Family lawyers and IFAs - a team approach

Posted: 27/05/2014

Frequently family lawyers will refer their client to a financial planner or IFA once the divorce settlement has been finalised, in order that the settlement can then be implemented. For their part, financial advisers will often find themselves dealing with clients who require family law advice. The relationship between the two professions can, and should, be beneficial for both, and Resolution provides an ideal forum for closer co-operation.

So, how can we work better together as Resolution members with different but complimentary skill sets? Some of our clients are financially 'savvy' or have their own accountants or advisers, but many are not in that fortunate position and will benefit from an early referral to a financial adviser, who can assist the family lawyer in a number of ways. This article sets out some of the areas where the financial adviser can work alongside the lawyer.

Gather and assess financial information

A financial adviser can help the client in gathering all the relevant data required, both financial and non-financial. For the less savvy client that could involve going through reams of paperwork and analysing the current expenditure. The client may be totally unaware of the cost of their current lifestyle. The financial adviser can assist the solicitor in understanding any specific issues they need to be aware of in relation to the pension or investment holdings for both parties. This would also include providing a list of questions to ask in relation to the spouse's information.

Where there are joint protection policies in existence, the adviser can consider whether it is more appropriate to leave them in place or consider replacement policies.

Other areas to address are whether any endowment should be assigned, surrendered or sold, and each party's mortgage capacity.

Manage expectations

Managing your client's expectations is vital in divorce. If there is not going to be enough money to continue to lead their lifestyle, the client needs to be made aware of that as soon as possible. It may be easier for the client to accept this information if the message is given by both the lawyer and the financial adviser.

How long will the money last?

The settlement figure on its own is just a figure. It isn't obvious to the client how long that money will last, or how much they can spend each month. A financial planner can work through that exercise with a client to show them whether they can afford to spend the amount they wish and not run out of money. If the client is likely to run out of money in their lifetime, the financial planner will provide financial planning strategies for how this may be addressed.

How should the assets be divided?

It's not unusual for one party to want to keep the house and the other to want to keep the pension. Although the house may be the most emotionally appealing option for the first spouse, it's not necessarily the best option for them long term. What will their income be at retirement?

A financial planner will look at the various options and demonstrate, for example, the financial effect of downsizing now and taking some pension share, as opposed to taking the house and no pension. It may be that one spouse still wants the house because they want some stability in their life, particularly if there are young children living at home. But at least they will understand the implications of this and will hopefully address the issue at a later stage, when they are feeling more able to make that decision.

Which option is most suitable for the client depends on their specific goals, priorities and objectives. The adviser can work alongside the family lawyer to review the various settlement options and advise on the most appropriate course of action.

The family lawyer's role

Financial advisers are key referrers for family lawyers. They are trusted advisers to whom clients turn when they are considering their options, and their professional recommendation carries great weight. But they are frequently asked questions that are outside their comfort zone. The sort of scenarios where financial advisers may reach for the phone to the lawyer could include:

• the client who has retired and can no longer afford to pay maintenance to their ex-spouse at the rate set by the court;
• the parent who may have to remove their child from private school because their ex-spouse has moved abroad and stopped paying the fees;
• the client who is desperately unhappy in their marriage but is scared their other half will make the family assets 'disappear' if they initiate divorce proceedings.

The financial adviser cannot advise about these issues but knows someone who can!

How do you find a lawyer or financial adviser you can work with?

We all know family lawyers come in all shapes and sizes, and financial advisers are no different. Both professions have their share of the pompous, the malodorous and the less-than-entirely-competent. Resolution membership does not come with a cast-iron guarantee of excellence, of course, but it is a very good starting point. You can be reassured that a Resolution family lawyer will adhere to the code of conduct and a Resolution-accredited financial adviser will have the necessary skills to help a client going through a divorce or separation.

For many clients, a financial settlement following divorce or separation is their only chance of securing financial security for themselves and their children. It is therefore very important that they fully understand all the legal and financial options presented to them and are able to make informed decisions. Resolution members should be their first port of call.

This article was published in Resolution’s 'Review' in May 2014.

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