A spike in the divorce rate has increased the risk of financial vulnerability, the Financial Vulnerability Taskforce (FVT) has warned.
A change in the law to make it easier to divorce has caused the surge, the FVT said.
In April this year the Divorce, Dissolution and Separation Act 2020 came into effect across England and Wales. It enabled married couples to issue divorce proceedings without assigning blame and was the first significant change in divorce law for 50 years.
It has led to a spike in no-fault divorce applications, contributing to delays and backlogs in the civil law courts, the Law Society said.
Keith Richards, chair of the FVT and former CEO of the Personal Finance Society, said: “While the change in law removes bureaucracy and cost, the unintended consequences may be increased financial vulnerability.”
He said that collaboration between financial advisers and the legal profession was at the heart of good outcomes for clients going through separation and divorce.
The Taskforce has put together a practitioner’s guide focusing on immediate and future vulnerable circumstances and the need for professional advice.
Legal & General supported the production of the good practice guide entitled, “Advising and supporting clients going through Divorce (in England and Wales).”
Cecilia Furner, distribution director (interim), retail annuities, Legal & General Retail, said: “Legal & General’s own research has shown that women are likely to face worse outcomes financially as a result of a divorce, and often waive rights to key financial assets such as pensions, which can have a significant impact on their long-term financial wellbeing.”
“It’s our hope that via raising awareness of the impact of divorce on vulnerability, including through the publication of this guide, the division of finances for any divorcing couple will increasingly become as fair and equitable as possible.”
Tony Miles, author of the guide and a founding board member of the FVT, said: “The provision of relevant financial advice to clients going through separation or divorce is a complex matter, and not necessarily a core part of most financial advisers’ client services.”
He said he hoped the guide would encourage financial advisers to work closely with other professionals with relevant expertise, to help ensure that parties going through a divorce benefit accordingly.
One of the FVT’s aims is to encourage greater collaboration between Financial Planning and related professional services, including legal, tax and accountancy.
To download a copy of the guide, visit www.fvtaskforce.com
