Every year, more than 100,000 people get divorced in the UK, with figures reaching their peak in January following the festive period. This year, with the added pressure of lockdown and job losses, the number could be even higher. Despite the significant changes to finances divorce often means, just 3% of divorcing couples seek financial advice.
According to research from Legal & General, less than one in 20 couples seek out financial advice during the process. In fact, they’re four times more likely to turn to friends for advice during this time. It’s understandable why this is the case. Thinking about their financial future may be the last thing on their mind. However, with the majority of couples sharing financial assets and commitments, advice can make the process smoother and ensure both parties understand what divorce means for them financially.
We work with solicitors and other legal professionals to guide clients throughout the divorce process, lending support during the proceedings and as they start on the next stage of their life.
If you work with divorcing couples, here are six reasons why a recommendation for financial advice should be considered.
1. We can provide support assessing assets
While individuals can complete financial disclosure forms alone, in some cases, it can be complex and time-consuming. As a financial adviser we’re able to help clients understand the various assets they may have, from savings to investments and property, and provide accurate values for each. It’s a step that can help ensure an equitable financial arrangement is reached that both parties are satisfied with.
2. Divorce will likely have an immediate effect on finances
For the majority of couples, divorce will mean a need to rearrange their short-term finances. They may now have to pay housing costs by themselves or find that their disposable income has changed significantly. The research, for example, finds that 37% over-50s, which accounts for around a quarter of divorces, would see their income fall by an average of £10,650. It’s a sum that can have a huge impact on day-to-day expenses.
3. Understanding the impact of pension arrangements
Pensions are often one of the largest assets a person has, yet they’re often overlooked during the divorce process. As they may be inaccessible, they can seem less tangible, leading to a greater focus on other assets, such as savings or investments. The research found that only 12% of respondents took pensions into account when dividing assets. It’s an oversight that could affect security later in life and mean some end up with far less in retirement than they expected. It’s essential those going through a divorce understand the long-term impact of the financial agreements they make.
4. Providing long-term security for children
Where children are involved, their long-term stability and security will be a priority for both parties, but it can be difficult to reach an agreement. Financial planning at this stage can give both parents assurances about the children. This may include discussing long-term maintenance costs or setting up an education fund that will pay for private school fees. It can provide peace of mind about the immediate challenges families may face as well as the long-term ones.
5. Updating financial arrangements that are often overlooked
During a divorce, it’s not just assets that need to be assessed, but certain financial planning steps will need to be updated too. This may include updating a will, Power of Attorney, or expression of wishes, which names who should receive unused pension funds. Divorcees may also have to reconsider financial protection products, such as Life Insurance and Critical Illness Cover, which may include a partner, or no longer be appropriate for their circumstances. These are important steps to take but can be overlooked amid a divorce.
6. Ongoing support to meet new goals
Once the dust has settled, divorcees will need to start thinking about their long-term plans and how these have changed following a break with a partner. Financial planning can help individuals set out new goals, whether that’s to buy a new home or retire early, and put a plan in place to help them reach them. Ongoing support can help clients get the most out of the next stage of their life.
Want to find out more about working with us?
If you work in the legal profession and would like to find out more about working collaboratively with Templegate Financial Planning, please get in touch. We can provide financial advice and support for those going through the divorce process. Likewise, we want to know that our clients going through a divorce are in a safe pair of hands and to work closely with solicitors and other professionals during this time.