Clients are entitled to change their minds, and advisers should be careful not to inhibit their freedom to do so.
However, where clients give instructions at odds with their previously stated, and often long-standing intentions, advisers should be alert to whether the client is in a vulnerable position or suffering a cognitive impairment affecting their decision-making or impulse control.
This is particularly so when new instructions come about abruptly and seemingly without explanation.
2. Making decisions that would lead to a manifestly negative outcome
Clients are also entitled to make their own decisions, even ones that are inadvisable. While advisers should make clients aware of the risks and consequences of a course of action, they cannot stop clients from making bad decisions.
However, clients who insist on making bad decisions may be in a position of vulnerability, either due to health issues impairing their cognitive function or due to undue influence or abuse from third parties, which often comes hand in hand with impaired capacity.
3. Rambling, inconsistent or incoherent instructions
Having to clarify unclear or sometimes contradictory instructions is an issue all professional advisers deal with.
However, when clients seem incapable of giving clear instructions even after attempts at clarification, or struggle with making decisions, this may be a sign of a cognitive impairment (whether temporary or more permanent) impacting the client’s capacity to make decisions.
4. Heightened and erratic emotions
Advisers need to be careful not to attribute every expression of anger or anxiety to a lack of capacity, but extreme displays of emotions incongruent with the situation or the client’s usual disposition can be a warning sign there is something else going on that is impacting their ability to think clearly and make rational decisions.
For example, mood changes are a stated symptom of Alzheimer’s disease, including anxiety and depression.
5. Instructions being given through a third party
While some clients may wish to have a third party (often an adult child or carer) deal with day-to-day correspondence, advisers need to be comfortable the client is not being taken advantage of by said third party.
Key warning signs are if the client is not kept in copy on emails by the third party, if the third party is resistant to allowing the client to attend phone calls or meetings with the advisers directly, or if the client attends meetings but appears disengaged or confused.
None of these warning signs are definitive markers of vulnerability or lack of capacity but indicate advisers should be alert and take additional care advising the client, particularly when multiple signs are present at once.
When is it appropriate to intervene?
The legal test for capacity set out in the Mental Capacity Act 2005 is a useful starting point. This is a two-stage test: whether the person has an impairment or disturbance in the functioning of their mind, and whether this impairment makes them unable to make a decision for themselves in respect of the matter at hand.
At the same time, the principles underpinning the MCA make clear that the default assumption should be that someone has capacity, unless the converse can be established. Legally, people who have capacity should be allowed to make their own decisions, even if they are inadvisable ones.
The question of vulnerability, however, is broader than just capacity and it is difficult to know where to draw the line.
