Buyers beware

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Posted by Dave Seager, consulting adviser to Legal Futures Associate SIFA Professional

Seager: Not all financial advisers are equal

Some 12 years on from its first published research, the Society of Trust & Estate Practitioners (STEP) has published a new report – Wills and Trusts – Buyers Beware.

This respected organisation has long been concerned that unqualified or simply incompetent advisers are intentionally or unintentionally taking advantage of clients or letting them down because their lack the specialist skill of knowledge.

STEP is consistently “receiving complaints from people whose loved ones have inadvertently chosen wills that mean substantial parts of their estates are spent on legal fees”.

Sadly, the research STEP conducted with its own members between April and May 2023 suggests the situation has not improved, with a high percentage of those surveyed still reporting regularly coming across or having to unravel bad practice. These are some of the shocking, if not surprising highlights:

• Close to 80% of respondents have come across cases of wills with errors;
• The majority (63%) have encountered cases where a will-writing company has quoted a fee for writing a will but later added additional costs not covered within the terms of business;
• Over half (55%) had come across cases of incompetence or dishonesty in the drafting and administration of trusts;
• A similar proportion (54%) have come across firms making false claims about the wills they are selling to clients.
  Of those, 71 people mentioned that advisors had wrongly told their clients that they could avoid care home fees by putting their home and other assets into a trust during their lifetime. Some clients have been advised to gift their house during their lifetime. Both of these, as any sensible practitioner would know, are considered to be deliberate deprivation of assets and thus ineffective for care assessment which can lead to serious problems; and
• A third of respondents had come across cases where incompetence has led to significant tax bills, with examples of tax charges in many instances in the tens or hundreds of thousands of pounds and in a few cases up to £2m.

From a SIFA Professional perspective, it is happily a non-issue, as all our highly qualified financial planning members only wish to work closely with solicitors for mutual clients ongoing wellbeing.

Our members, found here, will only refer clients to specialist solicitors to ensure any will, lasting power of attorney (LPA) or trust is correctly worded and ties in with their clients’ financial plans and succession wishes.

However, in financial services, as in legal services, not all advisers are equal or indeed the same. This is perhaps a subject for another blog, but the modern financial planner is very different from a transactional financial adviser.

It is unlikely that a true financial planner would leave a client to their own devices when in need of a will or trust because such tools, as with LPAs, are vital to underpin the established plan.

However, the more transactional financial adviser, even if independent, might be more inclined to try and supplement their income by referring clients to non-regulated legal advisers or will-writing services.

It is because of this that, when an SRA regulated firm conducts research or reviews the third-party firms that it will be referring to, remembering that the regulator expects a firm-wide process for this, the above discrepancy and factors are part of the due diligence process.

In a practical sense, this should be as simple as asking the financial advisory firm directly whether they ask if their clients have a will, and how and where they will look to refer them if they do not.

It will also often be quite clear on an IFA website if they are offering their own will-writing service or suggest that they are linked to one. We sincerely hope that you would not wish to include such a financial services firm among your approved third parties.

As more wills in the UK than ever are being contested, the STEP research, and obvious renewed call for will-writing to be regulated, show that it has never been more important for clients to seek qualified professional advice, and better still collaborative, qualified professional advice.

To find the SIFA Professional directory of financial advisers, click here