Posted by Dave Seager, consulting adviser to Legal Futures Associate SIFA Professional
Seager: Reach out to financial planners
Sometimes it is difficult to offer thought leadership, which is my challenging remit for the SIFA Professional monthly Legal Futures blog, and on other occasions, events or developments in the legal market suggest the perfect subject matter.
With the Powers of Attorney Act receiving Royal Ascent at the end of September, this is one of those months.
The industry can debate delays at the Office of the Public Guardian and whether the new online processes will help in the short term, and indeed whether its online nature is in danger of excluding some of the most vulnerable in society who may not have the internet, or access to professional advice.
However, I think we can all agree that far more people should have a lasting power of attorney (LPA) sorted and sorted earlier. It was wonderful to see the Ministry of Justice confirm that the registration of LPAs for Q1 2023 was 33% up on 2022, but I was concerned to also read that 54% of them were put in place for individuals over the age of 75.
This is exceedingly worrying to us, because we passionately believe that plans the financial planning community establishes for its clients, generally for forward-thinking individuals and couples in their 50s, should be underpinned by an LPA.
LPAs being set up by individuals over the age of 75 smacks of panic and not the foresight and planning we would advocate.
This leads me on to my challenging and thought-provoking question for you.
If you are not receiving constant referrals from your financial planning partners, then are you not working with the right partners. Or are they perhaps not true financial planners at all, but more transactional financial services companies?
This may sound as if I am being critical of my own financial advisory community, or even our own SIFA Professional members, but in truth I genuinely want true professional collaboration and that MUST be a two-way street to benefit mutual clients.
If a financial services professional is creating a true financial plan, then I believe it must include the ‘what if’ scenarios presented by loss of mental capacity. This is not only from a purely practical standpoint, in the short term, but from a succession planning and inter-generational wealth planning perspective in the more medium to long term.
You do not need SIFA Professional to tell you that the guidance included in a solicitor-established LPA can prevent tricky decisions and even family disagreements in the future.
Obviously, the LPA can tackle more complex needs, such as the release of funds for medical or even long-term care, at home or residentially, as well as allowing attorneys, alongside us as financial planners, to ensure the plan stays on track to facilitate for such occurrences.
An earlier establishment of the LPA alongside the financial planning exercise also offers the chance to actively involve the next generation in the inter-generational wealth planning. It facilitates an early discussion and hence better understanding, for adult children, if they are to be appointed as attorneys of what their role and potential duties could be if their parent loses mental capacity.
True financial planners will find this not only provides comfort to our clients, the donors, and their children, the attorneys, knowing the plan for what could happen in difficult circumstances.
Following on from the above, it will also allow adult children as attorneys to make investment decisions, in conjunction with their financial planners, to preserve and grow wealth.
Sometimes, they might need to take more risk to attain greater returns to fund care, for example, or conversely they may wish to take less risk to ensure the most wealth can be securely passed on to the beneficiaries.
A donor should also include a wording permitting that their will can be disclosed to attorneys. This will ensure that attorneys, supported by their financial planner, can make financial, and particularly investment decisions, appropriate to the wishes expressed in the will.
With so many DIY LPAs being rejected for incorrect completion, or incorporating inappropriate instructions, we will always encourage SIFA Professional firms to refer to an appropriately qualified solicitor.
Surely all genuine financial planners must consider it imperative to underpin the financial plans they so carefully create for their clients with LPAs, not least for the very real benefits they can provide for future generations?
So, in conclusion I will return to the challenging and potentially uncomfortable question, posed earlier: are you receiving a regular flow of LPA referrals from your chosen financial planning partners?
Why not reach out to the firms for a discussion about their process for client conversations around LPAs? If they are not having that ‘what if’ conversation, why not? Show how you can assist.
Looking at how a true financial planner operates, will provide peace of mind that they are the safest pair of hands for your clients.
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