Attorney Guidance On Investment Management Under a Lasting Power of Attorney
What the Law Requires of Attorneys Managing Financial Assets
Accepting an appointment as an attorney under a Property and Financial Affairs Lasting Power of Attorney is not a formality. It is the acceptance of a legal role that carries genuine and enforceable obligations — obligations that extend well beyond paying bills and managing a bank account.
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Where the donor holds investments – whether a share portfolio, investment bonds, ISAs, or other managed assets – those obligations become significantly more demanding. Many attorneys are unaware of the legal standard to which they are held. This guide sets out what the law requires, what good practice looks like, and where the risks of personal liability arise.
The Legal Framework: Mental Capacity Act 2005
All attorneys appointed under a Lasting Power of Attorney operate within the framework established by the Mental Capacity Act 2005.
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The Act establishes five statutory principles, the most directly relevant of which for investment purposes are:
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An attorney must always act in the donor's best interests.
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Any decision made on behalf of the donor must be the least restrictive of the donor's rights and freedoms while still achieving its purpose.
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An attorney must take into account the donor's past and present wishes, feelings, beliefs and values so far as these can reasonably be ascertained.
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These are not aspirational standards. They are legal requirements. An attorney who makes investment decisions without reference to the donor's known wishes and circumstances — or who acts in a way that benefits others at the donor's expense — is acting unlawfully.
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The Office of the Public Guardian supervises attorneys and deputies and publishes detailed guidance on their responsibilities. That guidance is consistent and unambiguous: attorneys must act in the donor's best interests, keep the donor's finances entirely separate from their own, maintain proper financial records, and seek professional advice when making significant financial decisions.
The Standard of Care: Trustee Act 2000
The Mental Capacity Act establishes the principles. The Trustee Act 2000 establishes the standard of care.
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In practice, the duties applied to trustees under the Trustee Act 2000 are the recognised benchmark for attorneys managing financial assets. Section 1 of the Act imposes 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 the attorney may have.
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This has an important implication. An attorney who happens to be a financial professional is held to a higher standard than one with no relevant expertise. Familiarity with investments is not a defence against a finding that insufficient care was taken — it raises the bar.
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The duty of care applies to every investment decision made on behalf of the donor: the selection of an adviser, the mandate given to that adviser, ongoing oversight, and the decision to change or terminate an arrangement.
Delegating Investment Management
The Trustee Act 2000 recognises that attorneys — like trustees — will not always possess the specialist expertise needed to manage investment portfolios competently. Sections 11 to 15 of the Act specifically permit the delegation of discretionary investment management to authorised and regulated professionals.
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In most cases, attorneys should not attempt to manage investment portfolios personally unless they hold appropriate professional qualifications and expertise. The prudent course — and in most cases the legally required one — is to appoint a suitably qualified professional. This will typically be either:
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An independent financial adviser authorised and regulated by the Financial Conduct Authority; or
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A discretionary investment manager or stockbroker with relevant expertise in managing assets on behalf of attorneys and vulnerable clients.
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Before appointing an adviser, attorneys should verify their authorisation status on the FCA Register at register.fca.org.uk, obtain written terms of engagement, confirm that the adviser understands the legal context in which the attorney is operating, and document the reasons for the appointment.
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It is worth being clear about one point: delegation does not transfer responsibility. An attorney who appoints an investment manager retains a continuing supervisory duty over that manager's conduct and the suitability of their decisions.
The Investment Policy Statement
Where investment management is delegated, attorneys should ensure that a formal Investment Policy Statement is prepared and agreed with the adviser before the mandate begins.
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The Investment Policy Statement provides the framework within which the investment manager operates. It should record:
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The donor's financial circumstances and investment objectives.
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Income requirements and the anticipated time horizon.
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The donor's attitude to investment risk, based on their known wishes and circumstances.
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Any restrictions, preferences or excluded asset classes arising from the LPA or the donor's known views.
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The Investment Policy Statement is not a bureaucratic formality. It is the document that demonstrates the investment mandate was constructed with the donor's specific situation in mind — and it is the reference point against which the adviser's subsequent decisions can be evaluated.
Ongoing Oversight
Appointing an adviser and agreeing to an Investment Policy Statement are the beginning of the attorney's investment management responsibility, not the end of it.
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Attorneys must maintain active supervision of the appointed adviser. In practice, this means:
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Ensuring the adviser remains appropriately authorised and regulated.
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Receiving and reviewing periodic investment reports.
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Assessing whether the portfolio continues to reflect the donor's circumstances, risk tolerance and income needs.
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Reviewing the Investment Policy Statement whenever the donor's circumstances change materially — including changes in care needs, health or anticipated expenditure.
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Documenting each review and any instructions given to the adviser.
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The frequency of formal reviews will depend on the nature and size of the portfolio. Annual reviews are a minimum; more active oversight is appropriate where circumstances are changing or where the portfolio is complex.
Personal Liability
Attorneys acting prudently and with appropriate professional advice are not held responsible for normal market fluctuations or investment losses that arise from market conditions outside anyone's control.
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The position is different where losses arise from conduct that falls short of the required standard. An attorney may be held personally liable where:
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They failed to exercise reasonable care and skill in managing or overseeing investments.
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They made unsuitable or speculative investment decisions without appropriate advice.
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They failed to appoint a professional adviser where doing so was clearly required.
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They failed to supervise an appointed investment manager adequately.
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Personal liability in this context means precisely that — the attorney may be required to make good on the loss from their own resources. This is not a theoretical risk. Complaints to the Office of the Public Guardian about attorneys managing investments poorly are not uncommon, and the OPG has powers to investigate, suspend and ultimately remove attorneys from their role.
A Note on the LPA Itself
The terms of the LPA document matter.
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Before taking any investment-related action, attorneys should review the LPA carefully for any restrictions, conditions or guidance relating to financial management or investments. If the donor provided a letter of wishes or supplementary guidance alongside the LPA, that guidance should be taken into account in establishing the investment mandate.
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If the LPA contains instructions that conflict with what appears to be in the donor's best financial interests, the attorney should seek legal advice before proceeding.
Related Guides
The following resources expand on several of the issues raised above:
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7 Questions to Ask Before Creating an LPA — the key decisions to work through before you draft the document.
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Attorney Checklist on Investment Management Compliance — a structured reference for attorneys managing investments on behalf of a donor, covering each stage from confirming authority to ongoing review.
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If you would like to discuss your own arrangements, the team at Wills, Tax & Trusts Ltd. is here to help.
Speak With Our Team
If you are acting as an attorney and have questions about your investment management responsibilities, or if you are planning an LPA and want to ensure the document properly addresses financial and investment matters, the team at Wills, Tax & Trusts Ltd. is available to assist.