18/07/2024 by Lottie Kent 0 Comments
3 key questions your divorcing clients may ask you, and how a financial planner could help answer them
Discover three key questions your divorcing clients may ask you about managing their finances. A financial planner can offer the help they need at this difficult time.
Whether or not a separation is amicable, managing the financial side of divorce can be complex.
As a solicitor, your divorcing clients may have a lot of questions for you, from how their retirement plans might be affected to whether or not they should keep their family home.
Fortunately, a financial planner can not only answer your clients’ questions, but also help them navigate the financial intricacies of divorce at every stage.
Read on to discover three key questions your clients might ask you and learn how, as a financial planner, I could provide expert help and support during this time.
1. Should I give up my pension rights to keep the house?
If your clients have spent many years renovating their homes or raising children there, it may feel difficult to relinquish the property during a divorce. This might be especially true for your female clients if they maintain custody of their children.
What’s more, your clients may want to keep their divorce as amicable and efficient as possible. They might be seeking simple solutions, such as agreeing that one person keeps the house and the other takes their combined pension wealth, if their values are similar.
While this may seem practical in the short term, such an arrangement often results in one partner – often the woman – facing a significant shortfall when it comes to their retirement.
Indeed, research by Corporate Adviser (7 February 2024) has shown that by their late 50s, women have average pension savings worth less than two-thirds of men’s.
So, giving up rights to a pension in exchange for keeping the house might leave your clients with a lower income than they expect in later life. Even if they could later sell their home to pay for retirement, this is a costly process that is not guaranteed to provide the capital they need.
As a financial planner, I can help your clients review the pension assets they hold as a couple and explore options for pension sharing. This could help them make an informed decision about how to divide shared assets. Please feel free to share my online insights with your clients, too – this article about why divorce can exacerbate pension inequality could help them understand the issues further.
2. Am I still covered by our joint financial protection?
Married couples often take out joint protection, such as life cover, critical illness cover, and income protection.
Having adequate protection in place could ensure that essential costs are covered if an unexpected event – such as illness or bereavement – reduces the household income.
Unfortunately, it might not be possible to split this protection when a couple divorces. While some protection packages offer a “separation benefit”, this doesn’t apply across the board. Plus, many divorcing couples may no longer wish to be financially tied, in which case they could be required to cancel their joint protection.
What’s more, if your clients let their policy lapse, fail to amend it, or cancel it without taking out replacement cover, they could be left without this invaluable financial safety net after the divorce.
I can help your clients understand their options for financial protection, assess how much cover they need, and factor the premiums into their new financial plan.
3. Can I still afford to retire at the age I want?
If your divorcing clients have set their retirement age based on joint finances, they may need to review their plan – especially if they’re likely to be living on their own for the foreseeable future.
Indeed, while your clients might previously have shared essential costs such as mortgage repayments and utility bills, they may now need to cover these entirely. This increase in living expenses could affect how much your clients are able to save and invest for their retirement.
What’s more, research reported by FTAdviser (16 April 2023) has revealed that single savers need an extra £160,000 in retirement than couples, to achieve the same standard of lifestyle.
So, depending on your clients’ circumstances, they may need to rethink their retirement after divorce.
Alternatively, I can help your clients revisit their retirement plan and review whether they’re on track to retire when they wish to, even after their circumstances have changed.
If it looks like there might be a shortfall, I can advise strategies for boosting their retirement pot – such as increasing pension contributions, building a strong investment portfolio, and making the most of tax-efficient savings.
Get in touch to find out how financial planning could benefit your divorcing clients
I have extensive experience working with women and couples who are going through a divorce.
Your clients may find it difficult to navigate the financial practicalities of separation during this emotionally charged time. I can help them gain a clear understanding of their financial position and support them in planning for their desired future.
Seeking advice as early in the divorce process as possible could help your clients reach a fair financial settlement and allow them to plan for their long-term financial security.
If you have clients who could benefit from working with a female financial planner who understands their needs, email lottie@truefinancialdesign.co.uk or call 07824 554288.
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