While the services of a solicitor are often considered essential during divorce proceedings, many people overlook the role of a financial advisor. Whether or not you get a financial for your divorce depends on various factors, including the complexity of your financial situation, the size and nature of your assets, and your own financial literacy.

When is it advisable to get a financial advisor for your divorce?

  • Complex asset portfolios: If you and your spouse have complex finances—including investments, multiple properties, pensions, trusts, businesses, and international assets—seeking the services of a financial advisor is almost always advisable. These scenarios require in-depth analysis to ensure fair division and to avoid costly mistakes. Misunderstanding the valuation or liquidity of certain assets could have long-term consequences.
  • High-value divorces: For high-net-worth individuals, the stakes are higher, and the division of wealth can be more contentious. A financial advisor with experience in divorce situations can help evaluate tax implications, recommend asset division strategies, and project the long-term impacts of settlement proposals.
  • Pensions and retirement planning: Pensions are one of the most misunderstood and overlooked assets in divorce settlements. Given the technicalities of pension sharing, offsetting, or earmarking, a financial advisor familiar with pension legislation can be indispensable. Mistakes here could result in significant financial hardship later in life.
  • Income and lifestyle assessment: If there is a question of spousal maintenance or child support, a financial advisor can assist in projecting realistic budgets, income requirements, and lifestyle sustainability post-divorce.
  • Business ownership: If either spouse owns a business, the valuation and potential liquidity issues can be highly technical. A financial advisor working with forensic accountants may be needed to ensure that the business’s value is correctly assessed and that any settlement is fair and sustainable.
  • Rebuilding your financial life: Post-divorce, many individuals face the challenge of rebuilding their financial life, often with a different income level, reduced assets, and new responsibilities. A financial advisor can help you set new goals, manage settlements wisely, and create a secure financial plan for the future.

When might you not need a financial advisor?

  • Amicable and straightforward divorces: In cases where the financial situation is relatively straightforward—such as minimal assets, no children, and mutual agreement on how to divide everything—it may not be necessary to engage a financial advisor. A solicitor might suffice for drawing up the legally binding agreements.
  • Low asset cases: If both parties have limited assets and are not dealing with pensions, investments, or complex property ownership, the cost of hiring a financial advisor may outweigh the benefits.
  • Strong financial literacy: Some individuals, particularly those with strong backgrounds in finance, may feel confident navigating the financial aspects of a divorce themselves. However, it is important to remember that emotional stress can cloud judgment, so even financially literate individuals might benefit from a professional’s detached, objective viewpoint.

Areas commonly overlooked that could benefit from financial advice

  • Tax implications of asset division: Failing to understand the tax consequences of asset division can be costly. For instance, transferring properties, shares, or other investments might trigger capital gains tax or income tax liabilities. A financial advisor can highlight these risks and recommend the most tax-efficient strategies.
  • Pensions and lifetime allowance: As previously noted, pensions are frequently mishandled. Issues such as the lifetime allowance (LTA), annual allowance breaches, and the nuances of different pension schemes (defined benefit vs defined contribution) can have profound financial impacts.
  • Hidden costs of settlements: What might appear as a fair settlement on paper might not be equal when factoring in liquidity, maintenance costs, tax, and inflation. A financial advisor can help model these factors and provide a clearer picture of what each party will end up with.
  • Impact on future borrowing and credit status: Divorce can negatively affect your credit status, borrowing capacity, and access to financial products like mortgages. A financial advisor can assist in managing these aspects.
  • Overlooked liabilities: Dividing debts, mortgages, and other liabilities is just as important as dividing assets. A financial advisor can help ensure these are properly accounted for and apportioned fairly.

How do financial advisors and solicitors work together?

While solicitors provide the legal framework for the divorce process, financial advisors provide the financial clarity needed to make informed decisions. Their roles complement rather than replace each other.

Solicitor’s role:

  • Advise on the legal rights and obligations of both parties
  • Draft and file legal documents (such as the Consent Order or Clean Break Order)
  • Handle negotiations and court representations where necessary
  • Ensure compliance with family law, particularly the Matrimonial Causes Act 1973

Financial advisor’s role:

  • Provide detailed financial analysis and forecasts
  • Assist in the valuation of assets and liabilities
  • Recommend tax-efficient strategies
  • Support clients in understanding complex financial products and implications

The ideal setup is for both professionals to work collaboratively, ensuring that the legal settlement reflects the best financial outcome.

What if the other side has a financial advisor? Could this be an issue?

If your spouse is using a financial advisor and you are not, this could potentially create an imbalance in negotiations. Their advisor may uncover opportunities, tax savings, or settlement structures that are more beneficial to them. You might not recognise these nuances without similar advice, putting you at a disadvantage.

Additionally, if the other side presents financial reports or proposals prepared by their advisor, you may struggle to critique or challenge these without professional support. In contentious cases, hiring your own financial advisor ensures you have an expert who can identify inaccuracies, biases, or strategic omissions in the other side’s documentation.

While solicitors can challenge financial claims, they are not financial experts, and gaps in financial understanding could affect the final settlement if left unchecked.

So, should you get a financial advisor for your divorce?

Ultimately, whether you should hire a financial advisor for your divorce depends on your personal and financial circumstances. For many, the stakes are simply too high to rely solely on legal advice without comprehensive financial analysis.

When in doubt, at least seeking an initial consultation with a financial advisor can help you assess whether their ongoing support would add value to your situation. Many financial advisors offer a one-off divorce financial health check, which could help you decide if further involvement is necessary.

In cases of complex, high-value, or contentious divorces, financial advisors should almost always be a part of your divorce team—working alongside your solicitor to ensure you emerge with a settlement that protects your long-term financial well-being.