CityWire.co.uk – London,England,UK
For some years, many independent financial planners have sought to foster professional relationships with solicitors to assist with implementing pension credits following divorce settlements. This type of referral typically involves the recommendation of an individual pension vehicle with associated asset allocation and investment advice, and is usually remunerated through commission payment. Now a new opportunity has arisen for financial planners and solicitors to work together in helping separating couples reach agreement on dividing their assets outside of court. This is known as collaborative law, and having began in the US it is now gaining momentum in the UK, with over a thousand lawyers having been approved by Resolution (the Solicitors Family Law Association) to practice in this specialist area. The collaborative process is not suited to all separating couples, since it requires significant goodwill and commitment between the parties. However, for couples willing to undertake the collaborative route, there are clear advantages over the traditional court settlement. The process is often quicker and less costly, and has potentially less of a detrimental emotional impact on all concerned. It also helps with how ‘co-parenting’ may work in the future. Moreover, a collaborative settlement represents the couple’s own solution, rather than being a solution imposed upon them by a judge.
How, then, does the independent financial planner contribute to the collaborative process? Firstly, an adviser may be asked to act as a ‘financial neutral’ at collaborative ‘four-way’ meetings between the separating parties and their respective solicitors. In this capacity, the adviser is not providing specific advice to either party, but instead offers generic consultancy which assists with the decision-making required in dividing assets. This is not restricted to pension matters, and may encompass elements of employee benefit packages and non-pension assets the couple may have accrued. In order to maintain transparency, the financial neutral is prohibited from subsequently acting as an ‘implementer’ of the pension solution, although in the interests of client choice and comfort it is hoped that this stipulation may be reviewed as the collaborative model evolves. The responsibility of acting as a financial neutral should not be underestimated due to the difficult emotional environment, and because if the process breaks down, different solicitors must be appointed to resolve the separation in court. The collaborative model also presents financial planners with the opportunity to become involved in the separation process much earlier than they have traditionally done so, for example by undertaking the requesting and collating of pension rights information instead of the solicitor. This type of work, as well as financial neutral duties, is ideally suited to financial planning practices that operate on a fee- based model.