April 2019

Financial planning is important in all stages of life. A good financial plan can help you get from where you are, to where you want to be, whilst enjoying a good quality of life along the way.

However, events often occur that no planning can easily take into consideration - and this is especially true of divorce/separation.

After separation, it is extremely important to review your affairs in order to rebuild your financial plans and ensure they are still on course to achieve your objectives. The starting points for your plans need to ensure that:

  • You have enough set aside as a day-to-day emergency fund
  • There is some form of protection in place to cover liabilities
  • Enough of your savings allocated for medium-term savings
  • You are making provision for the longer term in the form of a retirement nest egg

Making the Right Decisions

Typically, one party in a couple makes most of the financial decisions and the other one is less interested in doing so. For those who have never had to deal with these issues before, suddenly being in sole charge of their finances can be a daunting prospect. However, the process is made much easier by utilising the experience and guidance of a financial planner.

Start Planning Quickly

It is always useful to engage with a financial adviser at the early stages of the separation process. This means that the adviser will be able to help your solicitor decide how the asset base should be apportioned between the couple. Building upon that, the advisor can then help assess the impact of the separation with regards to decreasing your pension fund, for example. There may also be the need to consider housing costs for those who have moved out of the marital home.

Cash Flow Modelling

Cash flow modelling is an important way of assessing the impact of any of the recommendations made by a financial adviser or lawyer. This can also be used as part of the separation process when assessing a fair and equitable split of assets between the two parties, based upon their needs and circumstances.

At Becketts, we have built our own cash flow modelling tool to help clients and lawyers understand the implications of different degrees of asset spitting. This has proven invaluable in setting realistic expectations for all parties with regards to the type of income which can be generated from a pool of money.

In many cases this has led to one of the parties receiving a greater share of the asset base than originally planned for, as a demonstrable need can be proven.

However, cash flow modelling should not be used as a “once only tool” and should be used at regular review meetings with your advisor to ensure that the plans laid out after separation remain fit for purpose in the years ahead.

Challenging Your Decisions

Part of the job of a financial planner is to help educate clients about the implications of the decisions made and, sometimes, this means encouraging clients to take slightly more risk with their investment assets to provide better returns.  The opposite is also true where a client’s circumstances mean that de-risking their investments would be more appropriate for them.

Holistic Planning

All areas of financial planning need to dovetail to provide the twin goals of a comfortable retirement and an enjoyable lifestyle. Everybody has different requirements for both goals but experienced advisers know that the themes generally tend to be the same for everyone: namely that they do not want to scrimp and save every penny while working; and neither do they want to pay too much tax (before, during or even after retirement).

A competent, well-qualified, truly understanding financial planner will spend time with you discussing what is important to you and helping you plan your life following the changes.

Gavin Wood

Chartered Financial Planner, FPFS
Director at Beckett Financial Services

gavin.wood@beckettinvest.com

Tel: 01284 773776