The majority of the investments were ring-fenced for long-term care fees, and so Mr Lindfield said he did not agree with this course of action, saying it was detrimental to the client’s estate and long-term care planning needs.
He was therefore instructed by his external compliance provider and professional indemnity insurer to disengage with the client with immediate effect and report the issue to the relevant authorities.
Following correspondence with the power of attorney, he also suspected another adviser had become involved, urging the client’s investments to be encashed and reinvested under their business.
“Some advisers would have caved into this pressure, but we will always do what is right for our clients and maintain our ethics,” Mr Lindfield said, adding the issue caused a lot of hassle and cost.
“This was not a nice situation; the process took a lot of time and we had to lose a client, while potentially generating an unfounded complaint because we did not give the POA what they wanted.”
He said the issue was potentially a “hand grenade waiting to go off” if it was not handled in the correct way, pointing out he had to be careful to follow all the right procedures to ensure his business wasn’t at risk.
Matthew Harris, director of Dalbeath Financial Planning, had also faced problems arising from a client’s power of attorney, but more commonly with guardianships, where the court decides who will act for the client.
“On rare occasions, the person who has been granted a guardianship can ask us to release money from an investment for a reason that we are not entirely comfortable with,” he said, adding however, he has always been able to resolve this via dialogue with the client's guardian.
“We have never had a situation where a guardian or attorney has asked for a very large policy to be cashed in, but if this happened we would certainly refuse to action it.”
Keith Churchouse, chartered financial planner at Chapters Financial, said this issue points to the importance of getting it right when appointing attorneys.
“Children are not always the best option and we have experienced a situation recently where this might be the case.
“There are often occasions where relatives are not experienced in larger sums of money and can become daunted by so much cash that they become vulnerable in being able to allocate it correctly.”
Tony Catt, compliance officer of TC Compliance Services, said this is a difficult issue for advisers because often the only contact with the client is through the POA.