Lasting POA/discretionary fund mgt 24 November 2021 at 2:24PM in Marriage, relationships & families 5 replies 244 views

JLRetired

I understand the need to include the following statement in my POA : “ My attorneys may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees”.  Can somebody please explain, in the final sentence, “…my investments will be held in their names or the names of the nominees.”? Thank you. 

Malthusian

It means the shares will be held in the name of "Bank XYZ" for your benefit, not in the name of JLRetired.

Do you need to include that statement in your POA? It only needs to be included if you want your attorneys to be able to invest via a discretionary fund manager or if you already do. For most people DFMs are unnecessary and expensive. If an attorney needed to invest their donor's money it would usually be more appropriate to use a simple portfolio of collective funds.

Keep_pedalling

Can you say why you think this is nessasary?

JLRetired

Thank you. I already use a DFM, the cost of paying someone to manage something I know little about is less than the cost of me making a mess of things…

Keep_pedalling

JLRetired said:

Thank you. I already use a DFM, the cost of paying someone to manage something I know little about is less than the cost of me making a mess of things…

OK but why do you need to put that statement in? Your attorneys will be able to carry on doing it without that statement, which in any case is just guidance rather than an instruction. 

Malthusian

Keep_pedalling said:

OK but why do you need to put that statement in? Your attorneys will be able to carry on doing it without that statement, which in any case is just guidance rather than an instruction. 

Not the case for people who use discretionary fund managers. A specific instruction must be in the LPOA, as detailed in the OPG's guidance.

This is because normally, attorneys cannot legally delegate their responsibility to others. Which is exactly what discretionary managers are there for.

If you use a DFM, lose capacity and the required instruction is not present in the LPOA, the DFM will have to close the account or switch it to an advisory basis (i.e. your attorneys would have to approve every single transaction, which defeats the purpose of using a DFM).

For most people DFMs are unnecessary and an expensive way to hold investments. The only time I would personally use a DFM is to hold AIM shares for the purpose of reducing Inheritance Tax liability. However, it's a free country.