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More retirees than ever are choosing to separate in later life, with one in four divorces now happening over the age of 501. The end of such a significant chapter is never easy, but the strain of divorce isn’t purely emotional. Divorce can also have a huge impact on financial wellbeing, particularly as clients approach retirement. Financial advisers can play a critical role in helping divorcing couples.
|Emotional and psychological||Financial|
|Stress and depression||Actual legal costs of divorce|
|Anxiety||Protecting the financial position of children or grandchildren|
|Concerns about wellbeing of children||Family home|
|Long-term savings and investments|
|Debts and credit worthiness|
Our research shows that more than one third (38%) of over-50s consider their divorce to be financially unfair, yet just 3% of people seek financial advice when going through the process. Over-50s are four times as likely to seek advice from friends when going through a divorce, as they are from a financial adviser2.
It’s particularly crucial for women to seek financial advice; 31% of women in our research said they were financially worse off in the year following their divorce, compared to just 20% of men2.
A third of financial advisers also said that clients got in touch with them too late in the divorce process2. As an industry, it’s important that we help clients understand that the earlier they take advice, the better their outcome is likely to be.
Half of all divorcing couples look to the family home as the most important asset to consider when splitting their wealth, followed by possessions and cash2.
Just 12% of couples consider pensions when dividing assets with their partners2. In fact, 24% actively waive their rights to their partner’s pension, as the emotional cost of battling over it is too high3. In divorcing couples over 60, this percentage increased to 31%2, despite the fact that retirees in later life have less time to make up any shortfall in income following a divorce. This is often to the greater detriment of women, who are more likely to have smaller pension pots.
Divorce is challenging and can have a significant emotional toll on clients. Advisers may witness clients begin to "burn out" because the experience is often overwhelming. To support clients through such a difficult time, it’s essential that advisers approach the subject of divorce sensitively and empathetically.
More than ever, clients will need clear explanations about the advice process to understand the rationale behind their guidance. This is particularly pertinent for older people; while many may have more economic resources to help them cope with the challenges resulting from divorce, they also tend to have fewer social resources to support them emotionally and practically4.
Providing an environment of trust and support will mean clients feel more comfortable taking the advice of professionals, which enables advisers to become advocates for their clients' future.
Henry Ford said that, “if everyone is moving forward together, then success takes care of itself” – and it’s true that it’s important that advisers build relationships with other professionals to secure best outcomes. Clients of one profession will often require the services of another.
In our recent webinar, 'Later life divorce and the impact on financial planning' it was said that many private client solicitors have at least one financial adviser they have worked alongside in their career who they would recommend to their clients. Likewise, financial advisers will often suggest their preferred solicitor contacts to their clients.
When dealing with divorce, advisers should work together with solicitors to achieve the best for their clients. A great way to establish good working relationships is to talk. Roundtables, seminars, and networking events even virtually are a great way to spark conversations and exchange knowledge.
Divorce causes an inevitable strain emotionally and financially, but with good financial planning and sensitive advice, an adviser can guide a couple to make the best of the fresh start that awaits them.
We specialise in helping advisers support their clients to achieve their financial goals in retirement.
If you’re interested in finding out more, our dedicated team would love to hear from you.
Please leave us a message using our contact form and we can arrange a time to talk that’s convenient for you
1ONS: Divorces in England and Wales: 2017
2Opinium Research ran a series of online interviews among a nationally representative panel of 2,008 UK adults aged 50+ who are divorced from 19 to 23 September 2020
3A Guide to the Treatment of Pensions on Divorce, Pensions Advisory Group, 2019
4Gray divorce and mental health in the United Kingdom, Tosi & van den Broek, 2020
We’re living for longer and choosing more varied retirements than ever before. Although we don’t know how long an individual may live, we can take steps to help clients deal with the risks posed by longevity.
In times of uncertainty, some clients may benefit from the security, peace of mind and flexibility that fixed term annuities can provide.
Estate planning with the family home has traditionally been difficult. We discuss how lifetime mortgages could provide an alternative way to use property in Inheritance Tax (IHT) planning.
This website is designed to give professional financial advisers information and tools that they can use to help control and develop their business and should not be relied upon by private investors or any other persons.