The number of power of attorneys being used is on the rise in the UK and therefore financial advisers should undergo more training on dealing with a client’s mental capacity, according to law firm Irwin Mitchell.
This comes after the Office of Public Guardian reported in the year to April 2019, 749,000 LPAs were registered. This was a 63% increase in annual registrations since the 2016-17 financial year.
As of May 2019, there were a total of 3,998,000 LPAs registered.
Margaret Windram, associate solicitor in the wills, trust and estate disputes team at Irwin Mitchell, told International Adviser: “All financial advisers should have regular, updated training about The Mental Capacity Act and the things they need to look out for.
“Advisers need to be aware of anything they are providing to someone lacking capacity.
“I think we are used to judging capacity but perhaps a financial adviser doesn’t think about it.
“Often people are thinking about their financial circumstances as they get older, and that’s when they are more likely to seek advice. It is about being aware of all the issues.”
Complicated issues
Training may be a necessary matter because financial advisers need to be updated on changes in the law in terms of power of attorneys.
Kelly Greig, partner at law firm Irwin Mitchell, told IA: “I do think that some financial advisers don’t know that power of attorneys cannot undertake inheritance tax planning without court approval.
“We have had case law since 2016, which says that you can’t invest in AIM schemes either without court approval.
“This wasn’t previously the case. Some of the big providers of business property relief type products used to sell ‘perfect solutions’ for attorneys and deputies because it is the easiest way to undertake inheritance tax planning.
“But since 2016, you can’t do that without approval, and I think it has taken the financial services industry to catch up with that. And when I speak to advisers – it is about 50/50 that they know about that case.”
Helping advisers with lack of experience
Greig added: “They need to understand to what capacity their client is capable of making financial decisions or not.
“If they are incapable – and therefore the attorney or deputies are acting, they then have to know the necessary powers to implement the advice they are giving.
“I think understanding is necessary. You get some very good advisers that do a lot of work – if you have advisers that do a lot of work with the elderly, they are used to it.
“They are not the risk ones – it’s the advisers that have a entrepreneurial client base and then one client who happens to be much older.
“Or if their client has a stroke and loses capacity and it’s the first time they are used to that issue. That is a bigger problem.”
