Investment Management by Attorneys Under a Lasting Power of Attorney
This practice note provides general guidance for Attorneys appointed under a Lasting Power of Attorney (Property and Financial Affairs) in relation to the management of investment assets. Attorneys must act in the best interests of the donor and exercise appropriate care and prudence when dealing with financial matters.
1. Duties under the Mental Capacity Act 2005
Attorneys appointed under a Lasting Power of Attorney must comply with the principles set out in the Mental Capacity Act 2005. In particular, an Attorney must always act in the donor’s best interests and must take into account the donor’s past and present wishes, feelings, beliefs, and values so far as these can reasonably be ascertained. Attorneys must also ensure that any decisions made on behalf of the donor are the least restrictive of the donor’s rights and freedoms while still achieving the intended purpose.
2. Office of the Public Guardian Guidance
The Office of the Public Guardian (OPG), which supervises Attorneys and Deputies, publishes guidance explaining the responsibilities of those acting under a Lasting Power of Attorney. The guidance emphasises that Attorneys must act in the donor’s best interests, keep the donor’s money and property separate from their own, keep appropriate financial records, and seek professional advice where necessary when making significant financial decisions, including investment decisions.
3. Legal Duties of Attorneys
Attorneys managing the property and financial affairs of a donor are expected to exercise a high standard of care. In practice, the duties applied to trustees under the Trustee Act 2000 are generally regarded as the appropriate benchmark.
Section 1 of the Trustee Act 2000 establishes a statutory duty of care, requiring those exercising investment functions to act with such care and skill as is reasonable in the circumstances, taking into account any special knowledge or professional expertise they may possess.
4. Delegation of Investment Management
The Trustee Act 2000 recognises that trustees may not always possess specialist investment expertise. Sections 11–15 of the Act therefore permit the delegation of certain functions, including discretionary investment management, to authorised and regulated professionals.
Accordingly, Attorneys should exercise caution when dealing with investment assets and should not normally manage investment portfolios personally unless they possess appropriate professional expertise.
In most cases it will be prudent to appoint a suitably qualified and regulated professional, such as:
- an independent financial adviser
- a discretionary investment manager or stockbroker
5. Investment Policy Statement
Where investment management is delegated, Attorneys should ensure that an Investment Policy Statement (IPS) is prepared. This document provides the framework within which the investment manager operates and should record:
- the donor’s financial circumstances and objectives;
- income requirements and expected time horizon;
- the donor’s risk tolerance; and
- any relevant restrictions or preferences.
6. Oversight and Review
Delegation of investment management does not remove the Attorney’s overall responsibility. Attorneys must continue to exercise reasonable supervision of the appointed adviser. This should include ensuring that the adviser is appropriately authorised and regulated, receiving periodic investment reports, and reviewing the portfolio to confirm that it remains suitable for the donor’s needs and circumstances.
7. Responsibility and Potential Liability
Attorneys are not responsible for normal market fluctuations or investment losses where investments have been made prudently and with appropriate professional advice. However, Attorneys may be held personally liable if losses arise due to failure to exercise reasonable care and skill, unsuitable or speculative investment decisions, failure to obtain professional advice where appropriate, or inadequate supervision of an appointed investment manager.
Disclaimer
This document is intended as general guidance only and does not constitute legal or financial advice. The duties of an Attorney will depend on the specific circumstances of each case and the terms of the relevant Lasting Power of Attorney. Independent legal or financial advice should be obtained where appropriate.