The current hot topic among family lawyers is “collaborative law”. This is an approach by which both parties in a divorce, and their solicitors, commit to avoid the courtroom. Instead, mediation is used to reach a sensible solution for their “break-up”.But how will this affect the financial services industry? Since the Welfare Reform & Pensions Act 1999 gave powers to the Court to split pension rights between husband and wife on divorce, many solicitors have approached financial advisers for guidance on the best way to approach this complicated area. But there has not exactly been a rush to use the specialist technical knowledge that many advisers could offer. Collaborative law may change this. The settling of financial arrangements on divorce, “ancillary relief” in lawyer speak, is by their own admission “undoubtedly a major flashpoint”. With financial issues pushing the collaborative approach to its limits, it seems inevitable that more and more frequently financial advisers will be called to the table to become part of the professional team couples need. To be active in this area, financial advisers need to bear several points in mind. First, it is futile to think that solicitors will take for granted any specialist knowledge you may have on divorce issues. Despite the myriad of examinations most of us have endured, we are still not deemed, as an industry, “up there” with solicitors on the professional front. Many solicitors do not appreciate the complexity of the issues in hand. So, you must be proactive. It is not just “blowing your own trumpet” about how good you are. Educating solicitors, worrying them even, about just how careful you have to be, particularly when dealing with pensions, is crucial. Solicitors are just like us, in that they are increasing fearful of professional indemnity claims in our “blame culture”. In addition to tutoring on the finer technical de-tails, you need to present a straightforward, procedural approach, which fits with their collaborative stance. Creating a fee structure for each part of this process can help. First, you need to agree with solicitor firms that, as early as possible in their mediation, pension information is made available to you to be assessed for errors and inconsistencies. As part of this audit you will be adding value by making sure that the correct figures are being used. This prevents wasted energy in discussing incomplete, or erroneous valuations. Solicitors should be cautioned – pension providers and scheme administrators are not always correct. Neither are their CETV’s. In the second stage, a financial adviser can prove his or her worth. The Pension Inquiry Form used by the legal profess- ion – or Form P as it is known – gets the bare facts about the pension plans in question. But only with the detailed technical knowledge of a financial adviser can the important questions be asked: l Is there a guaranteed annuity to be considered? l Is there enhanced protection following A-Day? l Does the CETV include any compensation – for example, following an earlier pension review decision – which is, under the rules, not shareable? l What is the funding position of the scheme – is it underfunded and how has this affected the CETV. l What about state benefits, are there any shareable Serps benefits? l If shadow membership is offered, on what terms? They are not always the same, or as beneficial, as the main scheme. It has to be said, this is double-dutch to most solicitors. But, crucial information nevertheless, since the answers to these questions, and a few more, could change beyond recognition, the potential equitable solutions for both parties. The next logical stage in the process is the provision of either a generic report, or more likely, a detailed tome, which is tailored to the specific pension schemes that have been considered. Possible solutions for the division of benefits may be outlined. The last stage following mediated agreement will be the drafting and implementation of a pension attachment or sharing order. The need for a technical eye does not end here. If the Order is wrong, amendments following Decree Absolute require a joint representation to the court prior to implementation. This can prove difficult. Most Orders will specify a percentage split, as the court prefers this. However, if the client is using “Hallam” wording to effect a monetary value sign off from the pension scheme is required in advance. Finally, be aware that you may need to be will- ing to walk away before the product implement-ation stage, if that is what is required. Acting as a partisan adviser during the mediation process may well preclude you, though not always, from acting for only one or the other of the parties at the final stage. In essence, this is what collaboration is all about.
The FSA has fined The Ancient Order of Foresters Friendly Society 55,000 for financial promotion failings. The firm is run by Financial Services Practitioner Panel chairman Mark Rothery.
For those of you who remember the lord of the black dogs and former MM investment hack, you might be interested to know that Matt Davis is now officially married. Again. Having parted our shores for the rolling hills of Portland, Oregon and the lovely Sue, and having had the civil ceremony earlier this year, […]
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