As a financial advisor, there are many important conversations to be had with your clients. The one we are about to discuss in this blog may be distressing to think about, but it is a time-sensitive, urgent conversation you will need to have with your clients as soon as you take them on - who has power of attorney over your client’s financial affairs if they were not capable of managing their finances due to sickness, or worse, death.
Other conversations with your client would normally include their ethics so that you know where to place their cash to align with the values. Or a conversation about what they hope to achieve with their returns in the future. All of these insights into your client’s life can help you create the perfect financial plan for them.
The conversation around what they are hoping to achieve with you as their financial advisor is important, making the conversation around the power of attorney, critical. There are many reasons people want help from a financial advisor when it concerns their hard-earned savings. It could be to help with a down payment on a house, boost a client’s retirement nest egg, or on the more morbid, but still practical side, it could be to cover funeral costs after death.
Making plans for your finances is the proactive, smart thing to do for yourself, your dependents, or for anyone who may have to handle your affairs once you pass. Being in a state where you cannot or will not be able to manage your financial dealings is a possibility. Unfortunately, hurdles in life or even the end of life is something we will all experience at one point or another, and being prepared can alleviate unnecessary stress and upset, to your client and those around them. This is one aspect to ensuring you are preparing your client for a stress-free wealth management journey.
Why is appointing a Power of Attorney (POA) so important?
The document will legally allow your client to give a designated agent the authority to make legal decisions and financial transactions on their behalf in the event of incapacity or any other limitation. Just to note, this should not be confused with a health care proxy, a document that only affects health care decisions.
Without a POA, no one is permitted to manage your client’s financial and legal affairs. Should your client become incapacitated, even if they are married, in a civil partnership or have adult children, family members will not be allowed to make important decisions without going through an extremely intrusive, time-consuming, and expensive guardianship process, unless the person has been granted via a POA.
Other than writing a will, appointing a POA is one of the key pillars in regards to personal financial planning. It is in your client’s best interest to assign a power of attorney. You as an advisor can only guide them through this process, but it is critical to emphasise these, and the following points.
What should you let your clients know about the power of attorney?
In the UK, there are three types of power of attorney your client should be aware of:
- An ordinary power of attorney: This covers decisions about your client’s financial affairs and is valid while they have the mental capacity to make decisions. It is suitable if they need cover for a temporary period (hospital stay or holiday), or they want someone to act for them.
- Lasting power of attorney (LPA): An LPA covers decisions about your client’s financial affairs, or their health and care. It comes into effect if your client loses their mental capacity, or if they no longer want to make decisions for themselves. A person would set up an LPA if they want to make sure they’re covered in the future.
- Enduring power of attorney: EPAs were replaced by LPAs in October 2007. However, if your client made and signed an EPA before the 1st of October 2007, it should still be valid. An EPA covers decisions about your client’s property and financial affairs, and it comes into effect if they lose mental capacity, or if they want someone to act on their behalf.
How do you set up the power of attorney in the UK?
There are three ways you can set up a power of attorney:
- Contact the Office of the Public Guardian to get the relevant forms and an information pack. Your client can download the forms or fill them out online.
- Your client can fill out the forms themselves, or with the help of a solicitor or local advice agency. Taking professional advice can prevent problems later on, especially if they’re unsure of the process or because their financial affairs are complex.
- Have the LPA signed by a certificate provider. This is someone who confirms that the person signing it understands it and hasn’t been put under any pressure to sign it. The certificate provider must be someone your client knows well, or a professional person such as a doctor, social worker or solicitor.
Although having these difficult discussions is not something you want to encourage your client to spend their weekend doing, ensuring they understand the importance of having clarity with those closest to them about their financial wishes, your client will save themselves, and others in their circle, a lot of future confusion, stress and hassle.
So, why should you choose Akoni to help you with your client’s cash decisions?
1) Safe and secure with FSCS protection
All deposits are held with each bank providing protection of up to £85,000 per bank, or up to £1 million for Temporary High balances.
2) Diversifying risk (spreading money across savings providers)
With the option to spread cash across several providers on the Akoni Cash Management Platform, you can diversify risk, and increase the chances of positive returns.
2) Increased returns & Better interest rates
In a climate of economic uncertainty, and with interest rates being cut across many providers, it’s not easy to find decent interest rates in a simple way. With Akoni, you can find competitive interest rates to suit your client’s specific needs.
4) Quicker, and hassle-free - no form filling
Akoni Hub provides a hassle-free cash management experience - your clients can onboard and open an account online with no fuss. Clients will only need to complete one AML/KYC process, can switch between providers, and manage their account on the Akoni Cash Management Platform in just a few clicks.
5) White label Adviser portal and tools
You have the flexibility to create a platform that works for you and your clients. Add your branding to showcase who you are through a sleek, professional cash management platform designed with you in mind.
The award-winning Akoni Cash Management Platform is already leading the way in the wealth management sector, and has partnerships with Barclays, Aldermore, Investec, Clydesdale, amongst others. The ability to white label the platform gives financial advisors flexibility to help their clients move cash depending on ever-changing macro and micro environmental factors.
Find out more about Akoni: Akoni is an award-winning UK cash platform, which provides a marketplace to financial advisors and wealth managers through a bespoke white-label offering, or off-the-shelf offering. Akoni uses innovative technology to personalise cash planning solutions for clients, and also provides a full API solution to banks and insurance clients.