DIVORCING a Beatle is one sure-fire way to come into a huge sum of money in a few short years, as Heather Mills proved last week when she walked away with £24m after four years of marriage to Sir Paul McCartney.

Mills joined the growing ranks of the so-called “divorce market” who have become big business for private banks, lawyers and advisers over the past decade. A landmark case in 2001 set down the principle that homemakers were entitled to an equal share of the breadwinner’s wealth, and since then payouts have soared.

Renato Labi, of law firm Hughes Fowler Carruthers, said: “It is not merely the size of the woman’s share that is increasing – the size of the cake has grown because there are so many more wealthy people in Britain.”

Private banks such as Butterfield, Duncan Lawrie and Coutts have been offering divorce loans to help women with the costs of splitting from their husbands. In return, they are rewarded with the lucrative role of managing the woman’s assets once her settlement comes through.

This month, Anna Sofat, formerly of AJS Wealth Management, launched Addidi, a “female-friendly” independent financial adviser (IFA). She joins Nicola Horlick, former chief executive of SG Asset Management, who set up Bramdiva, a “wealth consultation service for women” in 2005.

Bramdiva does not give investment advice but introduces clients to firms such as Goldman Sachs, Credit Suisse and Cheviot Asset Management, and IFAs such as Robert Reid at Syndaxi.

Amanda McCrystal, Horlick’s No 2 at Bramdiva, said: “We offer a service to women who may not have had to pay an electricity bill before, or organised their pension. Women are making progress in the workforce but they still may be intimidated by finance.”

However, some advisers were sceptical about women needing specific advice. Reid said: “Women should manage their assets no differently than men and what they need is a competent adviser, irrespective of gender. Having said that, divorce payouts are often a special case. They may seem an enormous amount of money but having a robust financial plan is essential to maintain a high income.”

McCrystal agrees. “Quite often there is a discrepancy between the lifestyle that a woman has become accustomed to and the capital sum that has been settled upon,” she said. “When you actually turn that into an income per year it’s not unusual for there to be a shortfall.”

A woman in her mid-thirties, with a child aged three who came into a £24m settlement would, if £9m in property and household expenses were included, find herself with about £15m to invest, including cash. This would produce a yearly income of £600,000, or about £380,000 after tax, assuming returns at about 4%. However, the value of this would be just £166,208 in 10 years’ time because of the eroding effect of inflation.

The next step is asset allocation, and here the advice is useful if you have come into a substantial windfall.

Sofat said: “I would recommend such a client take a balanced approach to risk, putting aside about three years – or £2m – worth of cash at a rate of 5.6%. The rest of the portfolio could be split between cash at £2m, gilts and bonds at £2m, about £4m in equities, and £2m each in property and alternative funds, with about £2m for art.

“Setting up a portfolio such as this would take up to two years.” Here we talk you through the options.

GILTS

Conventional gilts, which are bonds issued by the government, are a great way to protect the value of your assets. The government commits to return your investment at the end of a fixed term, and you earn a fixed rate of income on top. With interest rates predicted to fall again this year, a fixed income looks increasingly attractive.

Sofat said: “Gilts are looking pretty expensive at present because of their obvious attractions, but funds I like are Allianz Pimco Gilt Yield fund and Royal London UK Government bond.”

HEDGE FUNDS

Alternative assets – investments that do not tend to move up and down in line with conventional assets such as equities and bonds – are ideal for big windfalls as they are designed to preserve your capital.

Funds of hedge funds are also worth a look, although you will pay a double layer of charges. Whereas traditional fund managers invest for the long-term hedge funds focus on more short-term returns.

Sofat said: “Very rich people will go to individual hedge fund managers because they have a clear strategy for what they’re doing. For example, the PSolve Defensive Equity fund is about half as risky as the FTSE All-Share.

It has about 20 funds which use a whole mix of strategies, including long-only and short-only, and long-short funds.

“The funds of hedge funds I like are where they have a really decent risk management strategy. Psolve Defensive equity has been doing 11% or 12% a year since it launched.”

INFRASTRUCTURE

Infrastructure is another buzz word among wealthy investors – where you buy firms that have tangible assets such as utility supply networks or roads. Infrastructure funds invest in long-term projects – for a big capital outlay, investors can have a fairly good idea of returns for 10 years.

Sofat said: “There is predictability there and many funds are now taking a global perspective. The Macquarie infrastructure iShare, for instance, tracks about 30 funds around the world that invest in infrastructure projects such as toll roads in China as the country rapidly expands its road network.

WATER

Water investments are also gaining popularity among wealthy investors because of their steady returns. Andrew Popper at SG Hambros, an investment bank, said: “They display a relatively low correlation with the rest of the stock market, which means they will not necessarily fall as much in a downturn.”

Water also has long-term growth potential. As the populations and economies grow in the developing world, it is becoming increasingly apparent that there is not enough to go round.

There is growing demand in China for desalination, filtration, new pipelines, water transport and pumps – and an opportunity for investors to cash in.

Sofat said: “Water will become more of a commodity, especially on the back of the Chinese, Indian and African economies developing further. I like clean energy funds for a similar reason.”

Barclays Global Investors’ Global water iShare, which launched in March last year, tracks the S&P Global Water index which returned 27% in the year to January 31, 2007.

TAX PLANNING

Finally, don’t forget tax. Sofat said: “Lots of attention would need to be paid to tax – especially as income would be taxed at 40% and capital gains at 18%. The divorcée should explore the use of a limited company for part of her investment portfolio.”

Limited companies pay corporation tax at 30% on their earnings, rather than the personal rate of income tax at 40%, creating a tax saving if the portfolio starts to earn income from the properties. Wages and dividends, taxed at 40%, can be drawn from the company.

As matters stand, none of the savings income from the portfolio could attract tax relief if it was invested in a pension.

However. 40% tax relief is available if the company makes the pension contribution.

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