Financial Planning and divorce

23 August 2019 - Elizabeth O'Hanlon

Neil Hewitt, Independent Financial Adviser (IFA) discusses the importance of getting independent and neutral financial advice when going through divorce.
I have been actively providing financial advice to divorcing couples for over nineteen years, assisting them in understanding and reaching a division of their financial assets, including pensions and investments.  The process will invariably include helping those clients understand the value of those assets today and in the future, post any settlement.
Initially my instructions were received by only one of the parties, husband or wife, and I assisted them in trying to achieve the best possible outcome for them individually.  Sometimes we may have been successful in achieving a more favourable outcome for the client being advised, but at other times this just led to a toing and froing between parties causing greater emotional and financial costs.  Even where the recommended solution was fair to both parties there would often be a distrust from the other party whom I was not instructed by.
Soon after becoming involved in this type of advice I became a member of Resolution, followed their collaborative divorce training programme and sat their qualifying exams to become a Resolution Accredited IFA.  The training was hugely valuable and provided me with a far greater understanding of the legislation and issues divorcing couples are subject to and affected by, and also the whole legal process itself.  Following this accreditation, one of the first challenges I faced when working in the collaborative divorce process was that I was required to act as a Financial Neutral. 
As a Financial Neutral I was instructed by both parties to the divorce to help them understand and resolve the division of their financial assets and in particular their pensions.  I recall sitting in my first meeting with both parties and their solicitors around the table, recognising that I did not represent either but was there to help them understand and reach an outcome that was fair to them both.
My biggest challenge was not to apply any bias to either side but to help each party understand the implications of each possible course of action, and to explain the pros and cons of each action to them, such as one course of action being better for the husband but not fair to the wife and vice versa.  The ultimate goal would be to reach a fair and reasonable balance in the division of those assets. 
It quickly become clear to me that this was a much better approach for all involved.  It avoids the positioning that we often see with more litigious approaches.  It also helps both parties have faith in an adviser’s strategy as it removes the distrust that the advisers are leaning one way or the other.  It can also very much reduce both the emotional and financial costs that would be associated with more drawn out negotiations, as an agreement can be reached round a table.
It seems better to me to try to achieve a fair settlement from outset, rather than positioning to try to get more which only causes the other side to the other extreme and results in a back and forth battle.  If we start at a fair offer there is nowhere else to go.
Whilst this approach was specifically designed for the collaborative divorce process, I am pleased to say that this round table approach seems widely accepted today in most divorce scenarios and is certainly an approach that I champion where possible.

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