“As a chartered financial planner, building long term relationships with my clients is key” says Joanne Fisher.
Part of that process is meeting with clients regularly to ensure their investment strategy & solutions to their objectives remain suitable. However, if ever the client becomes unable to deal with their own finances due to illness or disability, it is important that they have a legal document allowing another trusted person to act on their behalf.
Having a property & finance Lasting Power of Attorney (LPA) gives any person the client wishes, to have permission to deal with their affairs if they become incapacitated. It gives the authority for this person to make decisions about the client’s property & money.
If you already have a type of power of attorney (POA) in place or are considering getting one, there are a few things you need to know:
Don’t leave it too late!
When I recommend setting up a lasting power of attorney for property & finances, clients sometimes respond with ”I’ve done this for my parents but I’m too young to do it for myself”. It is important to remember that an individual cannot set up this document if they have already lost mental capacity.
In the absence of an accurate power of attorney document, no one else can lawfully act on behalf of the individual. The only alternative is then for the family to apply to the court of protection for a deputyship order, which can be a long and expensive process.
In the absence of a deputyship order or a POA, a client’s investments could be left in limbo until someone is lawfully authorised to provide instructions on them. As financial advisers, we could potentially not offer the best advice to clients due to this document not being in place.
Make sure you have the correct Power of Attorney (POA)
There are different types of POA with different uses. The most up to date and most formal is a ‘lasting power of attorney’ which replaced the Enduring Power of Attorney in 2007. It must be registered with the Office of the Public Guardian (OPG) at outset and has two versions – one for health & welfare & one for financial affairs. It is important to note that if you have the older enduring power of attorney, you did not need to register it at outset, only when mental incapacity occurred.
Include specific instructions about discretionary fund management
In 2015, the OPG amended its guidance to say that if an individual wanted to allow an attorney to engage the services of a discretionary fund manager, they would need to include specific wording in the POA. At the time there were mixed views in the industry about whether this wording was strictly necessary and it broadly came down to the views of each provider.
In March 2022, the OPG revisited its guidance and it no longer says an individual needs to include the wording, but it does still say that legal advice may be necessary.
Our advice would be for the client to include the wording if they currently use a discretionary fund manager or might consider using one in the future.
“Whilst we were pleased the OPG have now accepted that attorneys can use discretionary investment management, even without express provision in the LPA, we still take the view as a firm that it is better still to include suitable wording for the sake of clarity” says Elizabeth Armstrong, managing director and private client solicitor at Latimer Hinks
Sign up for the ‘use an LPA’ service
In July 2020, the OPG created a new online service “use an LPA”, which third parties like banks and investment providers can use to verify an LPA.
Although this service is a positive development from the OPG, we are still in the early stages and while the OPG reports “growing interest” among organisations, it may be a while before it is widely used.
Make sure copies are certified correctly
If a client is sending out a paper version of the POA, providers will always prefer to see the original document (not a copy). A copy will need to be certified in a particular way by a professional like a notary or solicitor. Guidance on the gov.uk website provides standard wording, that can help with this.
Let family members know there is a POA in place
If you have decided that your attorney is not to be a family member, it is worth letting other members of your family know who they are and their contact details.
Health & Welfare LPAs
Another important point is whether or not you have a ‘do not resuscitate’ (DNR) order in place. A DNR allows you to give someone you trust the legal power to make decisions on your behalf if you later become unable to.
Planning in advance helps you to prepare for all eventualities – postponing important decisions and arrangements could mean that you miss the opportunity to make your wishes known.
We always advise that you speak to a financial adviser before making important financial decisions.
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