Financial advisers are missing out on a £500m divorce market as the majority of divorcing couples do not seek professional financial advice.
National financial advice firm, Continuum, has warned of this opportunity ahead of the closure of the Ministry of Justice consultation into divorce finances.
The Personal Finance Society has estimated the divorce and separation advice market to be worth around £500m a year in England and Wales, but financial advisers are still failing to engage with family lawyers and other mediators to offer their services.
The Ministry of Justice is currently undergoing a major public consultation, launched in June, proposing changes to divorce finances in an attempt to clarify the courts’ approach to financial settlement at divorce. The consultation closes on 14 August.
Continuum said it would like to see more separating couples signposted towards taking financial advice and/or guidance.
Women, in particular, often lose out financially on divorce where they have not taken professional financial advice, with many unaware of their rights. While courts are there to divide assets fairly, research shows women see their household income drop significantly post-divorce and frequently waive rights to critical assets like pensions.
When couples separate, the financial focus is almost always on the family home, but pensions are often one of the largest assets. By the time people realise pension sharing can form part of the financial settlement, important decisions may already have been made.
A shocking two thirds of married pension savers do not think that pensions can be included in financial settlements at divorce. This is a particular risk to women, who are statistically more likely to experience a greater reduction in household income after divorce and continue to face a significant pension funding gap.
“One of the biggest misconceptions I come across is that the family home is the most valuable asset during divorce. In reality, the pension is often worth considerably more, yet many people don’t realise it forms part of the financial settlement until decisions have already been made.”
“Financial advice shouldn’t be seen as something that happens once the divorce has been finalised. In many cases, the greatest value comes beforehand, helping clients understand the long-term financial impact of the decisions they’re making, particularly around pensions and retirement planning.”
Laura Duncan, Independent Financial Adviser at Continuum
Recent reports from the Department for Work and Pensions and the Pensions Commission have reported a widening gender pensions gap. Many women not only accumulate poorer pension provision themselves, but are also less likely to know the value of their own pension, let alone their spouse’s.
The cost of divorce can be more expensive than a lot of people realise. While the court application fee currently stands at just £612, The Relationships Foundation’s Cost of Family Failure Index estimates that divorce costs the UK £47.31bn per year.
