Ep. 30 - How to work with a financial advisor on divorce

Jen Curtis: We're joined today by Steve Hennessey, a Chartered Financial planner and Resolution accredited IFA at Beeswax Wealth Management. Steve brings a wealth of experience in supporting clients through divorce, both in traditional roles and as a financial neutral in mediation settings. Welcome, Steve.

Steve Hennessey: Hi, Jen. Hi, Tim. Thanks for having me along.

Tim Whitney: Thanks for being here. So let's start with the basics. What can a financial advisor actually do in the context of divorce? And also probably helpful to think about what don't they do?

Steve Hennessey: Yeah, that's a really good question I think. I mean, generally everyone, whether divorcing or not, has some sort of underlying financial uncertainty/anxiety as to whether or not they have enough to live the life they want. And you know, on whether it's a bereavement or a divorce.

All those uncertainties get thrown up in the air and it gets quite confusing for people even in the most sort of straightforward circumstances. They're worried if they've got enough or not. On whether that's still going to be the case or if that's going to change.

So a financial advisor will come along and help just with a very narrow angle with the financial side. Typically, you know, savings, investments, pensions and things like that. That's what our kind of traditional fodder is.

But increasingly, a lot of what I sort of distinguish financial advice from financial planning, which is working with that individual to get an understanding of what their priorities are, what their blind spots are, what their values and anxieties are, and put together a financial plan for them that gives them that confidence that they've got, you know, a financially secure future to look forward to. And they can do all the things that they want to do.

Jen Curtis: I think you've picked up on a key point there, Steve, in terms of the uncertainty that people might be feeling, and particularly for people who haven't potentially got as much of an understanding about their family finances from during the marriage, then making that transition into managing their finances moving forwards. How do you sort of begin the process of working with someone who needs that financial advice?

Steve Hennessey: Yeah, I mean, I typically will have an initial conversation with any new inquiry for typically about half an hour or so just to get a feel for what they know they don't know and what they don't know, they don't know and what they're really strong at. And everybody who walks through the door is a mixture of sort of strengths and weaknesses and or blind spots, as I call them. And it's quite normal in a relationship for two people to sort of divvy up the task. And it's like, well, you take care of the school run, I'll run the bank account and I'll pay the direct debits and things like that.

So it's no reflection on any individual that they suddenly, within the context of a divorce, are thinking, well, I've never had to think about what I'm spending on the council tax and gas and electric. He or she always took care of that. Now I've really got to start thinking about it. And so I think initially I spend a bit of time helping that person to just sort of, you know, not worry too much about having those blind spots. They're completely normal. You've got far more interesting stuff to be doing than worrying about what you're spending on bread, you know?

So I just help them start to feel that they are more than capable and able of being in control of their money going forward, and that's a source of confidence for them rather than anxiety, because, you know, some people maybe overthink or try and second guess themselves and end up in a bit of a state.

So I just have the benefit of being emotionally detached from what's going on in their life and just can say, you know, you're going to be okay. Now, I can see that. But they might. Not only can they not see it, they're just not feeling it at all. They're thinking, well, everything that I've assumed, you know, I've had the rug taken from underneath me or not. Sometimes, you know, this is a lot of divorces, you know, it's like this has been coming for a long while, but they're still not quite in a position to think about these matters. So I'll just come along and be a financial ally, just a sounding board sometimes.

Tim Whitney: I think that point around, you know, when you're in the relationship, it's efficient for each person to have their role, and it would be inefficient if everyone was doing everything. I think that's a good point, and that's one that I often say to clients and almost treat this as learning a new skill. And actually the expectation that you can do that without help is sort of relatively unlikely.

If you're learning anything new, it's always easier to do it with someone that knows how to do it, or a teacher or a coach or whatever you want to call them. And I think there is that element of somebody who's normally had a more prominent role in the finances, and so the other person often needs to learn that new skill. 

I suppose that brings us on to timing it slightly, maybe answers our question before I ask it, which is I think there's a temptation that some people think, oh, well, I'll do this at the end when I know what I've got, when I know what there is. What's your view on when's the best time to engage someone like you?

Steve Hennessey: Yeah. I mean, I would always encourage people, whether it's me or any other professional, to sort of start getting good advice early on.

And as I say, any decent financial adviser who works in this area will have an initial chat without any cost or obligation to just get a sense of, well, what's your you know, what's your challenge? What's your priority? What are you what are you worried about? What? Maybe they've had a chat with the family who says, oh, you might need to speak to somebody about that. Might be pensions or something. And the sooner you get that conversation going, the better. Because invariably a lot of these decisions and the processes take a long time, so a smooth run up, rather than a rushed flurry at the end is preferable.

When I first started doing this work, I was being called in at the end, you know, where somebody had pretty much agreed on what their financial settlement was going to be, and then they just needed somebody to implement it. And that's where I got a call and I started looking at some cases thinking, well, actually, I might have done this differently if I'd have spoke to you a year ago.

Because, you know, to oversimplify, you've ended up with too much house and not enough savings and pension. You know what? You're going to have the house that you wanted, but there's no food in the fridge, you know, just to sort of characterise it a bit.

So getting in early again just allows me to just, you know, dovetail my approach with perhaps with the family law and saying, I'm sure you've given some thought to this, this is what I'm seeing. And that could be quite useful. And then no decisions feel rushed for that individual, you know, because they might be having these conversations for, you know, a couple of years sometimes.

Jen Curtis: Now I think it's absolutely right to highlight the timing side of this. And I think it allows for the opportunity to bounce back between sort of the legal advice and the financial advice and for everyone to be on the journey together, really through the divorce and the separation process.

Other than perhaps getting the timing of advice slightly out, are there other sort of other misconceptions or pitfalls that you commonly see when people are going through a divorce, sort of from a financial perspective?

Steve Hennessey: Yes, a few I mean, a general level. I think, you know, financial advisors as a profession, our background going back to when I started in the late nineties, we were predominantly a sales force selling products and investments and things like that, life assurance and were typically paid through commissions. And so, you know that even when I started, that fell off, especially if you're dealing with someone who's quite vulnerable on a divorce and they want advice.

Well, if they're at a fork in the road where they can go left or right, but you only get paid if they go right. It's not really going to feel like you're on their side. So much so I think there's still understandably a perception out there that a lot of financial advisers are selling stuff where undoubtedly there'll be a few financial advisers still floating around who are trapped in that mindset.

But most of us, most of the people I know across the country who do what I do now are very much people centric. They charge that way. So that's a big misconception, really, is that we're just there to sell investments, I suppose, but perhaps a more focused level in terms of divorce. You know, something like pension sharing this what happens with pensions that so many times I'm myth busting.

Google can do a hell of a lot of damage pretty quickly. You know, if someone's sort of got an idea, they look something up and they're actually looking at a web page from like twenty ten or something like that. So timelines, I spend a lot of time working with people to set their expectations that this isn't going to happen overnight. I think the biggest one for me is that it's a particularly technical one.

But pensions, if and when they're shared, the share is stipulated as a percentage of a fund value that's changing on a daily basis, and many couples with the best of intentions might come up with, well, I'll take three hundred thousand of your pension, and that's all done. And then having to explain that, well, unfortunately, that makes a hell of a lot of sense, but there's no way we could really stipulate that, certainly in England anyway. So things like that. Yeah.

Tim Whitney: I think that, I mean, the last point you made is a good example, isn't it, of you being in a position where you've been through this before, and there are sort of patterns of behaviour that people that are going through divorce come up against more commonly.

So someone who is experienced in advising people can be useful. It's not to say that it's imperative, but I think there is that value in someone knowing what they're doing, someone having dealt with a number of pension shares. Someone knowing what questions to ask, knowing realistically how long something's going to take because you can give a court timetable.

But actually if you've got experience of saying, well, I've worked with these administrators before and they're quite quick or they're quite slow, or this is how it works, I think that can sometimes help clients just from the point of view of setting expectations.

Steve Hennessey: And yeah, and again, if I'm working with a client who's got a good family lawyer like yourselves already in their corner, so to speak, I'm very often just going, yes, that's correct. They're just they just want to hear it, just kick the tires around on some of the things that they've maybe heard. And you can just see the sort of the muscles relax around their shoulders when you just say, yeah, no, no, no, Jen was right about that, that is what's going to happen.

And yeah, just having that experience of saying, look, I know like you're now at the point where you're implementing, but a new process now begins. And something like pension sharing again, you know, there's a four month clock that hasn't even started yet because you've got to send a piece of paper off to some pensions administrator, because they kind of think, right, well, it's done now. This, you know, I've got the final order through, we're divorced. Let's crack on. And it's like, okay, this is going to take about another six months in some cases. In some cases it's a lot quicker, as you say.

Jen Curtis: And I think you make the useful point there, Steve, that sometimes it is that you're backing up information that we've perhaps given in terms of timescales for implementation and things.

And I suppose a point that we really want to convey out of today's episode is the way in which going through a divorce is something that requires a bit of teamwork between the client, certainly between in terms of the legal advice, bringing someone like yourself on board. Do you find that you've got these touch points actually throughout the process and helping along the way act as a bit of a sounding board?

Steve Hennessey: Yes. And I say we have the benefit perhaps, that say family lawyers don't have is that generally we will work with a client for several years beyond the divorce as we implement and ensure that the plan is doing what it's supposed to.

From experience, the transition so much easier for an individual where they've had a team around them from early on who are, you know, sense checking each other's advice, trying to dovetail the approach. And there's again, one of those misconceptions is, well, that's just driving the cost up. And I think from experience it's quite the opposite actually. If we're all working smart as professionals, we're often finding efficiencies and, you know, going out of our way not to overlap. And so actually you don't need me for this. You need this. And that's saving that client a whole lot of time and repeating information and that.

So I very rarely, I'm going to say very rarely... It's probably, I never work with an individual who doesn't have other professionals around them. It just it's going to end up better for them that they are getting. that advice from different professionals who specialise in their field, but in such a way that is all pointed towards the same outcome, which is, you know, that they're being happy and safe and secure moving forward.

Tim Whitney: When Jen was introducing you, she mentioned you working as a financial neutral. Do you want to just tell us a bit more about that role?

Steve Hennessey: Yes, it's an interesting one, really. I mean, probably most of my work is looking after one person and helping them and set their strategy going forward.

As a neutral, I might be brought in, typically it might be in a mediation setting or, you know, a constructive lawyer led negotiation where I'm acting for both parties as a joint expert. And my duty there is to the process really just helping them answer those often-niggling questions.

It might go back to what we were talking about earlier is, well, I'll work with both of you to, to gather all this data, and you've got a big shoebox full of statements and stuff like that. Let me make sense of that. You guys are overwhelmed with other real-life stuff at the moment. Where am I going to live and who's moving out, and where are the kids going to go to school, things like that. I can just sort of get my shirt sleeves rolled up, so to speak, and do the data gathering with them. 

And then coming back to a point, I think you touched on Tim making sure that they're both it's a level playing field in terms of their understanding, because historically it may be that one of them has taken care of the finances. We now need to make sure if they're having these discussions, that they are both clear and have a good understanding of the same issues.

 And, you know, I'm doing it collegiately. They don't both need to go off and get the latest mortgage statement. And if you're going to make an assumption about, you know, a return on some asset, well, let's use one rather than you've got one and he's got another one, you know. So that's really is a neutral. You're just trying to keep that team approach going forward.

But crucially, I think distinct from where I'm working with one party. It's a very transactional piece of work. There's no expectation that I'm then working with one or both of those individuals going forward. It's to help them through that little bottleneck, for want of a better phrase, and then disappearing into the sunset, often signposting them to sort of financial advisors.

Tim Whitney: Great. And I think that talking about signposting, I think that's a good time for us to signpost back to the episodes we've done on mediation, also on the one lawyer two client process, because I think that what Steve was just talking about there, fits quite nicely into the one lawyer model as well. And I think the other question I was thinking that sort of arises from what you were just saying was around if you were acting for a couple while they were married, do you then continue to act for them both separately? Do you have or what's your view on that?

Steve Hennessey: Yeah. That's only happened to me once, you know, in terms of clients divorcing, unfortunately. And I just feel it's not just about the ability to approach that sort of ethically and without conflict. It's that perception I think, that really matters to the individuals.

And I just think in that case, it's better for them. They've got a lot going on, big decisions, a lot of emotion, and I don't really want to inadvertently add to that by hanging around where there's well, you know, you always you know, you met up with him for a game of golf once or, you know, you and her always like the same music. So now that's going to start being a factor.

So yes, it's only happened to me anecdotally once. And I think in that case, I got plenty of good peers around the country. I'd try and find them, help them find a decent financial advisor just to keep that conflict of interest out of the picture.

Tim Whitney: That fits with what we often say to clients is that it's even the perception, isn't it? A perception of conflict, even if there isn't one, is unhelpful. Especially where I like your point about how much else is going on. It's about trying to help simplify things rather than add things to the table. That might be worrisome. I think that that sounds very sensible.

Steve Hennessey: Yeah, you want to help, but sometimes the best thing you can do is get out of the way, you know?

Jen Curtis: So hopefully people will take away from this episode the real value that financial advisor can bring. How would you suggest that someone goes about choosing the right financial advisor for their situation? I mean, I don't know their particular qualifications or is it just about compatibility? What are your thoughts?

Steve Hennessey: Yes, a bit of all of the above, really. There are various registers which maybe you can put a link to, but I think first and foremost, for me, sitting where I sit, it's got to feel right for you as somebody going through a divorce. That chemistry I think, is so important that you feel you can open up and be listened to by the person that you're working with is fundamental, and too often that's overlooked in in favour of a CV stuffed full of technical qualifications. But there's just not the dynamic that I think you need for such a big journey and transition. So get it feel right.

And as I said earlier, most decent financial advisors will have an initial chat with you without cost or obligation. That's a lot of us work that way, so you can just get a feel and then technically you want to know how long have they been doing the job, what qualifications they have. They're sort of the bar, if you like, is that they might be chartered. It's not necessary. But that's sort of the highest qualification on our side of the fence is that they're a chartered financial planner.

There are a few of us, myself included, who are accredited by an organisation known as Resolution. That's one of the toughest things I had to do. And anybody who's got that or on their way to that is probably someone who's doing a lot of this work and has seen quite a bit, so that should be quite reassuring. There's a register on the Resolution website of financial advisers who are either accredited or members, and then fees. How do they charge? I think the good ones will have no problem talking to you about how they charge. 

We all charge slightly different ways, which is kind of confusing, but also means that consumers have got a lot of choice. But if it doesn't make sense after a couple of sentences or two and it might take a couple of chats about it, because it depends what kind of work we're doing. But if it just doesn't make sense after a chat or two, it's probably not for you. You know, it's really important that you feel confident that you're paying for a service that you can see value in, that it's transparent and ethical. 

o yeah, that's... and make sure they're quoting pounds and pence. Again, going back to the point I made about our industry was previously quite salesy. We talk too easily. Talk about percentages. It's just like put that in pounds and pence for me please. What is that? What am I going to be paying initially and maybe be ongoing.

Jen Curtis: And I suspect with most services that people are providing these days, there's always the option to discuss. Well, I'll spend X amount of time doing that and give you an idea of fees for things and the option to break things down and hopefully work quite flexibly.

Steve Hennessey: Yes, my own approach is I've got a combination and whatever works best for the client it might be, in some cases, I'm just doing a little piece of transactional work for somebody, and then an hourly rate is perfectly acceptable in other areas. It depends on the complexity of the work we're doing.

But yeah, the main thing is that we end up at a point before they are instructing us that they know in pounds and pence what they're paying for, why they're paying for it, and they're happy to pay for it. And that wasn't, sadly, always the case with financial services going back a few years.

Jen Curtis: I suppose, bringing that all together, then, if there was one piece of advice that you would give to someone who is perhaps starting the divorce process and potentially feeling quite overwhelmed by the financial side of things. What would that be?

Steve Hennessey: Well, I suppose one piece of advice broken down into three bits, which I think the thing that I say to a lot of people that I first speak to is that there's a sense that they're trying to get everything done in one go. They're getting back to all sorts of correspondence. And I start by saying, look, you've got to go at your own pace. It's you can't be rushing through these decisions to this is complicated stuff at the best of times.

So you're going to dictate the pace, not me. If I've said, oh, I'll speak to you next Tuesday and you're just not ready for it next Tuesday, we're not speaking. I'm not going to have an issue with that, you know. So go at your own pace. And I think I touched on this earlier. Start as you mean to go on, go out and get some expert advice early on to set you off on the right track, unfortunately. Or you know, it's with the best of intentions.

Like I say, there's plenty of oh my, my neighbour's sister-in-law got divorced and she said this. And the bloke down the pub and the Sunday Times article or whatever it is. There's all this kind of stuff floating around in the ether. So to actually sit down with an expert and for them to understand your situation, listen to you and talk to you about your priorities, I think is really valuable. You'll avoid a lot of bad time and energy and probably money if you do that early on. So that would be the overwhelming piece of advice there.

Tim Whitney: Brilliant. Well, thank you very much, Steve. You've given a very comprehensive canter through why people will benefit and why it's important to take the right advice from the right people at the right time. So thank you very much for joining us.

Steve Hennessey: Thanks. It's been my absolute pleasure.

Tim Whitney: As always, if anyone has any questions then please contact us in the comments or on social media.