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Role of a Financial Advisor in the separation process

The Separation Guide team recently spoke with one of our Network Members, Kylie Macdonald from Morgans Financial, to discuss the very important role of a financial advisor in the separation process. Through our discussion we understood that while an accountant can help to establish the monetary value of assets and income streams in the relationship, a financial advisor will take a more broad approach to help guide and support clients going through significant change and/ or issues in their life.

1. How can a financial advisor benefit someone early on in the divorce process?

One of the key roles of a financial advisor is to guide clients through major life changes. Advising someone who’s going through divorce can help them gain a better understanding of their cash flow, expenses and their assets and liabilities. Making sure both are aware of what is in question to split and assist both parties to recognise what is a fair share. For separating/ divorced/ newly single parents, it’s important for them to create a financial plan early on – to ensure that all the family’s needs are met.

2. What practical steps can people take to help them get more equipped?

It’s important for a couple/client to understand the potential financial impact of divorce on themselves and their children. They need to consider the answers to the following questions: Who will stay in the home? Who will have access to which assets? Who will cover house-related expenses like the mortgage and utilities? Will there be sufficient cash flow for the spouse who has the primary custody? Are there any pre and post divorce tax issues they should be aware of and are there ways to plan around them? How will joint savings be divided? How will you deal with any taxes?

3. Are there any tips to support primary caregivers who may not be earning their pre-children salary and want to manage their money effectively? Anything we might not know about?

Beyond divorce a financial advisor can help their clients formulate a financial plan for themselves as a single person, depending on their circumstances. This is very important, especially for women who may not have been highly involved in the finances during their marriage. With the proper guidance and understanding, a newly single person can have the confidence to start anew and take control of his/her financial future.

4. What are the main financial goals you notice people have when divorcing? How does this differ across different age brackets/ socio-economic groups?

I have found a common financial goal of couples divorcing is that they want to be able to maintain their pre-divorce lifestyle, especially the children’s, but that isn’t always achievable due to the new circumstances.

For younger couples, financial goals differ because there are children involved. There are more expenses to cover like child support, education, healthcare, insurance and retirement savings. Luckily for them, they are more capable of earning and have a longer period of time to prepare for their retirement.
Younger divorcees are more focused on rebuilding their financial house like paying off debts, providing for their children’s needs and establishing their retirement savings.

For more senior couples who are separating, they may find themselves in a more complex financial situation than younger couples. Their earning capacity may be behind them and opportunities to rebuild their wealth are limited compared to those who have a long career ahead of them.

Older couples’ main goal is to have an income stream they can live off for the next 20 to 30 years. That’s why liquidating their assets helps them avoid being cash poor in their retirement years.

5. What special things do divorced women need to do to consider life after divorce, to save for retirement and plan for their future? What is the path to help them get there?

While it’s clear women who divorce have financial goals – many don’t have a clear path on how to achieve them. With women living longer, one of their top priorities after divorce should be saving for retirement. Having a financial advisor is important for long-term financial planning as it provides some clarity around what is required to achieve future goals. Things that one can consider including regularly include: tracking expenses, reviewing income, budgeting and tax planning. Changes in estate plans are also extremely important, wills and as well as beneficiaries on retirement accounts and life insurance policies all need attention and update after divorce.

Kylie Macdonald is a Financial Advisor and authorised Network Member of The Separation Guide. The Separation Guide aims to make separation and divorce simpler, more manageable and less expensive. To find out more about how one of our network members could support you in your financial planning, take our free five minute Q&A here

You can also use our calculator helps you identify assets and liabilities that need to be considered in your separation.