24 November 2015

LPAs: authorising use of discretionary investment management


Julia Abrey
Partner | UK

On 7 September 2015, the Office of the Public Guardian published an updated version of its guidance 'Make and Register your Lasting Power of Attorney: A Guide (LP12)'. The most significant change to the guidance is the addition (on page 28) of suggested wording for inclusion in a financial LPA where the donor wishes to authorise attorneys to delegate investment management decisions to a discretionary investment manager, such as a bank. The OPG notes that, where possible, the wording of the donor's authorisation should be checked with the financial institution concerned before the LPA is registered. The guidance also provides suggested wording, both for attorneys continuing to use any existing discretionary management service and for attorneys who wish to engage a discretionary investment manager once they are operating the LPA. The guidance indicates that attorneys cannot use a discretionary management service without specific authorisation and says that this is the only time, in relation to a financial LPA, that such an instruction must be given.

The guidance goes on to say that, in the absence of express permission from the donor in the LPA, where the LPA has already been registered, the attorneys will have to apply to the Court of Protection for authority to appoint a professional investment manager on a discretionary basis. The implications of this change in previous guidance could be serious for those attorneys who are operating a discretionary management system under a registered LPA without such specific authorisation. On the basis that the donor lacks capacity and cannot ratify the attorney's decision to employ a discretionary investment manager (which may in any case not be able to be continued on subsequent incapacity) there appears to be little choice but to apply to the Court of Protection for specific authority, a process which is expensive and can take some time. During this period, valuable investment opportunities may be lost. One alternative for attorneys to consider would be to change to an advisory investment management service. Although this does not require specific Court or LPA authorisation it has its own implications- an advisory service may not be offered, may be subject to a different charging regime and may be challenging to operate if more than one attorney needs to give specific authorisation to each investment change. Clarification of how the new guidance will work in practice has been sought by out team from the Office of the Public Guardian.

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