Appropriate % cash in portfolio

Sailtheworld

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

Just been through a similar thing albeit with less money involved. With a PoA you have to act in the best interests of the donor and not the beneficiaries. When it became clear my dad was on his way out I simplified a lot of his affairs to make my life easier later (I was the executor too. The beneficiaries included an estranged step family so I documented what I did and why I did it just in case.

It has to be taken as a whole but I'd look to be moving to cash and having the minimum number of accounts open at death. It makes your life easier later but, more importantly, you can argue (not that you'll need to) it's in the best interests of your mother because she's got plenty of money to see her through so doesn't need money at risk in a S&S ISA and certainly doesn't need to be paying to hold cash.

Linton

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

I fear you are skirting around some legally dodgy areas.  As an Attorney, particularly for someone without mental capacity you do not have the authority to act in your mother's beneficiaries' interests.  Holding 30% in cash may not make sense to you, but it is not your money.  If your mother was happy with how things were invested previously you should have a good and valid reason to do something different.

https://www.gov.uk/guidance/investing-for-someone-as-their-attorney-or-deputy gives some guidance, especially on thr use of Advisors. Also note the following quoted from that reference:

We (The Office of the Public Guardian) may advise you to apply to the Court of Protection for permission. This will happen if you want to:

• invest a substantial amount of the person’s money, particularly where the person had previously chosen to hold money in cash

Sailtheworld

Linton said:

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

I fear you are skirting around some legally dodgy areas.  As an Attorney, particularly for someone without mental capacity you do not have the authority to act in your mother's beneficiaries' interests.  Holding 30% in cash may not make sense to you, but it is not your money.  If your mother was happy with how things were invested previously you should have a good and valid reason to do something different.

https://www.gov.uk/guidance/investing-for-someone-as-their-attorney-or-deputy gives some guidance, especially on thr use of Advisors. Also note the following quoted from that reference:

We (The Office of the Public Guardian) may advise you to apply to the Court of Protection for permission. This will happen if you want to:

• invest a substantial amount of the person’s money, particularly where the person had previously chosen to hold money in cash

The clause above is specifically to deal with the situation where an Attorney takes substantially more risk with the donor's money than the donor did previously. There's nothing to stop the OP reducing risk & reducing charges but, as you say, this has to be argued on the basis of being in the best interests of the donor.

In this case the OP is miles away from legally dodgy areas unless they sell up their mother's assets and put it in bitcoin.

Thrugelmir

Bobziz said:

My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

That's not a legal responsibility of someone granted an LPA. 

Linton

Sailtheworld said:

Linton said:

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

I fear you are skirting around some legally dodgy areas.  As an Attorney, particularly for someone without mental capacity you do not have the authority to act in your mother's beneficiaries' interests.  Holding 30% in cash may not make sense to you, but it is not your money.  If your mother was happy with how things were invested previously you should have a good and valid reason to do something different.

https://www.gov.uk/guidance/investing-for-someone-as-their-attorney-or-deputy gives some guidance, especially on thr use of Advisors. Also note the following quoted from that reference:

We (The Office of the Public Guardian) may advise you to apply to the Court of Protection for permission. This will happen if you want to:

• invest a substantial amount of the person’s money, particularly where the person had previously chosen to hold money in cash

The clause above is specifically to deal with the situation where an Attorney takes substantially more risk with the donor's money than the donor did previously. There's nothing to stop the OP reducing risk & reducing charges but, as you say, this has to be argued on the basis of being in the best interests of the donor.

In this case the OP is miles away from legally dodgy areas unless they sell up their mother's assets and put it in bitcoin.

Provided the OP does not change the investment strategy for the benefit of the future beneficiaries but simply tries to reduce charges then as you say all should be OK and is clearly in the interests of the donor.  However, reducing the 30% cash to invest in a global tracker would surely be covered in the quoted section as needing approval from the Court of Protection although it could be advantageous for the beneficiaries. You dont need to put your mothers life savings into bitcoin to cross the letter and spirit of the law.

The law appears to be very careful in protecting the donor as far as possible. When I was looking into this area in the past I seem to remember there was a case where Court of Protection approval had to be gained to rearrange the donors affairs to minimise IHT. As the donor would be dead it was rather difficult to claim that this was in their best interests.

NedS

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

The issue you have is that your mother has chosen to invest that money in a S&S ISA. What authority do you have to cash in the whole investment because you don't agree with the way it is being managed? And if you were to just withdraw the 30% cash part of the portfolio to avoid the fees on holding cash, the IFA would most likely just re-balance the portfolio moving 30% back into cash to meet the risk profile of the portfolio so you'd be back to square one.

Bottom line, you are paying a fee for the performance of the portfolio as a whole, and overall the portfolio appears to be doing it's job given the risk profile identified. Seems the IFA has done his job and earned his 1.3% fee by the fact the portfolio has not lost 20% of it's value in the last 3 months.

Sailtheworld

Thrugelmir said:

Bobziz said:

My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

That's not a legal responsibility of someone granted an LPA. 

No it's not but it's likely that most people consider their own best interests and the best interests of their beneficiaries to be intertwined. In my dad's case there was still sufficient capacity such that he was able to discuss and, to a degree, direct. 

Most PoAs are granted when the donor still has mental capacity so there should be some scope for discussion.

Bobziz

Thrugelmir said:

Bobziz said:

My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

That's not a legal responsibility of someone granted an LPA. 

I'm not sure I follow your point. The attorney has to make a decision based on what's in the person's best interests and taking into account the person's preferences and beliefs, as per the above guidance. So, having taken advice from a suitably qualified IFA, I have to decide what my mother would want to do with some cash currently sat in a S&S ISA, with the knowledge that she already has more than enough funds to guarantee that all of her future needs will be met. Would she want the money to remain in the S&S ISA and pay for the privilege, move the money into a savings account with the associated loss of value, or invest it in a way that provides a reasonable chance of growth that will benefit the beneficiaries of her will.

To provide some comfort, I should make it clear that the amount of cash in question represents less than 1% of the value of my mum's wealth. I should also make it clear that the beneficiaries of anything that my mother may leave would happily swap it all in an instant if they could have another few years with her where she was of sound mind. I wouldn't wish Alzheimers on my worst enemy. 

eskbanker

Bobziz said:
I should make it clear that the amount of cash in question represents less than 1% of the value of my mum's wealth.

....which in turn suggests that the S&S ISA is about 3% of the total.  How much of the other 97% is being managed or advised by the IFA?

Bobziz

eskbanker said:

Bobziz said:
I should make it clear that the amount of cash in question represents less than 1% of the value of my mum's wealth.

....which in turn suggests that the S&S ISA is about 3% of the total.  How much of the other 97% is being managed or advised by the IFA?

We have two advisors at the moment, long story...the Isa is being managed by one, with the other 97% managed or advised by the other.