Article How advisers can best support clients going through a divorce

Divorce is a difficult and emotional experience, and it's often accompanied by significant financial worries. Assets need to be divided and budgets need to be revised, and this upheaval can greatly cloud someone’s financial outlook.

During this turbulent time, you can offer your clients vital support – providing clarity, stability, and a path to financial security. With that in mind, here are some strategies that could help you assist your clients navigate divorce.

Handling the emotional landscape

Grief, anger, and other emotions associated with divorce can cloud judgement, making decision-making more challenging. Soft skills can help in these situations – clients might appreciate an approach that prioritises listening, empathy, and understanding. By building trust and a safe space for open communication, you can lay the foundation for a strong and lasting relationship.

Don’t forget to look beyond your clients’ finances and discover what’s most meaningful to them as well as what motivates and fulfils them. By gaining a deeper understanding of your clients’ needs, you can tailor your advice, encouraging them to focus on the life they want after their divorce. As part of this, our financial wellbeing research has found that only one in four people know what experiences bring them joy and purpose.¹ You could help your clients identify what will bring them happiness in the present and the future.

Adopt an alternate advice approach of becoming a wellbeing maximiser

Being a ‘wellbeing maximiser’ could help you build trust with clients especially, for those who are going through a divorce. Wellbeing maximisers focus on gaining an in-depth understanding of their clients needs and motivations alongside their financial requirements. With both of these in hand, a tailored plan can be created to suit each client. To understand more about being a wellbeing maximiser, read our article that explores the idea in more detail.

Assessing the financial landscape

Early on in the divorce process, you can help conduct a comprehensive financial inventory for your client, detailing their assets, liabilities, income, and expenses. This will form the basis for informed decision-making when the time comes to split up assets.

Budgeting and managing marital debts

If your client’s financial safety net will be impacted by the divorce, you could consider offering budgeting training to help them build it up again. Your expertise might also be needed to manage any outstanding marital debts. Of course, not all debts are problematic. However, if your client now has responsibility for a proportion of marital debts but has a reduced income as a result of the divorce, this could require planning.

The valuation of business assets

As well as assisting your clients in understanding the value of marital assets such as homes, investments, and pensions, you may be able to help with the valuation of business assets. This can be a complex area of financial planning and your clients might not have much understanding of how businesses are valued.

Because financial situations change, it’s also possible the inventory will need to be amended during the divorce process. Scheduling regular check-ins to ensure records are updated could help your client, and their legal team if they have one, make the best decisions possible.

Navigating asset division

Asset division can be one of the most financially challenging aspects of divorce. So, you could explore creative asset division solutions such as phased buyouts or asset offsetting in order to minimise asset sales and maximise financial security for your client.

Note that in many divorces, people feel that assets aren’t split equally, and that one party is favoured. You could help clients understand the trade-offs of different asset divisions and advise what assets would be best to retain after the divorce.

Of course, your knowledge of the tax environment will be important here. By explaining the tax implications of asset divisions, you can help clients better understand their tax liabilities.

Splitting pensions

Pensions are likely to represent a substantial proportion of a couple's net wealth. They can also play an important role in supporting them in later life, helping them achieve the lifestyle they expect in retirement. So, it’s worth explaining the pros and cons of different pension-splitting strategies such as pension sharing, pension offsetting, and pension attachment.

Exploring creative solutions can be effective here. For example, if one party has a much larger pension than the other you could show them how pension offsetting could help balance things out. To understand about the gender pension gap in more detail, read our article, What's next for the gender pensions gap?

It’s worth noting that research shows less than one in eight couples formally split their pensions during a divorce settlement.² In many cases, one party retains the marital home, while the other receives most or all of the couple’s pension wealth.

Preparing for the next chapter

In a divorce, it’s common for people to be worried that they might not have enough money in the future. This fear often stems from the uncertainty associated with income changes, asset division, and potential spousal support obligations.

Use cash modelling

Here, your clients could be reassured by cash flow modelling showing them what their lives could look like financially in the future. Our research has found that having a firm picture of their future self can help clients achieve their goals.

Re-setting budgets and long-term plans

You could also help clients develop realistic budgets for their lives post-divorce. These budgets could account for potential changes in income – incomes often drop in the years following a divorce – and increased living expenses. Specifically, our research has found that people who write out a financial plan do better financially.

This part of the process is also a good opportunity to discuss clients’ long-term financial plans. For example, you could show them if they’re on track for retirement and if they’re not, how they can get there. You could also take the time to discuss intergenerational wealth planning.

All these points encompass good financial wellbeing. To learn more it and tools available to help you and your clients, visit our financial wellbeing hub.

Guiding clients towards financial independence

Overall, there are many ways that you can potentially support your clients undergoing divorce. From exploring asset division solutions to helping them plan for retirement, you can play a crucial role in helping them adjust to their new reality.

Bear in mind that each divorce situation is unique, so taking a personalised approach and guiding each individual with compassion and expertise could be key. By tailoring your support, you could empower each client to navigate their individual journey towards a secure financial future.