Minimising the opportunity cost of divorce
Lengthy disputes over divorce settlements can create significant opportunity costs for clients, putting their financial lives "on hold", according to ipac law sector manager Jane Campbell.
Before a settlement can be reached, both parties need to draw up a financial statement - that is, a balance sheet of the couple's assets, according to Campbell.
"From the lawyers' perspective, the delivery of an accurate financial statement is one of the issues creating a financial settlement logjam," Campbell said.
The lawyer doesn't earn any additional fees during the delay, but the affected client faces a period of "dead time" while their wealth is not working for them, according to Campbell.
"Without a financial settlement, it means your life is on hold whether you're arguing over $20,000 or $200,000, and you can't actually start to invest or grow your wealth until your divorce is finalised," she said.
Halcyon Wealth Advisers financial planner and specialist in estate planning Phil Clinton says the angst of not settling a divorce can lead to clients getting advice "from all sorts of sources".
"It tends to derail what could have been a straightforward settlement," Clinton said.
The most important thing for both parties to do is resolve the issue quickly - particularly if the size of the estate is small, he said.
"If it's only a few thousand or tens of thousands of dollars, you're going to lose that in legal fees if you don't sort it out very quickly," Clinton said.
While the adviser should encourage their client to reach a financial settlement quickly, the fact that they only work for one party in the dispute means they need to tread carefully.
"It may be a case of [the adviser] stepping away from being [the client's] adviser while this goes on. Certainly on a couple of occasions we've had another adviser appointed to either the husband or the wife," Clinton said.
In such cases, both parties would issue letters of instruction to the advisers that they can talk openly, so nothing is being disclosed that should not be disclosed, he said.
"You really have to step back and say 'where am I exposed in doing this?' It's not putting your interests in front of the client's, but you have to be aware that these things can get very nasty. And when they start lashing out at everyone, you could be on the receiving end of it," Clinton said.
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