Robert Reid: Competency tests vital for power of attorneys

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.

Rachael Griffin: Understanding power of attorney legislation

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.

Robert Reid: Ambulance chasers hunt their next prey

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.

Case study: Gifting rules under lasting power of attorney

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


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Whilst I am positively evangelical about financial education and the need for it. You cannot make it compulsory other than say for example in schools.

    Making in compulsory for “attorneys”, where they are putting other people’s money at risk is a different argument, but it’s still a dangerous minefield.

    Fundamentally I suspect it could probably be better achieved by making it compulsory for those taking out POA’s to say whether they have considered the financial competence of those they wish to appoint, as well as another question asking if they really think those people will act in their best interests?

  2. The most important question is whether the POA will act with integrity and in the interests of the grantor.

    To insist on a competency test is very close to insisting on leaving it to the office of the public guardian, and professionals. For those who have been through that process – the end result is often a caring and level headed appointee, but the process to get there can be time consuming, and harrowing.

    As regards the example of scuba training. A little disingenuous – I want to scuba dive, and the exam is a necessary (and reasonably fun) requirement to allow me to do the thing I want to do. Most POAs act somewhat grudgingly, it’s a time sink with little reward beyond protecting a loved one. Set barriers in the way, and most would happily say ‘so sorry, I can’t’.

  3. I was recently asked to be nominated as an attorney. The documentation was prepared by a professional legal firm.

    At no time did they make any enquiries as to my competence to take on the role – or that of my co-attorney.

    It was simply chance that the donor happened to choose an attorney who was qualified to do the job.

    But I also have a second role relating to decisions over the donor’s health and welfare.

    On that I have no formal qualifications beyond the ethics covered in my biology degree decades ago.

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