Financial advisers have been directed to take account of their client’s family relationships to avoid expensive mistakes.
Jane Crowley, speaking at a conference for financial planning in London for the Chartered Institute for Securities & Investments, explained that it is increasingly common for families to be complicated, perhaps due to stepchildren or unmarried parents, which may have financial implications.
Ms Crowley also emphasised that financial advisers should not assume couples are married, even if they have the same surname, children and live together.
Recent statistics show that over half of couples that split are now unmarried. Despite the popular myth, the UK does not have common law marriage, which further complicates the issue.
A financial adviser’s role includes the need to understand family relationships and dynamics, with an awareness of tax and financial implications and family law in the occurrence of a relationship breakdown now essential. It is also helpful if advisers have the relevant software for IFAs.
Recent figures from the Office for National Statistics (ONS) reveal that the number of cohabiting couple families increased by almost one-third between 2004 and 2014. This makes them Britain’s fastest-growing category of family.
In 2014, there were almost three million cohabiting couple families of the opposite sex, with 84,000 same-sex couples cohabiting in the UK.
Living together agreements
Ms Crowley stated that this growth of unmarried cohabiting couples should drive advisers to encourage clients, if they happen to be in this category, to establish a living together agreement. Software for IFA’s available through Intelliflo and other providers can be useful in this regard.
A living together agreement is a legal document that sets out how assets will be divided and which individual owns what should the relationship break down.
In 2016, it is estimated that friends and family collectively lent around £5bn to help their loved ones purchase a home. Parents are thought to have contributed towards over 250,000 property purchases across the UK.
This money was usually gifted rather than through a loan arrangement, which can come with pitfalls should a relationship break down. Without an arrangement in writing, an argument could not be raised in court.
Advisers must take into account the family set-up, as there are many areas that can go wrong without correct financial planning.