Financial planning is about developing strategies to help clients manage their financial affairs and meet their life goals. This is especially important for clients who are experiencing a marital breakdown as their financial situation and life goals can significantly change.
The financial planning process in five steps
- Data collection
- Meet with the client, define their goals and scope of work
- Research and develop a strategy
- Present and implement a plan
- Review, monitor, and adjust plan each year
Case Study – “Sally Smith”
Sally had been to mediation and had reached an in-principle agreement as to the division of the marital pool. Sally was typical of a non-financial spouse, in that throughout the marriage she had little input into financial decisions. Sally had been the primary caregiver for the children and had been out of the workforce for 20+ years.
Sally was not in a position to re-enter the workforce at a level that where she would earn a regular income at a level that would sustain a comfortable lifestyle. Sally sought advice on how to manage her investments in a way that would provide a source of income and, as much as possible, maintain her asset base.
As part of the settlement, Sally retained the family home and received a proportion of investments and a lump sum of cash. Sally also received a proportion of her former spouse’s superannuation balance under a superannuation split.
Sally’s superannuation entitlement was held in a self-managed superannuation fund (SMSF) which added an extra layer of complexity as she needed advice not only on her financial future but also on SMSF compliance issues and a recommendation for a suitable complying superannuation product to roll her entitlement into.
As a non-financial spouse with limited financial literacy, Sally required RSM to develop a financial plan to map out her ‘financial’ life.
After discussions with Sally, RSM captured her objectives and defined the scope of work involved. The financial plan provided ultimately addressed the following:
- Assistance on selecting a suitable complying superannuation fund to roll the SMSF member balance into.
- Guidance on the level of cash required as a buffer for emergencies or unexpected one-off costs.
- Advice on establishing an investment account to deposit the lump sum cash payment. This advice considered the need to draw a regular income to meet living costs.
- Financial modeling to project how long the financial assets will last.
- Facilitation of updating Wills and estate plans to reflect the change in the situation.
- Ongoing financial advice and education as Sally moved into a new phase of her life with an aim to become financially independent.
Once the consent orders were finalised, RSM was able to review the initial advice provided and make any necessary changes.
As with most other financial planning clients, the support of the financial services team doesn’t end when the initial plan is provided. RSM continues to review and monitor client financial plans and adjust where needed to ensure clients stay on track to meet their goals and objectives.
When to involve a financial planner during separation?
The earlier clients can engage a financial planner during separation the better. An adviser can assist in immediate financial needs during separation such as creating new budgets, implementing insurance to cover any shortfalls, and updating superannuation nominations.
Advisers can also assist in determining which assets or structures in the asset pool are ideal to retain. This is particularly important where the spouse has limited financial literacy, but a need for an income stream to assist with ongoing living costs.
Finally, having a lawyer, accountant and financial planner in a client’s corner will ensure that they receive the best professional care during the separation process.
For more information
If you have any questions or require further information on financial planning please contact your local RSM office today.