For clients getting divorced, financial planners can be invaluable. But of course if you’ve never used one before, it can be hard to differentiate between them and the other kinds of financial advisor, and perhaps hard to work out how they will add value.
The aim of this post is to explain how financial planners work and why they might be helpful as you navigate your divorce.
What is a financial planner and how do they differ from a financial advisor?
The role of a financial planner is to help you to live the life you want with the funds that you have, or are likely to earn.
The role of a financial advisor is to help you maximise your investments.
Many financial planners will also be financial advisors, but it is a separate skill set.
How does it work?
A financial planner will usually start with your estimate of anticipated monthly income and outgoings. They will also look at your current assets. If you are in mediation, then this will already have been gathered and is easy to give them. A financial planner will talk to you to find out what future additional expenses you wish to have in your plan that you may not yet have considered.
For example you may need a new car every few years, or you may wish to support your children through university, or pay for their wedding. The financial planner will also consider potential house moves/downsizing, job promotions or reduction in hours. They will then run this through their software to project a ‘future income need’from now and for the rest of your life.
The specialist software, guided by the financial planner, takes into account your assets and income and shows whether you will have enough to cover your monthly and one-off expenses after everything (inflation, tax, investment returns etc.). You can even run through the ‘what ifs’ to see how different scenarios might play out.
How does this help with a divorce?
In cases where couples have got enough money to meet their immediate needs but want to be sure that they both have enough in the future, then financial modelling can be very helpful. It allows you to feel more secure that you will have enough and where that money will come from. Instead of each of you (or your solicitors) fighting to get as much as you can from the other because you are scared about whether you will have enough, the financial modelling can tell you if you will have enough. They answer one of the biggest fears of people going through a divorce: ‘will I be secure financially?’
Another great advantage of financial planners in the divorce process is that they can work for both of you together (unlike solicitors who can only represent one of you.) Therefore they can work with you both to model different options and help you to work out what is going to work best for both of you.
How much does it cost?
Obviously it varies and you will need to ask for a quote. But as a guide, a planning report will cost in the region of £1,500-2000. Many financial planners are also able to help advise on investments and provide pension reports.
What qualifications should I be looking for?
There are two types of accredited financial planner: a Chartered Financial Planner and a Certified Financial Planner. They both have their own professional bodies, with their own list of members. Chartered tends to be the ‘gold standard’ these days.
Where can I find one?
In honesty, there are not yet large numbers of accredited financial planners experienced in working with divorcing couples. So to get someone who knows what they are doing, I would suggest a two-prong search.
First of all, I would look for Chartered Financial Planners in your area by checking this database https://www.cii.co.uk/membership/join-us/chartered/chartered-firm-search/#next
There is no reason why you shouldn’t use a Certified Financial Planner, but their professional body do not have a searchable database.
Once you have got your shortlist of local Chartered Financial Planners, then I would check that they have experience in working with divorcing couples. To do that, your best option is to check out the Resolution database https://resolution.org.uk/find-a-law-professional/. As I understand it, a listing does not guarantee that the finance professionals have plenty of experience in working with divorcing couples, so you will need to ask them at your preliminary interview.
Resolution is a membership body, mostly of lawyers but also financial planners, who work to resolve issues on divorce in a constructive way.
Don’t worry that the search tool says ‘find a law professional’, just make sure you put in ‘financial professional’ in the services offered box.
Their search tool is slightly annoying as you can only search for up to t20 miles from your postcode and they don’t have that many financial planners listed. Therefore, if I search in my area, nobody comes up. To get around this, I suggest that you put in names of local large towns that may be a little further away. In these days of so much remote working, it probably matters more to get someone with the right experience than someone near.
תגובות