The Hidden Risks of Untrustworthy Financial Advice during UK Divorce

The money settlement is the most complex and significant part of divorce in the UK, although it is emotionally stressful. Numerous individuals look for clarification and guidance from financial planners when handling jargon, division of property, and pensions. Nevertheless, receiving poor-quality financial advice during divorce could spell calamity and lasting consequences. Here’s what you need to know to be safe.

The Importance of Financial Advice in Divorce:

Your financial future could be significantly affected by financial choices during divorce, for example, the division of investments, pensions, and the home. England and Wales courts aim at a “fair” distribution of assets, though fair can mean very differently depending on the situation.

The following are a few ways that experienced financial planners, particularly those with a background in divorce (e.g., Chartered Financial Planners or Pension on Divorce Experts, or PODEs), can help:

• Calculate the actual value of all marital assets
• Estimate income and expenditure post-divorce
• Advise on investment, pension, and tax implications.

Your own financial future may be put in risk, however, if you decide to use the services of the wrong advisor, especially one who is not qualified or independent.

The Unspoken Dangers of Flawed Financial Advice:

Asset Misevaluation
Incorrectly pricing significant assets, like business interests or pensions, is one of the most common hazards. A typical feature of public sector jobs, defined benefit pensions are often undervalued or misunderstood. You could agree to a settlement that is way below your rightful share if your advisor lacks pension expertise.

Prejudicial Guidance

In some cases, financial planners who started out as a couple’s shared advisor might seem objective but are actually working more with one spouse. Suggestion could become slanted towards one party’s interest at the expense of the other as a consequence.

Disregarding the Tax Implications

Stamp duty, capital gains tax (CGT), and taxes in general can have a considerable impact on the division of assets, especially where real estate or investments are involved. These aspects may be ignored by poor financial advice, which in turn may lead to unnecessary financial costs in the future.

Lack of Long-Term Planning

Most financial settlements only cover immediate needs. Your future earnings, retirement needs, and post-divorce standard of living might not be estimated by an incompetent or careless counselor if you have children. Long-term financial instability can result from this.

Characteristics of a Legitimate Advisor:

In selecting a financial advisor in a divorce, consider the following elements to minimize these dangers:

• Registered status: Check that they have an FCA (Financial Conduct Authority) registration.
• Relevant experience: Ask them about their specific financial planning experience with regard to divorce.
• Collaborative approach: Financial advisors who work alongside specialists in mediation and law often provide more comprehensive advice.
• Specialist designations: Look for advisors with Resolution or family law training, and certifications such as PFS, CFP, or STEP.

Read Also: Why You Should Use a Regulated Professional for Financial Settlements in Divorce

Financial and Legal Protections:

Even if they are negotiated out of court, divorce financial settlements in the UK must be approved by a court via a consent order. This legal procedure gives some protection, but not if the supporting data and advice behind the settlement are flawed.

You can complain to the Financial Ombudsman Service if you believe you were poorly advised.

Legal proceedings can be brought, especially if the guidance was negligent. In extreme cases, a post-divorce variation of the financial order can be possible, although this is rare.

Conclusion:

Besides being inconvenient, unreliable divorce advice can have catastrophic implications. To safeguard your financial well-being, ensure that you do your homework before employing advisors, speak with divorce experts, question and verify all valuations, especially those for joint investments and pensions, and, in uncertainty, seek a second opinion.

Divorce is a major life change. It doesn’t also mark the start of long-term financial regret, due to reliable, expert financial guidance.

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