Basic financial competence should be a minimum requirement for those making decisions on behalf of vulnerable people under a power of attorney.
It’s important that those appointed to act under a power of attorney are fully briefed on their role and responsibilities. But what of their competence in financial matters? Has that even been considered?
Some time ago I was involved in training staff at the Office of the Public Guardian and in discussions it became clear that their ideal position would be to see all attorneys file annual accounts. However, that would put many off from accepting the role and would have zero effect on those who would ignore the requirement – and who are financially inept themselves.
The need for basic financial competence extends beyond those who are or are about to become attorneys and prompts me to think of the European Computer Driving Licence where people could evidence their competence in using PCs. We really need a similar certification for attorneys and self-investors as a minimum. If we can encourage all ages to be more financially competent then those who have reached the minimum standard of competence should be safer for us to engage with.
The question is how do we encourage as many people as possible to validate their knowledge or to acquire basic financial knowledge to their advantage?
Returning to those who need help in later years, or vulnerable clients, we need to be able to determine, as part of a prescribed process, who is capable of giving instructions. We should also be determining how financially savvy they are.
Before anyone suggests that people rail against any form of testing, that’s simply not true. Look at all of those holidaymakers who take instruction and are tested so that they can scuba dive.
If it is possible to put up the barrier of competence before they dive, surely we can do the same with financial knowledge – albeit at a basic level? One of the barriers to people taking and paying for advice is the majority not understanding the benefits it can deliver.
Previous attempts at financial education have not captured the imagination of the very people that need it most, so the format of this needs to reflect the likelihood that those taking it will not spend long on one module.
For me the starting point is to make tested competence mandatory for those acting or potentially acting as attorneys.
It’s time this was acknowledged and acted upon before we witness a flood of vulnerable people left in dire straits, despite the supposed safeguards which are, in reality, more like a colander than a helmet. Giving people a sense of false security is never smart.
Next time you meet a client with a power of attorney, or who is actively considering one, ask them about their financial competence. I suspect few will have even thought about their suitability from that perspective.
After all, delegation of any nature should be to someone who is equally competent, otherwise it is pointless.
Robert Reid is partner at CanScot Solutions