Whether or not an attorney can appoint a discretionary investment manager is a question that has come up a number of times over the last couple of months. The position on this has changed following updated guidance from the Office of the Public Guardian (OPG), so maybe it is no wonder confusion still abounds.
It would be nice to say we now had a clear picture, but I’m afraid it’s not that simple.
Back in 2015 the OPG amended its guidance to require that a specific wording was added to a Lasting Power of Attorney (LPA) if the attorney wanted to use a discretionary investment manager. This applied whether the attorney was appointing a new discretionary manager, or simply continuing to use the manager that had been appointed by the donor before they lost capacity.
However, often LPAs would be set up without the relevant clause, and the issue only realised once it was too late. This missing wording meant, until recently, that when capacity had been lost only the attorney specifically given the power to manage their financial affairs via the LPA could do so. They could not delegate this management to the discretionary manager, even where they were previously appointed by the donor. In practice the manager would simply refuse instructions from the attorney. The only way out of this situation would be to go to the Court of Protection to amend the LPA – a lengthy and costly process.
The good news is that the OPG have recently changed its position and confirmed that the delegation of investment management by an attorney to a discretionary manager is legally permissible without the need for any specific wording in the forms.
However, their updated guidance* passes the buck somewhat. It recommends considering legal advice on whether to make specific provision for discretion investment management in the LPA as some institutions may still not accept instructions from the attorney where the donor has lost capacity. In short it’s not a legal requirement to have the wording, but some discretionary managers might insist on it anyway.
So where does this leave us?
If you are setting up a new LPA it would be prudent to include the specific provision to avoid the issue in future. If you are dealing with a client who uses a DFM and already has an LPA set up without the relevant clause then it’s probably best to check with their DFM whether they would accept instructions from the attorney in the event of your mutual client losing capacity. If the answer is no, then you have the opportunity to amend the LPA whilst the client is still capable.
Lisa Webster is senior technical consultant at AJ Bell. She is an economics graduate with over 15 years’ experience in financial services. Prior to joining AJ Bell in May 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. She is part of the AJ Bell Technical Team, responsible for providing regulatory and technical analysis to the business and outside world. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Twitter: @lisasippster