an adviser to agree a financial settlement.
  • Be able to understand some of the issues that come when an adviser's clients divorce.
  • Comprehend what divorce means for pensions and some of the pitfalls around pensions to avoid.

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