STEP is delighted to confirm that the Office of the Public Guardian (OPG) has agreed to change its guidance on the requirement to have express provision for a discretionary investment management clause within a financial lasting power of attorney (LPA) in England and Wales.

Many attorneys do not have the necessary expertise to invest their loved one’s (or clients) financial assets without professional investment advice.

In 2015, the OPG amended its guidance to require that specific wording must be incorporated into an LPA if the attorney wishes to use a discretionary investment manager to assist in managing financial assets.

However many people setting up LPAs would not have known that this clause was required. Without this, attorneys acting on behalf of their loved ones under a lasting power of attorney were unable to appoint an investment manager or replace one that was underperforming.

Where the donor (i.e. the person making the LPA) still had capacity, they could execute a new LPA to include this wording, but they would need to pay a registration fee, legal costs and revoke the previous LPA.

Where the donor no longer had the capacity to make a new LPA, the attorney could submit a Court of Protection application to obtain retrospective authority, but the process could be costly and could take months, risking further deterioration of the donor’s investments.

This was clearly a major problem since a significant number of LPAs were not fit for purpose if the attorney wished to use the services of a discretionary investment manager.

STEP had highlighted this issue to the OPG. We are delighted that the OPG has responded and confirmed that the delegation of investment management by an attorney to a discretionary investment manager is legally permissible, without the need to retrospectively apply for it through the court. 

STEP member Caroline Bielanska TEP submitted a Legal Opinion to the OPG, addressing the range of practical difficulties and legal inadequacies caused by the guidance, which has prompted the OPG’s response. Caroline states: ‘Most people do not possess the skills and expertise to invest without proper advice. Discretionary Fund Management allows skilled professionals to regularly review investments within agreed risk parameters, so as to react swiftly to changing investment markets, which reduces overall risk and creates management efficiency.’

It is not clear when the OPG will formally update the guidance but we understand that this verbal confirmation will be sufficient for an attorney needing to instruct a discretionary investment manager in the interim period.

We will keep members apprised of any further developments.

Emily Deane TEP, Technical Counsel & Head of Government Affairs