Listen: Planning your finances after separation or divorce

Planning your finances after divorce and separation

Jack Whelan:
Good day. It’s Jack Whelan here and welcome to The Separation Guide podcast number five. As you know by now, I’m a barrister and a mediator. And today I’m on the Central Coast and I’m joined by Steve Fort.

Steve is a financial planner and Director of Invest Blue; growing financial planning and financial advisory firm. Steve, welcome.

Steve Fort:
Thank you very much, Jack.

Jack Whelan:
It’s great to see you and thanks again for your firm’s involvement in The Separation Guide network.

Steve Fort:
Thank you. It’s fantastic to be involved with what you’re doing here with The Separation Guide. It’s a really tough time for people going through a divorce, so it’s great to see that there’s somebody trying to bring together a group of professionals to really make it easier for our clients.

Jack Whelan:
Terrific. One of the things that you and I have discussed, one of the things that I’ve learnt already, having a lot of discussions with a lot of different service providers on the central coast is you’ve got a bit of a reputation for being the go to man for helping people through, which is massively to your credit. With that in mind, with that experience and that expertise, Steve, doing this well is hard for many people because it is a difficult time. It’s often hard to think straight and there’s a lot at stake. From your perspective, from the financial planner’s perspective, what does it take for people to separate or divorce well?

Steve Fort:
Yeah, sure. I think we’re looking at it like that because divorce really is such a difficult process for anybody to go through, and it does impact people’s mental health, it impacts their family and their relationships, their social networks, but of course we’re focusing on the financial side of things. From a financial planner’s point of view, we tend to find that clients do it well or have a better experience when they’re more realistic, when they’re focused on achieving an outcome where they’re trying to sort of be fair to all parties that are involved. When they understand that achieving an outcome might not be perfect for them, but it’s close. So not getting some immaterial matters get in the way. Certainly, still being able to communicate with their previous partner helps dramatically. And of course, putting their family first.

Steve Fort:
And I think it’s when people have those sort of characteristics at the start that things tend to be a little better. But I think in doing it well and going through the process well, being fully informed really helps. So understanding their finances, articulating, and being able to articulate to us what their best possible life is and what their goals and dreams and objectives are. And of course a real willingness to seek and listen to advice.

Jack Whelan:
Okay. How regular is it for people not to be across their own financial situation? Is that something that you’re surprised by, for example? Would it be the case that quite regularly people would come here and really not have a great sense of what their pool of assets is for example, what their liabilities are? Can that happen?

Steve Fort:
I think it can happen and you tend to have the two different types of people when you’re coming to this situation. You’ve got the client that’s been completely surprised by what’s occurring. They don’t have a thorough awareness at all of their financial circumstances and they haven’t been involved in managing their financial circumstances, particularly when there’s businesses involved, they’re a little more complex. It can be quite common.

Jack Whelan:
Okay. And what to do in that circumstances? Because that can create a power imbalance if you’re representing one part or giving financial advice to the one partner. In those circumstances, how do you here at Invest Blue and you yourself take people on that journey, because plainly they need to be educated in what their own asset base is in order to be able to start their negotiation with their partner.

Steve Fort:
Yeah, absolutely. I think there’s two parts to it. There’s the understanding of the financial circumstances and their asset base and there’s the understanding of what is important to them in their life and where they want to head and what we do at Invest Blue is really trying to address both. Being prepared for this is really the service that we provide and we do that by making sure that we start to understand as best as we possibly can what the life that they want to achieve is, what their goals and objectives are, but then we also look at their financial side of things and often we’re working with solicitors or accountants to be able to try and fully understand their circumstances.

Jack Whelan:
In respect of those two, let’s call them work streams, the first work stream where you help someone to understand what their own financial base is, what actually needs to happen there? For people who actually don’t know or haven’t been running a business or their partner’s had more of the financial responsibilities, what actually needs to happen? What advice can you give to people to get that knowledge?

Steve Fort:
Sure.

Jack Whelan:
Is it case of, “Look, you might need to get your own independent accountant” or are there other practical tips you can give?

Steve Fort:
Yeah. We have a detailed process that we go through with every client that we see at Invest Blue and really when a client’s going through a divorce or a separation, it isn’t any different. What we do is obviously understand them and their circumstances. Now, whether that means engaging a solicitor or an accountant, that may be something that’s appropriate to do. Most people through starting to work through their finances can gather that themselves. It just really depends on the complexity. We have a lot of tools that we use. We’re able to speak to a lot of the financial service providers and products and information and gather that information for the client as long as we know where to look. And then we also start to really understand things like cash flows, budgeting, expenses. Because that’s quite often the hardest area to understand.

Steve Fort:
Again, we use a lot of tools and technology to be able to gather information for the client, we basically get 80% of the work done for them and then get the client involved so that they can really apply the individual nuances to the things that we found out.

Jack Whelan:
Okay. Right. And would it be the case that often people would come, say to you and mention to you, “Look, I’m contemplating separation or divorce,” that often you could be the first port of call? Has that happened?

Steve Fort:
Definitely. It’s probably not the norm. We have a number of clients that clearly we look after and we’ll be discussing a lot of different things with them at their regular progress meetings, and there is quite often a discussion that occurs along those lines, but typically our clients we see as a couple. So it tends to be that we find out that there has been a separation or something’s occurred and now we need to decide firstly who is our client, because we’ve gone from two to one.

Jack Whelan:
Of course.

Steve Fort:
And then secondly, who we are best placed to help, of course. But I have had clients on any number of occasions call me up after a meeting and just go, “I just want to let you know that this is what’s actually happening at the moment.”

Jack Whelan:
Right. Okay. Again, in terms of developing the different networks to support The Separation Guide, it’s interesting how many different points of entry there are into that separation and divorce discussion. Sometimes it’s the accountant, sometimes it’s the financial planner, other times the family lawyer, sometimes the mediator, sometimes just a friend or an uncle or someone who’s been through it.

Steve Fort:
Yeah, we tend to find that. We also do get a lot of clients coming to us from a solicitor. We have a pretty large network of professional service providers that we do work with and they’ll know that they need some assistance on the financial planning on the personal advice side.

Jack Whelan:
So in effect of that second work stream, that on the assumption that someone will know what their financial assets and liabilities are, they’ll have a sense, as you mentioned, that you’ll work hard with people to get a sense of what it is that they need moving forward. Just explain that process to us if you can. It’s crucial for people to understand what they need and what they want. Of course, often depending upon what stage of the journey they’re at, they may be able to answer those questions, form good views, or they may not be. Often you’ll see people at different stages of the journey. How do you assist people in figuring out what it is that they actually want and need financially?

Steve Fort:
Yeah. Sure. We have a pretty detailed approach at Invest Blue when we engage with any family or any client, and the way in which we do that is, as I said, firstly we get to fully understand their circumstances. So understanding their circumstances to us is about, as I said, gathering all of the important financial information but really understanding their personal priorities, their objectives, and their best possible life that they can live. So that’s step one.

Now, when somebody comes to us that’s been, or at the start of a separation, I tend to find that we need to sometimes separate the short term issues to the longer term issues, because it can be really difficult to make long term financial decisions when their world’s just completely been turned upside down. So quite often we’re firstly starting to separate what are we actually being engaged here for. Is it some of those immediate things or is it the longer term things? We have a meeting that we run through. We have an agenda that we take all of our clients through to gather all of that information. Then what we do is we go away and do all of our research and we will come back and present what we think, in what we call our challenge meeting, what we think the clients should be considering. What are the areas of opportunity for them, what are the areas of risk or concern from our point of view, so that I suppose largely we can leave as many options on the table for their future as possible.

And that’s quite often where we’ll start it. It’s not often that a client that’s going through a separation will come and speak to us and they’ve got their future mapped out, because it’s as I said, it’s just all been turned upside down. So in that challenge meeting, we’ll actually get all of the information onto a big screen in our meeting room and we’ll outline and articulate what we call our lifelong cashflow modeling; so we’ll put their future up in front of them and start to go through various financial strategies and alternatives so that we can start to educate our clients to say, “these are your options and this is what it means for your future, and this is the impact of the kind of decisions that are in front of you if you go to option A, option B, option C,” that type of thing.

There’s a pretty detailed process that we work with and till we get to that point where we’ve said, “Here are your options, here’s the positives and negatives. Now, which way do you think you want to proceed within,” and that’s where we can of course help with the implementation and the establishment of those strategies.

Jack Whelan:
Okay. How do people react to that? In my experience in mediating, often when you are talking about the future and you’re achieving some resolution, it’s case specific of course, but often that tends to give people some hope. What’s your experience at the end of those challenge meetings? What does the … I’ll rephrase the question. What does a successful challenge meeting look like from your perspective and from your client’s perspective?

Steve Fort:
Yeah. To a degree, it is a sense of hope. I have had a number of clients in the past 12 months that have come and seen me that fit into the category of the partner that was not expecting this to occur. Coming in to that first meeting really very emotionally upset and very negative with obviously the situation and what’s ahead. So a successful challenge meeting for me is where they do walk away and they take the positivity that I’ve seen probably in the first meeting and to be able to say, “Actually, yes, I do have options.” And we typically will get that reaction. “I feel a lot better now. I understand that I’ve got choices and I’m able to go and positively engage with my pervious partner,” all of those type of things to be able to make some decisions that are good for their life. A successful meeting is one that has that hope, for sure.

Jack Whelan:
Okay. You mentioned before that often you’ll be advising a couple or a family, and of course there’s a separation, this can happen to lawyers and accountants as well. And then the separation occurs and you’re in a position whereby you have to make some decision, presumably, although I’m not a financial planner, I’m a lawyer, but in my field you’re making decisions about the existence or otherwise of conflict of interest, presumably similar. How do you make those decisions? What’s your own process and what advice to you give to people once you’ve made a decision that for example you need to go one way, the other way, or no way?

Steve Fort:
Correct. And they’re the three options that are in front of us for sure. Financial planners have to remove all conflicts when they’re providing advice to clients.

And that’s a given for any professional service provider. And we do that, I suppose sometimes the clients make the decision for us. So there is one of the members of the family that we’ve been dealing with that wants to continue our engagement, so therefore the other person cannot. It’s as simple as that. Sometimes it’s a little bit more amicable than that and we are dealing with both parties when they come in and tell us what’s happening, but we have to actually state that, “listen, we can look after one of your or neither or you. It simply can’t be both of you.” And that’s very much along who can we help the most, who’s got the better relationship with us, those type of things. Quite often it is decided for us by the clients going, “you deal with this person, I’ll go speak to somebody else.”

Jack Whelan:
I suppose there’ll be circumstances where your services are being fought over.

Steve Fort:
Yeah.

Jack Whelan:
That happens.

Steve Fort:
Absolutely. And a lot of clients will come in and say, “I’m happy to deal with you and can I deal with the other advisor in your office,” and that’s something that we don’t do.

Jack Whelan:
Okay. You don’t have what they have called historically in the legal profession a used-to operate process.

Steve Fort:
No, we don’t. And whether or not we could, but as a business we’ve decided that that’s not really something that we’re comfortable with. We work as a team. We have a team of people that support our advisors and of course there’s a significant amount of crossover there, so it’s just easier not to.

Jack Whelan:
Okay. Very wise. Very, very wise.

Steve Fort:
Yes.

Jack Whelan:
I’m speaking with Steve Fort, a financial planner and director of Invest Blue on the Central Coast of New South Wales. Steve, we spent a lot of time speaking about how people can do this well and obviously Invest Blue has a process that assists people to do this well. The flip side to it is of course when things go badly. And you said often in the family law system, for me when things going badly as a mediator it tends to be because of escalation, escalation, escalation. Three years to get to court, extensive court hearing, resolution being achieved with, and just picking numbers out of the air here, but say a $300,000 legal bill to settle 55% of one half million dollar pull of assets, for example.
So from a mediator’s perspective, and I’d argue from a client’s perspective, that is an example of things not going so well. From your perspective, the financial planner, what is an interaction going poorly? And I ask that question with a view to try to elicit some advice for people on how to avoid these pitfalls.

Steve Fort:
Sure. And I think a financial planner plays two roles when they’re dealing with a client in these circumstances. They’re obviously giving personal advice to that client, but they tend to be acting as an intermediary between the other professional service providers. There’s some things that our financial planner can do and then there’s some things that are out of our control, and that’s with the lawyers and the accountants and the other service providers. So I concentrate on the parts of the financial planning we can do. And I think the mistakes that people tend to make in those circumstances, and avoiding some of the pitfalls, the first thing that comes to mind is really trying to do everything at once.

As I mentioned before, sometimes it’s better to address the issues that are in front of you now and leaving options open for the future as opposed to trying to make decisions around a long term situation that may or may not come to fruition. I think that’s one of the first things that people trying to do too much can result in potentially not the best outcome.

Jack Whelan:
How often does that happen? Are people, again, it’s not homogenous, but would people be minded to, “I just need to get this done”?

Steve Fort:
Yeah. I think a lot of the times it happens. And not so much getting the financial separation and the financial agreements done, but it’s more making decisions around those financial agreements.

Jack Whelan:
Reaching agreement.

Steve Fort:
Yeah. Or deciding that I’ve got to sell this asset or we wanted to take this approach. It’s more coming with that preconceived outcome that this is the right idea for the future as opposed to saying, “well, let’s actually explore all the options and alternatives that are there.” I think that’s one of the things, is maybe just focusing a little bit more on what do we need to address now and not trying to solve everything today. And I think the other things, which are I suppose the obvious things, are things like out letting emotions throughout the decision making. And that’s one of the functions of a financial planner. We’ll provide in terms of taking some of that objectivity to the client and removing the emotional aspect from potentially making a wrong decision.

Steve Fort:
Some of the other things, clearly holding grudges and letting that drive the decision making, and one of the things that does happen with clients is to a degree it’s putting the head in the sand concept. It’s going the complete opposite and saying, “I actually don’t want to do anything. I don’t want to address this situation at all.” And then of course, you can get the snowball effect over time where that problem that exists today gets significantly worse and has got to be dealt with at some point in time. So they’re a few of the things that I would think of.

Jack Whelan:
How do you slow people down? If they’re rushing somewhere and it’s not necessarily in their interest. Or if they are very emotional, as often people are and that’s not in their interest, there’s a lot of trade craft in that and presumably you need to draw a lot of experience to be able to assist people who, for want of a better term, just in the moment very understandably, just aren’t thinking straight.

Steve Fort:
Absolutely. At Invest Blue, we are absolutely passionate about helping our clients achieve their goals and dreams, and we have a process that we’ve developed over a long period of time that we believe gets the best outcome, and my immediate answer to your question is the process will slow them down to a degree. So we take our time to fully understand what’s important to them. We take our time to fully understand their circumstances. We take our time to then come back after research and present the options and the alternatives.

Steve Fort:
Now, our process isn’t necessarily right for everybody, but we think that it’s going to provide the best outcome and the best platform to make the right decisions. We need to be objective with our clients. We need to provide them with the required information. We need to hold them accountable to the things that they say and be there for the future in those long term sort of relationships and partnerships that we develop. So there’s lots of things that we believe as high quality financial planners that we need to embed into our process so that we can get the best outcomes. As I said, it’s really the process and those kind of things that we strive for that provides the best outcome.

Steve Fort:
Now, if we don’t feel that we have that or there’s a client there that is trying to make those decisions based on the neighbor over the fence that said they should do this and you can see that that’s what they want to do, we’re more than happy to sit down with a client and say, “This is what we believe,” but if we’re not on the same pathway here, perhaps you need to seek advice somewhere else as well.

Jack Whelan:
So you think it’s true to say, Steve, that just as there are bush lawyers and bush mediators, there are bush financial planners as well?

Steve Fort:
I have no doubt there are.

Jack Whelan:
And do you find often that you have to disavow people of say, bad advice or folklore that’s become advice, you know, “There’s someone who knew someone who told me this and that’s what I-“.

Steve Fort:
All the time. All the time. And that’s why, I think its in two aspects. One is that it’s a confusing, highly complex, sort of difficult situation involving a financial planner, a facilitator, a solicitor, an accountant, a psychologist, and all of the people that are involved in that situation potentially. So sifting through the various aspects of advice, I think we recognize that we play a role in this. But it is just a role. There are certain things that we shouldn’t be professing to have the knowledge that’s required that a solicitor will have, for example.

But then on the flip side, we’ve then got the advice that they received from the expert which is their friend or somebody who clearly doesn’t have the qualifications, and it is difficult to try and change that mindset. But as I said, we go through a process, we actually do it with our lifelong cashflow modeling, that’s probably one of the most powerful tools that we’ve got to help the client really see in a clear and simple way, this is what the future will look like under these various options and alternatives, and then that allows them to make good and smart financial decisions.

Jack Whelan:
Effectively, that cashflow modeling tool that you have, that’s a form of reality testing. Which is something which as mediators we do all the time. So you’re able to, based on different inputs, reality test financial futures for people through that tool.

Steve Fort:
Very much so. Reality test, stress test it. The concept of the picture paints a thousand words is really what it’s doing. It’s articulating in a clear and concise manner that if you take this approach or undertake this strategy, that this will be the outcome, and then therefore this gives you the following choices for your future. Yeah, some of the examples that you might talk about are things like typically you’ve got a few assets in somebody’s situation and a couple of these main assets are a house and superannuation.

Now, clients will typically come with views on what they should do with their house or views on what they do with their super, but they both serve very, very different purposes. And depending on which way your view is, your predetermined view is, that could really limit some options for the future if the client takes too much in super for example, they need to know that there’s a lot of restrictions and liquidity that comes with that. If a client doesn’t do the right thing from their home, they need that kind of security and support for their family, particularly if they don’t have … they’re the lower income earner out of the two. There’s lots of things where just painting things out for the future can really help.

Jack Whelan:
And presumably also having to factor in tax implications.

Steve Fort:
Absolutely. Yeah. Absolutely. And that like every other client that sits in front of us has preconceived ideas of what you can and can’t do. And it is an education process and we say to nearly every client that we will sit in front of, one of the most important aspects of our role is to provide you with education so that you can be fully informed to make smart financial decisions, and that’s the way we approach it.

Jack Whelan:
Steve, I can’t think of a better place to end our discussion for today. I’m sure you have plenty more just invaluable information for people on The Separation Guide site, going through this difficult process. Invest Blue is highly regarded on the Central Coast. And thanks very much again for participating in today’s podcast and also on The Separation Guide on the Central Coast. Thank you.

Steve Fort:
Thank you very much, Jack. It’s been fantastic.