Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

How to address the needs of vulnerable clients

1 Comment
How to address the needs of vulnerable clients

With dementia now the leading cause of death in the UK, there is an ever-growing likelihood that a significant portion of a wealth managers’ client bank will be affected by Alzheimer’s or other forms of cognitive impairment.

The latest figures from the Office for National Statistics make for grim reading. More than 61,000 people died from dementia in 2015 – 11.6% of all recorded deaths in England and Wales – as the condition overtook heart disease as the biggest killer. And with increased longevity, many expect dementia to become even more prevalent.

For wealth managers, having the procedures in place to both recognise and then deal with clients suffering from the condition is crucial, as part of their duty of care to ensure the client understands the decisions being taken. Many place individuals with dementia within a broader ‘vulnerable client’ category, which could also include those ranging from widows or widowers whose deceased partner took charge of the finances to people who have suffered life-altering injuries.

Kate Leppard, deputy head of UK private wealth at Cazenove Capital, stressed the importance of providing training on how to recognise signs that a client’s mental capacity may be reduced to all staff who come into contact with them and not just frontline investment managers.

‘An ageing client base and vulnerable clients are not a new issue, but are potentially growing issues,’ she said.

‘We provide regular training for all of our client-facing employees, whether they are looking after private clients, trustees or staff dealing with administration – they still speak to clients regularly about dealing. It’s very important to train all levels of staff – anyone that might be speaking to clients.

‘We have guidelines and policy notes that anyone can refer to. A lot of our staff have been here years and have a lot of client experience, so the younger staff can also ask their opinion.’

Leppard said knowing your client is key in identifying abnormalities in a client’s activity.

‘If we are particularly alarmed by a change in their behaviour patterns, such as unusual withdrawals, we would almost certainly try and arrange a meeting,’ she said. ‘If we know a client very well we can be more probing in the questions we ask them. It’s not that we’re doctors, but a face to face meeting can be very helpful in identifying any issues.’  

Power of attorney

But Gary Smith, a chartered financial planner at Tilney, noted that it is important to differentiate between reduced capacity and plain bad investment choices.

‘We would need to assume that the individual has capacity unless it is established that they lack capacity,’ he said.

‘Furthermore, an individual is not to be treated as unable to make a decision unless all practicable steps to help them to do so have been taken without success, and an individual is not to be treated as unable to make a decision simply because they make an unwise decision.’

One of the first steps would be to contact the client’s wider family and any other professional advisers they have in place, such as accountants or solicitors. This can help identify whether the client has any legal arrangements in place, such as a court of protection order or power of attorney, and a valid will. Even this can throw up complications, however. The lasting power of attorney (LPA) replaced the enduring power of attorney (EPA) in 2007, although EPAs remain valid.

Neil Moles, managing director of Progeny, said he is much more comfortable if an LPA is in place as they are better defined and have to be obtained through a court.

‘I’d be wary if [a third party or family member] just had an EPA. You now have the LPA for which you have to apply to court and say this person doesn’t have the capacity to make decisions. The EPA is just registered and invoked,’ he said.

The LPA can also separate property and financial affairs from health and welfare. Leppard points out that it is important to ensure the EPA is for the client’s financial affairs and filled in correctly.

She said: ‘You need permissions to continue running discretionary and if you don’t have that, you can only offer execution-only and you don’t want that with a vulnerable client.’

If someone has not made an LPA, but a court of protection has appointed a deputy to oversee the client’s assets, Smith said: ‘We would still be able to provide ongoing advice, but would potentially be dealing with the deputy rather than the individual directly.’ 

In some cases, however, if a client has no family or is estranged from them, it can reach a stage where it becomes impossible to continue servicing them, Smith said.

‘If the individual didn’t want to include family members, or if they didn’t have any, then it is unlikely that advice would be provided where we felt there was a lack of capacity or understanding of the recommendations made.’

One key way to try and avoid this scenario is to encourage clients to regularly review their legal arrangements, he added.


Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: how career burnout led to a family office launch

Profile: how career burnout led to a family office launch

I was burnt-out from a career in finance and had no desire to come back, says the founder of Blu Family Office

Wealth Manager on Twitter