We occasionally receive what we would class as ‘technical queries’ from firms. We generally only deal with queries relating to FCA regulation and compliance but this was an interesting question so we thought we should give it wider circulation.

The query concerns the ability of attorneys to engage with DFMs. An issue came to light around 2015/16, which is summarised in this STEP blog and this update.

The England & Wales Office of the Public Guardian (OPG) published an update in September 2015 providing guidance on financial lasting powers of attorney (LPAs) and how attorneys can delegate investment management decisions to a discretionary investment manager.

Under this guidance an attorney can appoint a bank or an IFA to act on their behalf to make investment decisions; however specific wording must be incorporated into the LPA. Since the guidance was issued in 2015, STEP and other professional bodies have contacted the OPG with their concerns.

The primary issue is that if an attorney is currently using a discretionary manager without explicit permission in the LPA, then they need to apply to the Court of Protection to obtain retrospective consent.

This has an impact for advisers where a client is recommended to invest in a DFM portfolio – the potential difficulty that might arise in the event that the client subsequently enters into a LPA needs to be considered. And, of course, if advising an attorney/deputy, advisers need to consider the OPG guidance.

There is a difference between England and Wales on the one hand and Scotland on the other (there could be some differences in Northern Ireland too). OPG in E&W is governed by the Mental Capacity Act 2005 and updates. The OPG in Scotland is governed by the Adults with Incapacity Act 2000 and updates. So if advice is being provided to a client resident in Scotland or NI, some research around this aspect will be prudent. 

The essential issue is that attorneys and deputies are constrained in delegation of any decisions that they should make themselves. Cursory research indicates that including some wording (there is a wide variety of wording out there so not real consistent approach we can recommend) in an LPA might permit the use of, or continued use of, a DFM but this is far from certain as ultimately some organisations, banks, etc. and even DFMs might not accept that wording and so reject the LPA out of hand.