Life companies have been accused of failing to properly deal with vulnerable clients, amid allegations some firms are refusing to give financial guardians access to clients' cash.
Wendy Cochran, independent financial adviser at Dalbeath Financial Planning, works with a number of clients unable to make decisions for themselves due to illness or disability.
These types of clients often have a court order from the Office of Public Guardian appointing a financial guardian to act on their behalf.
Financial guardianship is decided by the court and therefore differs from a lasting power of attorney, which is decided by the client before they lost mental capacity.
Guardians can be carers, family members, or professional people such as solicitors.
But Ms Cochran, who has clients referred to her by a solicitor specialising in financial guardianship, said she has encountered problems with the vast majority of providers.
She claimed many companies have made it difficult, or impossible, for the financial guardian to withdraw investments from a policyholder’s account, despite the request being within what was ordered by a court.
Providers have refused to pay out income from an investment-linked insurance bond into a client account held by the guardian – which in this case is the solicitor – because the company has a blanket policy in place that they 'do not pay out to a third party', she said.
"It seems to be a one-way street; they let you put money in to an investment using a third party account but they won’t let you take it out,” she said.
Ms Cochran said providers do not have the systems in place to flag when a client has a guardian making financial decisions for them.
She also cited an understanding around the legal position of these clients, including the difference between a power of attorney and a guardian, adding: “Providers very often fail them.”
In one case, she said a vulnerable client was left without funds for three weeks because a provider refused to process a withdrawal, despite the situation being flagged previously by Ms Cochran’s firm.
However providers defended their role.
A spokeswoman for Aviva said the firm is able to log when a third party is acting for a client so staff can respond to the guardian without exposing customers to other risks such as fraud.
Standard Life also said it can accept business from customers with a guardianship order or power of attorney, provided it has the appropriate and correctly completed documentation.
She also said Standard Life will pay withdrawals to third parties where there is a legal obligation to do so, and after any anti-money laundering checks have been completed.
A spokeswoman for Prudential said money should only be paid into an account where the customer is also named, or an account that has been set up by the third party specifically for their legal role to look after the financial affairs of the client.
She also pointed out that any third party appointed to look after the financial affairs of another should keep their own money separate from that of the individual.
Despite the Financial Conduct Authority issuing guidance in 2015 on how to deal with vulnerable clients, industry professionals have since warned that issues around power of attorneys and guardianship are growing, due to Britain's ageing population.
However, providers have disputed whether more red tape is necessary to protect vulnerable clients.
The spokeswoman from Aviva said: “We think that this responsibility lies with firms, not regulators. We believe there is already sufficient guidance that has been issued by regulators and government departments for firms to act upon and put robust processes in place.”
Gareth Jenkins, head of in-force propositions at Zurich UK Life, echoed this.
“As long as firms take this seriously and adopt a flexible approach where required, then no further regulation is needed to guide providers,” he said.
Mr Jenkins advised guardians to set up a bank account specifically in the client's name, or seek control of the client's bank account, to help maintain clear ownership of the customer's money.
He also said Zurich was working with organisations both within and outside the financial industry to put a programme in place to improve outcomes for vulnerable customers.
katherine.denham@ft.com
