As an IFA, you may get approached by clients who are weathering some of life’s most difficult storms.
One such “storm” is divorce. Divorce is not only a financially strenuous time for those involved, but its emotional weight can also lead individuals to make rash choices with their money.
Often, individuals seek financial advice only when they experience a major milestone – and this means that, as an adviser, you may meet them at a particularly painful time in their lives.
In addition to acquiring new clients facing life challenges, your long-standing clients could also encounter bumps in the road and turn to you for help.
In any case, divorce rates are increasing – FTAdviser reports Q2 2022 saw a 22% increase in divorce applications compared with the previous year, and an 8% increase in Q3 2022 too.
From an IFA’s perspective, it is crucial to understand the financial and emotional pain points your divorcing clients might be experiencing – and how you can elevate your practice to help meet their needs.
So, here are four top tips for advisers working with divorcing clients this year.
1. Practising your soft skills can pay off when working with divorcing clients
When you meet a client who is going through a divorce, your first instinct might be to focus on the facts, and parse out their financial circumstances without delay. But it’s your “soft skills” – empathy, understanding, and listening skills – that will give you an idea of what that person really needs.
By simply listening to their worries as they go through the often tricky divorce process, you could:
- Gain an understanding of their immediate advice needs, such as the sale of shared property, pension sharing, or liquidating investments to pay fees
- Understand how their financial circumstances might look once the divorce is finalised
- Gauge their long-term goals for life beyond their marriage.
Ascertaining these details before wading into financially technical conversations can help you pinpoint where your client’s priorities are.
Not only may this enable you to provide a better bespoke service for this individual, but it can avoid wasting time for both parties, especially when dealing with a time-sensitive issue such as divorce.
2. Be aware of conflicts of interest
If your services have been retained by a couple in the past, it is important to be wary of conflicts of interest when the marriage dissolves.
After the “no-fault divorce” bill passed in 2022, if the couple are separating collaboratively without one party needing to “prove fault”, it may be possible for you to work with both individuals as they tease out the financial details of their divorce.
However, in some cases, IFAs risk entering ethically ambiguous territory here. If you’re providing guidance that aims to secure the optimal financial agreement for both parties – especially if legal arguments are involved – you may be stepping into a direct conflict of interest.
So, it could be prudent to ensure you are not engaging with parties who are in conflict over shared assets. As a member of the Corbel Partners network, you will receive ample help with due diligence, compliance, and research, all of which could help you navigate this difficult terrain.
3. Educate yourself on common financial mistakes made by divorcees
Finally, remaining educated and up to date on issues divorcees are facing today can help you provide great value to clients who need your help.
For instance, you may be surprised to learn that according to PensionsAge, in the period between January 2016 and August 2022, less than 1 in 8 couples formally split their pensions during a divorce settlement. Indeed, in many settlements, one party retains their shared property, while the other may benefit from receiving most or all of the couple’s pension wealth.
While this might seem like an equal split now, one party could be left with a significant shortfall in retirement – and if your clients are looking to pursue a similar arrangement, it’s important to advise them of the risks.
This is just one example of a potentially risky financial split divorcees might agree to in a rush. Without up-to-date, knowledgeable advice, they could lose significant capital in their settlement and put their financial future at risk.
So, as an IFA, remaining connected to the financial issues facing divorcing couples in today’s world could serve both you and your clients well in future.
4. Turn to your advice network for guidance
Have you ever met a new client and felt out of your depth?
Whether you’re recently qualified or have decades of experience behind you, divorce cases can be highly complex. As such, the due diligence, research, paraplanning help, and general legwork required to properly advise them might feel overwhelming.
That’s where being part of the Corbel Partners advice network can add real value to your practice.
We provide our IFAs with:
- Compliance support, including access to state-of-the-art software, marketing and documentation help, and FCA guidance
- Training, including one-to-ones with our firm heads David and Paul, Charted Insurance Institute (CII) exam training courses, and workshops delivered by third-party specialists
- Paraplanning and administrative support, so you can focus on providing a bespoke service for your clients.
So, whether you’re working with divorcing clients or those experiencing a similarly challenging life event, we are on hand to provide industry-leading guidance.
Get in touch
To improve your knowledge, soft skills, or the overall quality of your practice, join us. Email email@example.com or call 01925 637891.
This blog is for general information only and does not constitute advice.