Mediation and the role of financial advisors

Mediation has become an established approach of family lawyers to relationship breakdown – be it divorce, dissolution of a civil partnership, or separation between cohabiting couples. Many family lawyers also belong to Resolution, the foremost association for family lawyers and family justice professionals, which has a pronounced preference for avoiding conflict wherever possible, and provides a simple but effective code of practice.

Most family lawyers understand the value of sound financial advice when a relationship breaks down. It can be of enormous value for couples to have financial planning input when looking at options and trying to reach agreement regarding their separation and the division of assets.

As family lawyers and mediators, we are seeing an increase in the number of financial experts playing a role in the mediation process. So, if you are a financial services expert and want to know more about how mediation works and how you can support your own clients further, read on!

What role can a financial advisor have in mediation?

Financial planners, with the appropriate knowledge in divorce and financial remedy proceedings, can add a great deal to a mediation or round table meeting. They could be invited to join the meeting either as a co-mediator (if qualified to do so) or as a single joint expert. With the necessary experience in pensions they can often steer a pension-sharing negotiation to a pragmatic solution and/or they can offer advice on pension reports to demonstrate what it may mean in money terms. If need be they can also assist with framing questions to an Actuary where a pension report is required, which can speed up the process.

What financial issues can be dealt with in mediation?

Financial advice across the entire range may be sought from a financial advisor, but there are particular areas which regularly require assistance:

• Pensions: in particular, analysis and evaluation of schemes and of CEVs, looking at the practicalities of implementing pensions; and in appropriate circumstances, knowing where and who to refer the parties to for the next step is just as important as the primary advice.
• Investments, shares and other assets: knowing what particular investments consist of, how to value them, and what unusual features to be on the lookout for brings an extra dimension to many mediation cases.
• Tax advice: there is a constant need for background tax advice, particularly relating to tax planning in the year of separation, Capital Gains Tax, disposal costs, and the transfer and tax treatment of property.
• Investment income: sound knowledge and advice on how to invest to provide income is regularly required.
• Family trusts: when family trusts feature in a mediation case, input from an expert is almost always essential

The adviser can provide advice on how to get maximum benefit from their clients’ assets for their mutual joint benefit. More widely, knowledge of other financial matters such as investments, capital gains tax issues, equity release (with retired individuals), cash flow planning etc. can add an important dimension to the meetings, which will complement the skills of the family lawyer.

How can financial advisors find out more about family mediation?

The best way for financial advisors to become involved with mediation is to build relationships with expert family lawyers who are also qualified mediators.

Family lawyers tend to be a sociable bunch, and there are regular opportunities to meet at social events or seminars, not only through Resolution but also via local pods (local groups of solicitors who join together to promote Mediation and other dispute resolution such as Collaborative Law). Building relationships and trust will establish working relationships for everyone’s mutual benefit.

We also suggest the following:

• Read up about Resolution. It is a well-established organisation, providing a lot of training, lobbying and networking opportunities. Family lawyers relate well to financial advisors who understand the role of Resolution and who know about the code of practice and follow it -why not join Resolution?
• Be well versed in the areas where mediators need input. Typically, these are tax issues (particularly CGT); tax planning in the year of separation; pensions and pension sharing orders (including implementation) and evaluation of pension assets; shares, unit trusts and other similar investments; and be familiar with family trusts.
• Understand what mediation is about, the process, what is expected of the mediator, how they operate, and what are the limitations on their range of actions?
• Look at the resources on the websites of Resolution and the Family Mediation Council.

Significantly, mediators cannot advise. That often leaves them wishing/requiring specific advice to be given, particularly with regard to financial assets and financial planning. A financial advisor’s role can be invaluable in these scenarios, and fills a genuine gap in the process

The Collaborative Model and Arbitration

In addition to mediation, these are two additional ways in which family lawyers deal with cases without going to court and which are helpful for financial advisors to be aware of:

• Collaborative work requires both parties, both solicitors and family consultants or financial neutrals to sign an agreement that the process will be conducted without going to court, and if the process breaks down and court becomes inevitable then the lawyers must withdraw. It has been around for some time, and is a less common process but, nevertheless, it is undoubtedly an extremely effective one.
• Arbitration is proving to be an effective way of concluding cases rather than using the slow and costly court route and it provides a process tailor made to the client’s need and one where confidentiality can be guaranteed.It is worth being familiar with both of these concepts, and again information can be found on the Resolution website to help you signpost your own clients to resources that may help them.