Guiding Clients Through Divorce: How Your Role Can Be Transformational
5 min read
Divorce is not just a legal event. It is one of the most emotionally and financially destabilising experiences a person can go through. By arriving early in the proceedings, personal finance professionals are in a unique position to help clients navigate divorce well.
The probability of advising a client who is going through divorce is not a niche consideration. Forty-two per cent of all marriages in the UK end in divorce. Over 100,000 divorces in the UK were recorded over a 1-year period. The average length of a marriage before breakdown is just seven years. The average age of divorce is 44 for women and 46 for men with the numbers of people separating in their 50s, 60s+ rising. For women in particular, the financial consequences of a divorce can be severe and long-lasting. Many women may simultaneously be navigating the menopause, the symptoms of which are vast.
The Emotional Landscape: Understanding Your Client’s State of Mind
Regardless of how composed they appear, everyone going through divorce is a vulnerable client. Research suggests people retain only 10 to 20 per cent of advice given during periods of acute emotional stress. The Kübler-Ross Change Curve is a useful framework here: whether a client has initiated the divorce or been devastated by it, they will cycle through shock, denial, anger, depression and eventual acceptance. Trying to negotiate financial settlements during the anger phase rarely leads to good outcomes. There are no hard and fast rules about how quickly divorce proceedings must begin. Sometimes the most valuable thing we can do is give a client permission to pause.
The Legal Framework: What Advisers Need to Know
Divorce in England and Wales changed significantly in 2022 with the introduction of no-fault divorce. Couples can now file jointly or individually without having to assign blame. The process involves three parallel tracks: legally ending the marriage, making arrangements for children, and agreeing a financial settlement. These can run concurrently or separately, and on average the financial separation alone takes 62 weeks. The law differs in Scotland, where the process is generally more prescriptive and faster. It is also different in Northern Ireland.
In England and Wales, the principle of fairness governs financial settlements, with an equal split as the starting point for longer marriages. Needs always trump everything else: housing, income, and the welfare of any children must be addressed before any other considerations. Only where there is surplus wealth does the concept of non-matrimonial assets, such as pre-marriage pensions or inherited assets, become relevant. In Scotland, non-matrimonial assets are excluded by default.
A critical point that cannot be overstated: clients must not apply for the final divorce order before the financial settlement is concluded. Doing so can have serious and irreversible consequences for their financial position.
Where Financial Planners Add Real Value
Pensions are where proceedings so often grind to a halt. Defined contribution pensions are relatively straightforward to value, but defined benefit schemes require a cash equivalent transfer value that may not reflect the true worth of guaranteed income. For DB pensions above £200,000, a formal pensions report written by a Pensions on Divorce Expert (PODE) is recommended. Crucially, these reports provide valuations but do not always drill into the detail of specific scheme benefits.
Beyond pensions, the Form E (the financial fact-find required by the courts) is often completed poorly by clients who significantly underestimate both their spending and their capital needs. Helping clients complete this document accurately and compellingly is where we can make an immediate and tangible difference. Errors in pension valuations, where clients record income rather than transfer values, are common and can go unchallenged by family lawyers who have little financial product training.
Cash flow modelling is perhaps our most powerful tool in this context. When a client has received an offer and is agonising over whether to keep fighting, being able to show them clearly and visually that this settlement is sufficient to maintain their lifestyle can be life changing. It can also reveal where an offer is inadequate providing evidence to negotiate further.
Routes to Settlement and Our Role Within Them
There is a spectrum of approaches to reaching a divorce settlement, from informal kitchen table agreements through mediation, collaborative law and resolution, all the way to contested court proceedings which can take two or more years and cost upwards of £200,000. Financial planners can actively support less adversarial routes.
Increasingly, financial advisers are being asked to act as financial neutrals, working with both parties simultaneously to provide impartial financial clarity. I have seen first-hand that when both parties are equally informed and empowered, negotiations are less destructive, outcomes are fairer, the process is shorter, costs are lower, and children suffer less collateral damage. Whether a firm chooses to work with one party or both is a matter for the individual practice to decide, but the conversation about whether to act as financial neutral is one worth having.
Raising Our Game as a Profession
The legal profession receives very little training on pensions, investments, tax and financial products. Family lawyers who understand what we bring to the table are powerful referral partners. Divorce is prevalent, it is painful, and it is financially catastrophic for those who navigate it without proper support. We have the skills, the knowledge and the tools to make a genuine difference at one of the most difficult moments in our clients’ lives.
Watch my POWER Webinar
I cover the divorce process in much greater detail in my recent POWER Webinar and address some misconceptions around the menopause, prenuptial agreements, non-matrimonial assets, and inheritance received during proceedings.
Helen Howcroft is Private Client Director, Head of Women’s Financial Advice & Senior Chartered Financial Planner at Atomos Wealth
