Guidance

Investing for someone as their attorney or deputy

Find out about making investments for someone who does not have mental capacity.

• From: Office of the Public Guardian
• Published: 8 May 2019
• Last updated: 28 May 2019 — See all updates

Applies to England and Wales

• Guidance for Northern Ireland
• Guidance for Scotland

This guide is for:

• attorneys appointed under a lasting power of attorney (LPA) for property and affairs, or an enduring power of attorney (EPA)
• deputies appointed by the Court of Protection (the court) to manage the property and affairs of someone who lacks mental capacity to make decisions

Before you invest anything, be aware:

• you cannot do whatever you like with the person’s money
• you must support the person to make decisions themselves where possible
• you must make your decisions based on what is now in the person’s best interests, while trying to balance their wishes
• your decisions should be based on the person’s preferences and beliefs

Read more about checking mental capacity and making decisions.

What is an investment?

Investments are things you buy or put your money into to get a profit, such as:

• shares – you buy a stake in a company
• cash – you save money in a bank or building society account
• property – you invest in a physical building, whether commercial or residential
• items – you buy things like gold, artwork, or cars
• fixed interest securities (also called bonds) – you loan your money to a company or government

You can invest directly (for example in shares) or indirectly through an investment fund.

What are returns?

Returns are the increase or decrease in the value of investments.

Depending on where you put the person’s money, this could include:

• dividends from shares
• rent from property
• interest from things like cash deposits and fixed interest securities
• the difference between the price you pay for an investment and the price you sell it for (capital gains or losses)

What is risk?

Risk is the chance of losing some of the person’s money. Generally, the greater the possible returns, the higher the risk an investor will have to take.

The longer you keep an investment, the more likely it can overcome any short-term changes in price. Generally, many financial advisers will suggest that you should aim to hold non-cash and deposit investments for a minimum of 5 years. So, you should consider whether this is feasible, bearing in mind the person’s financial needs.

The risks depend on the investment, for example:

• an institution may fail
• your money may not keep up with rising prices
• share prices may go up or down
• you could have earned better returns elsewhere

You can avoid taking too much risk by managing money carefully, such as saving and investing in more than one thing (known as diversification).

What is a financial adviser?

Financial advisers are experts in making decisions about money and investments.

Sometimes they are named by their specialism, such as investment adviser, wealth manager, pension adviser or financial planner. They are also known as brokers when dealing with products such as mortgages, insurance or shares.

All financial advisers in the UK are regulated and registered by the Financial Conduct Authority (FCA) and should make you aware they charge for their services.

You should work with a financial adviser when:

• you feel you do not have relevant experience or knowledge
• you need to show that you’ve taken advice
• you need to diversify or review the person’s investments
• you need advice from a specialist adviser on specific investment types, such as faith-based (for example Shariah compliant) or ethical investments

You must make sure:

• the adviser knows you’re acting on someone else’s behalf
• you assess the risk and person’s circumstances with the adviser
• the cost of the adviser is an appropriate use of the person’s funds, for example, you should not pay £1,000 for advice when there’s only £5,000 to invest
• you fully understand the products they recommend, and that they provide you with a key facts or key investor document to read
• you take the current and future circumstances of the person into account
• you do not delegate decisions to an investment fund manager unless you have permission within the LPA, EPA or court order (you can take advice, but if you want them to make decisions, you may need to apply to the Court of Protection)
• you make decisions based on the person’s beliefs and interests, not your own

Search for qualified and specialist advisers on the Personal Finance Society website - the professional body for financial advisers and support staff.

Getting started with investments

Investments should be made in the person’s name. Where this is not possible, you should make a declaration of trust (a legal document) or record of the person’s beneficial interest.

If the person already has investments

You should not transfer any existing investments or funds into your name.

Instead, you should contact the investment company and give them evidence that you’re able to act on the person’s behalf (such as your LPA or court order). If they do not accept it, ask what they need from you instead.

You must regularly review all investments and finances to make sure they meet the needs of the person’s current and future circumstances, and that items of value have insurance.

Check your LPA, EPA or court order first

There may be restrictions or clauses about investments or how you can use the person’s money.

If you want to do something that’s restricted

We 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
• use the person’s money to invest in your own business, a family member or friend

You may need to include evidence such as financial statements and documented advice from a financial adviser with your application.

Think about the person’s current and future financial needs

If possible, ask the person’s opinion and collect financial information (also known as a financial fact find) for your plan. You should consider:

• their age, health and average life expectancy
• their current income and outgoings and how these may change
• whether their income will cover what they will spend on living
• how much the total assets are worth
• the cost of their care and accommodation
• whether they own property and what will happen to it, the costs of insurance, bills and maintenance
• other financial plans in place, any fixed term savings and maturity dates
• whether any major items of expenditure are anticipated
• whether any gifts or payments to dependants are likely to be made (this may involve an application to the court for permission)
• whether you need to keep any funds in reserve for emergencies

Then find a qualified financial adviser to help you plan or review the investments.

It’s your responsibility to make sure that all cash is held in savings and deposit accounts with a UK banking licence so they’re covered by the Financial Services Compensation Scheme (FSCS) available up to £85,000 per banking institution.

Checklist

• Have you gathered all the financial information you need?
• Have you found a suitable financial adviser?
• Have you been able to get the views of the person?
• How much money are you able to invest?
• What type of return is needed?
• What’s the level of risk?
• Will the investments satisfy the person’s current and future needs?
• Have you set a date to review the plan?

Other things to think about

Tax

Consider how tax will impact the investments - your financial adviser may refer you to a specialist tax adviser. If you want to make gifts to reduce the impact of inheritance tax, you may need to make an application to the court.

Find out more about giving gifts.

Local authority care

Be aware if the person may need local authority care services. Some authorities may still charge if they think you’ve made decisions to avoid making contributions.

Wills and beneficiaries

If you’re aware of the contents of a will, you should try to take this into account when considering how to manage the funds. However, the priority must be the current and future circumstances of the person.

Keeping records

It’s important to keep accounts of all transactions you’ve carried out on the person’s behalf, as we may ask you to send us a financial report.

Fraud

Abuse of position is a criminal offence. This applies to anyone looking after another person’s finances.

This means it’s against the law to abuse your position, where you intend to gain for yourself or others, causing a loss or exposing the person to a risk of loss.

Your duty as an attorney or deputy

• Involve the person in the decisions where possible
• Make decisions in the best interests of the person for whom you’re appointed
• Invest finances for the person’s benefit and not yours
• Keep your own money separate from theirs where possible to avoid mistakes or confusion
• Keep to the principles of the Mental Capacity Act 2005 Code of Practice
• Do not take advantage of your position, allow anyone to influence how you act or let your personal interests conflict with your duties (your fiduciary duty)
• Do not personally profit or benefit from your position, apart from receiving gifts where the Mental Capacity Act 2005 allows it
• Do not allow someone else or a financial adviser to decide something that you should, unless it’s been authorised by the person in the LPA, EPA or by the court

More information

If you need help or more information about this guide, you can contact us by:

• email: customerservices@publicguardian.gov.uk

• telephone: 0300 456 0300

Published 8 May 2019
Last updated 28 May 2019 + show all updates

1. 28 May 2019

   Added translation

2. 28 May 2019

   Added Welsh translation

3. 8 May 2019

   First published.