Practitioner perspective: We need to work together to help vulnerable clients

Robin Melley TEPVulnerability is not synonymous with poverty or age, it can happen to anyone, at any time.

While I have been interested in vulnerability for many years, it was the development of my firm’s corporate social responsibility (CSR) policy, with the theme, ‘vulnerability and combating financial abuse,’ that really crystallised my desire to develop my technical knowledge.

The issue was highlighted for me when I started working with NS&I Premium Bond winners, who had each scooped a GPB1 million jackpot. You might not think such a group are people to be concerned about, but I discovered there are sometimes substantial difficulties faced by those who come into ‘sudden wealth’, particularly vulnerable minors and elderly people who have lost mental capacity.

For me, it highlighted the fact that we, as professional advisors, should not try and pigeonhole people as vulnerable, but look at a person’s overall circumstances and make sure we consider potential vulnerabilities for all clients.

Everyone is potentially vulnerable

Importantly for financial planners such as myself, and, I’d think, most STEP members, dealing professionally with vulnerability should be at the core of our work. It is too important an issue to be relegated to a compliance tick-box exercise. The Financial Conduct Authority (FCA) is in the middle of a consultation on vulnerability; and the risk is that advisors fall into the trap of viewing ‘vulnerable clients’ as a defined group of people and focus on complying with a set of regulatory requirements.

In real life, everyone is potentially vulnerable, and the signs of vulnerability are often not immediately obvious. Consequently, the issue of vulnerability has to be embedded in the advice process for all clients.

I believe it’s also vital for chartered financial planners, lawyers, and other professionals to work together. For example, when there is an application to the Court of Protection for gifts to be made, the legal advisor usually needs to demonstrate that the attorneys are acting in the donor’s best interests and fully meeting their obligations under the Mental Capacity Act 2005. A chartered financial planner can provide support by undertaking detailed analysis, incorporating a lifetime cashflow forecast to demonstrate the long-term financial consequences of making gifts at the levels proposed.

Helping our fellow human beings is a basic human instinct and, like many STEP members, I have spent my career helping clients solve some of their problems to satisfy their aspirations for themselves and their families. It has been very gratifying to help them, often supporting them with issues not normally considered part of the financial planner’s responsibilities, and it’s a special feeling to give a safe pair of hands to a client who particularly needs help.

Watch out for abuse

Financial planners who adopt a holistic approach with clients can often spot problems because of the nature of the long-term (and often lifelong) relationship they have with clients, where they are meeting on a regular basis. He or she is well placed to pick up on any cues of possible financial abuse. I have, for instance, become aware of an adult child attempting to persuade an elderly parent to make gifts to them to the detriment of the parent; and have been able to intervene to guide and support the client in what is often an emotional situation.

Why I took the STEP Diploma

I realised I could better help others by deepening my understanding and achieving a higher level of technical competence. The STEP Diploma in Advising Vulnerable Clients offered the most comprehensive professional qualification in this area. I certainly found it a challenge finding the time over the last three years to study, but it has been hugely worthwhile. I have learned so much and it has enabled me to adapt our approach to financial planning to be more closely aligned with the needs of those who find themselves in vulnerable circumstances.

Examples of the improvements include the provision of detailed information and guidance to the parents of minors, to ensure they are clear on their fiduciary duties and obligations, and improving the way in which we refer to and collaborate with legal advisors.

Put simply, I believe that I am a better financial planner because of what I have learned through the attainment of the STEP Diploma and becoming a Full Member of STEP. The biggest beneficiaries are, of course, our clients.

Robin Melley FPFS TEP is a Chartered Financial Planner, at Matrix Capital in Shropshire.

STEP members input into reform of the law of wills

doctor with patientEarlier this week STEP held the second of three consultation events on the reform of the law of wills in England and Wales. Law Commission representatives Dr Nick Hopkins and Spencer Clarke invited feedback from STEP members in England and Wales on key areas of the consultation including, capacity, statutory wills, formalities, electronic will-making, protecting vulnerable testators and revocation.

At both events, practitioners raised substantial issues relating to the review of the test for capacity to make a will under Banks v Goodfellow (1870), the review of the formality rules, the introduction of court dispensing powers and further possible protection measures for vulnerable testators.

Some particularly pertinent questions that initiated discussion amongst members at the events were:

• How can the Golden Rule (where the making of a will by an elderly or ill testator is witnessed or approved by a medical practitioner who is satisfied of their capacity) be improved?
• Should the Wills Act adopt the Mental Capacity Act 2005 for decisions regarding testamentary capacity?
• Could other professionals such as psychiatrists assess capacity, not just medical practitioners?
• Should the ‘attestation’ requirement be removed?
• Should a dispensing power be introduced to allow judges to override a will formality that has been overlooked, for example, missing witnesses?
• Should the marriage revocation clause be reconsidered or removed?
• Is there scope for expanding the undue influence doctrine, in order to further protect vulnerable testators?
• Could there be more clarity separating the concepts of undue influence, and knowledge and approval?
• Have nominations been taken into consideration, particularly considering they require far less formalities than wills?
• Do domicile and residence issues need to be considered, including how the new rules would operate within other jurisdictions?

Members note that these roadshow type events are invaluable in the consultation process. The Commission, in turn, has been pleased with the response from members at both events.

Following the consultation deadline on 10 November 2017 there will be an analysis stage, after which a report and impact statement will be published by the Commission and subsequently a draft Bill.

Spaces are still available at the Manchester event on 18 October at Mills & Reeves LLP.

If your firm is unable to attend a consultative event, but would like to submit some feedback on the consultation to be incorporated into STEP’s consultation response, please contact emily.deane@step.org by 30 October.

Emily Deane TEP is STEP Technical Counsel