Protect yourself online. Learn how to hide your browsing history. × Quick exit (ESC)

Divorce and separation podcast 4 with John Swaine Accountant and Director of PKF Accounting Central Coast

Jack Whelan and John Swaine talk about financial considerations through separation and divorce.

  • An accountants perspective on how to divorce or separate well
  • The cost of conflict

 

Podcast 4 with John Swaine Accountant and Director of PKF Accounting Central Coast
(21 minutes)


How the courts can affect the cost of separation and divorce

Jack Whelan:
Good day, it’s Jack Whelan here, Barrister, Mediator and founder of The Separation Guide, and welcome to The Separation Guide podcast number four. Today we’re talking about financial accounting and I’m joined by John Swaine, Director of PKF accounting and business advice on the central coast. Good day John.

John Swaine:
Hello Jack, how are you today?

Jack Whelan:
Really well, thanks. Thanks for joining us and thank you for being a part of The Separation Guide.

John Swaine:
Pleasure.

Jack Whelan:
I’ve always had a view that, and it’s a view born of experience, that I think the accountants are just as important as the lawyers when it comes to assisting people in separation and divorce. Because it is all largely, children aside obviously, crucial to get the parenting plan draw up, but it’s also crucial to understand the pool of assets and get all the financial matters sorted. So John, my first question to you is, from an accountant’s perspective, what is a separation or divorce which goes well, what does that look like? What are the elements of a separation or divorce going well from your perspective look like?

John Swaine:
Yeah, so from accountants or from my perspective, what it would look like is when both parties, what I tell both parties is there’s never going to be a winner, because the two parties are separating. So it’s trying to do it very amicably, being transparent with each other with their asset base and being able to agree and separate in an amicable way. Otherwise they’ll just spend, unfortunately you’ll spend a lot of money in litigation and …

Jack Whelan:
Have you seen it? Have you seen it? John, have you seen large legal bills fighting over say fairly small pool of assets?

John Swaine:
Yeah, I would say a small asset base, you know? It’s all relative to people and what they perceive of their assets. But yes, definitely. And sometimes they’re just fighting for emotional reasons, not the financial reason. But I try and tell people to be amicable, fair and transparent.

Jack Whelan:
The issue of transparency and disclosure, obviously ultimately when someone does end up in court, the expectation of the court will be that people have disclosed everything in advance. It’s always struck me as odd that it might take two or three years for that realization. Clearly there’s a benefit in disclosing things upfront. How do people go about, in a practical sense, how do people go about that disclosure? How do people understand their own pool of assets and income streams and things like that and where do you come in?

John Swaine:
Yeah, so it depends upon what their asset or asset class bases are. It can be easy as money in the bank or cash in the bank, shares listed, companies, property, whether it’s residential or commercial, all those sort of assets are pretty easy to value, because you can get either registered values for property, residential or commercial, shares. It’s what the market value is at the time. And cash is just cash. It’s what the balance is.

John Swaine:
Where the arbitrary figures come a lot more into line would be valuing a business, or valuing something that’s a little bit intangible. Trying to put a value onto that. That’s the only arbitrariness about what we try to do. Otherwise it’s pretty, when I say straightforward, it’s just trying to work out what the asset base is, and then working out what’s a fair and reasonable distribution from there.

The financial knowledge gap

Jack Whelan:
And people in your experience John, and of course everybody’s different, but in your experience, are people aware of their own asset base or are they not? Are you ever surprised?

John Swaine:
Yeah, I’m never surprised. Some instances both parties know exactly all the assets and a pretty good idea of values. And there’s also a lot of instances where one party has looked after all the financial affairs the whole relationship and the other party has been very trusting and signed and done things and not really taken much interest. In those sort of circumstances it’s a little bit more difficult trying to get out of them what their assets really are – because they don’t really know.

Jack Whelan:
And in that circumstance where say you’re representing party B), where party B) has been perhaps say that more trusting party having had other duties, and they haven’t really had much visibility on the finances. How do you assist them? Because they often won’t know what they don’t know.

John Swaine:
Correct. So the way we would do it is you would look at prior year’s tax returns so you can sort of see income streams. That gives you a pretty good idea about where the income’s coming from. So if there’s different classes of assets out there producing income, that would be one point of call. Then hopefully they would know things about the family home or investment properties or things like that. Or if not, you could probably do … We could do property title searches and things like that. So either between us or the solicitors, there’d be one of the parties being able to do that sort of role to do a search through the …

Can you share an accountant during a divorce?

Jack Whelan:
Okay. What about the circumstances where you’re the accountant to the family, and then sadly they announce that ‘we’re going through a separation or divorce’ such that perhaps both parties will be seeking your services. How do you manage that? What’s your procedure for managing that? Because I’d imagine that a lot of people would be thinking when they’re going through this, “Well I needed to speak to my accountant. But the accountant is my partner’s accountant as well.” How does this all play out?

John Swaine:
Yes, so for me, my process is I tell both parties that they’re going to need to seek their own independent financial and legal advice, because there can’t be a perception that I’m favoring one over the other. And then I would then go on to explain what their assets may be, in very general terms, because I’m not a solicitor, just try and be very amicable. And it’s easy for me to say take the emotion out of it. But it’s just trying, from an accounting asset distribution viewpoint, it’s pretty clear. It’s just working out the asset base and the asset classes. And then the hardest part is just the fair distribution of those assets bases. So if people are wanting to be amicable, it’s easy to work for both parties. This is if there’s one or either party has a ulterior motive, then that’s when you’d have issues and they’ll seek their own independent advice.

Jack Whelan:
Okay. We’ve touched base on the whole separation going well, what that looks like. Well the circumstances of a divorce and separation, is there such a thing. In your perspective, when it goes badly, what does that look like?

John Swaine:
Yeah, it would from instances where I’ve either seen or heard instances going badly is either party trying to hide or not disclose all assets involved, or especially more so in when running a business and things like that. Because there’s a few more variables in the equation. Though the spouse that might be running the business will throw their hands in the air and say, “Look, I don’t want to do this anymore,” and try and value the business at a very low rate. They’re the sort of things offset, other general asset classes. If it’s just banking or shares or property, there’s no hiding, because it’s just the value. It’s more complicated if there’s a business or a business percentage involved… And then if a party’s not being forthcoming or trustworthy or transparent, that’s when the issues arise.

How legal fees can affect your pool of assets

Jack Whelan:
As an accountant. How do you feel given in many ways you’re obviously the counter of the assets, often the protector of the assets as well. If there is a matter which has litigated taking three and four years and so 20% of the asset pool is taking legal fees. What’s your view on that?

John Swaine:
Personally my view on that, I just think it’s crazy. You’ve just got a … You’ve given 20% of your asset base away to not just yourself, but to the legal profession when it could have been … There has to be a legal process for the agreements and everything like that. There has to be a small fee or a small agreement in place. But to litigate and to fight, it’s crazy. You’ve got to look at the bigger picture. Look at what, if you’re fighting, I would say percentages between 50% or 52% or 55%, what does that mean in dollar terms? Is it worth fighting for? Is it worth spending $5,000 on fighting and I was only going to get six. Just trying to be a little bit commercial about yeah, with dollars and cents of what we’re fighting or arguing over, for want of a better word.

Jack Whelan:
You would see people a lot who would be, because of the stage of the journey that they’re at, all the people are hurt and grieving and so forth that may not be the most commercially minded, or they may not be being as commercially minded as they need to be. So this turns on your experience in your trade craft. How do you help people to start to think a little bit more commercially and perhaps a little bit less irrationally?

John Swaine:
It’s a process. I think the sooner or the greener the hurt or the more initial the hurt and the emotion is, and when everything’s raw – people want to fight. They will absorb what you’re saying, but sometimes you just need a little bit of time to process what we’re talking about. It’s a little bit further down the journey sometimes. And everybody’s so different. Some people it can be a few weeks, and other people it can be a few months when they’re going, “Okay, this is life for me now. So what’s that going to look like for me financially? This is the pool of assets. So I need to either go work and get a job and earn this much money so I can fund my living expenses.” So just that’s the sort of …

Jack Whelan:
And one of the tools that we will try, is it to reality test different options to people moving forward where you actually assist them and say, “Look, if you don’t mind that you go down this path of what your financial future may look like, door A or B, is this sort of a future door? Basis of a future?” Is that something which you do?

John Swaine:
Yes. Well you always give the customer or the client options. So you’d be sort of saying, “Look, scenario one is you go to court and you fight. It’s a lottery, no guarantees. If you’re winning, you’re going to waste – not waste – you’re going to spend a lot of emotional energy. A, thinking about it, planning it and you’re going to throw away a percentage of your asset base to the legal system. So that’s sort of option A. Option B is have a little bit of a discussion around what’s fair and equitable without being silly about it. It’s just sometimes it can be a robust discussion, but it’s sort of having a boundary that’s passing the fair test for you.

John Swaine:
And so there would be like a B or a middle ground and then there would be like, hey, some people just go, “I can’t deal with this.” But then for some people like that, you have to make sure that it’s fair for them. They’re not just being bullied or pushed into a corner and sign here and you still have got to make sure it’s fair.

Jack Whelan:
What circumstances whereby you may be assisting both parties, because finally you’re not conflicted. But even so, the parties can still find it hard to interact because they are quite raw. In mediation we call it shuttle mediating, where you’re actually going between the parties. Do you ever have to shuttle accountant? Do you actually have to provide services to people kind of remote from each other, or where there’s still consistency in the instructions, precisely because of that emotion.

John Swaine:
No, definitely Jack. So people can meet together in the same room all the time, and especially if they’re going through mediation or something. So I have in the past what you can meet with them together and then being … Asking them in the beginning just to be respectful. There’s normally a little bit of emotion in the room. So it’s trying just to lead the discussion in a respectful way, just finding out what all the assets are, what the issues are on a financial basis.

And then it can be go away and come back another time and then talk, either talking on the phone or meeting separately to go, “Okay now, so what are the issues that you couldn’t say in the room that you’d need to explore or express financially?” And sometimes it’s meeting spouse A and then meeting spouse B and then go, “Okay, I think I can broker the deal here.” So, from one of the … and it’s a pretty crass term, but being able to bring the two parties to a middle meeting ground where hopefully it’s seen by both as fair.

Jack Whelan:
Often you’ll be in circumstances whereby you rise case managing from an accountant’s perspective, providing case management accounting for individuals based on their own particular circumstances.

John Swaine:
Yes. So it’s a bit like that. It’s sort of, and we’re all different, like some people just want different outcomes. Some, depends on what’s important to everybody. So some people might want the pets, certain cars, certain jewelry, or certain contents, or things like that. So it’s picking each other’s brains, finding out those and then sort of how to put those into each spouse’s category to be able to split and define.

Confidentiality in divorce

Jack Whelan:
And John, what about issues of confidentiality? So for example, let’s just say that there’s a young couple that don’t have an accountant, but one person’s decided that they want to separate. So they’re doing some due diligence on that. Would one part or the other be able to contact you and say, “This is not a notice of advice, but can you provide that advice to me only?” Is that something which happened, talking here about the practicality of maintaining confidences, people earning a sense of what actually may need to do if they are going to separate or divorce. How they go about doing that. Because for a lot of people they will of course be doing some research before they even have a conversation with their partner.

John Swaine:
Yes, no, definitely Jack. So I would like in the beginning, if I’ve met both parties together, I would definitely sort of be telling them what I tell to one or I’m saying to the other, especially in the family setting and the family pool of assets. But if a particular spouse came with particular, needing particular instruction or advice, it’s obviously very confidential and sort of the other party would not know. And if it came up it’s … If they asked, you’d be, “Sorry, it’s between me and the other spouse or between me and the client.” You definitely can’t, you know. We’re bound, not just bound by a confidentiality. It’s, we wouldn’t be in business if we would … Couldn’t pass or if we weren’t confidential with what we do.

Jack Whelan:
Yeah. This is all the settled cases of quite a big firm with a lot of clients. But it seems that quite a proportion of the work that you do is assisting people who are going through this process. Is there any final advice you’d like to give to people who are going through this and who are in need of some assistance?

John Swaine:
Yeah, thanks Jack. So I think the biggest thing to do is, unfortunately in our society, divorce or separation is higher than it’s ever been. I don’t know the exact stats, but unfortunately it’s …

Jack Whelan:
It’s about one in three, and about 200,000 Australians a year separating or divorcing, yeah that’s for sure.

John Swaine:
Yeah no, that’s right. It is a shame. But unfortunately it’s people’s realities. So it’s just trying to help those people being able to navigate their financial situation in a way that isn’t trying to … Not take the emotion out of it. Because there will always be the emotional side to it. It’s just trying to, I’m going to say separate well. Trying just to go through the issues of the assets and then to be able to split them. So it’s fair for both parties. And there’s just so many factors that you have to take into consideration, whether it’s children, the age of the children, pets, and all the different sort of asset bases. And the age of the people, this as you would know Jack, there would … There’s so many things to take into consideration as we’re navigating through that.

Jack Whelan:
Ease and navigation, ease and navigation, navigating through the maze. John Swaine, thanks again for your insight today. It’s just invaluable for people who are going through this, or researching it, or are at any stage of the separation or divorce process. Thank you. And again, thanks to PKF for being a part of The Separation Guide network on the case. Thanks John.

John Swaine:
No, thanks Jack. Thanks for the opportunity.