The long-awaited ruling by the Senior Judge of the Court of Protection around the appointment of in-house investment managers to act on behalf of vulnerable clients could have enormous implications for the legal and financial professions, says the Professional Deputies Forum.
The Professional Deputies Forum (PDF) said it was committed to supporting its members and protecting the best interests of vulnerable clients while awaiting further guidance from the Office of the Public Guardian after Her Honour Judge Carolyn Hilder ruled it was a conflict of interest for deputies to appoint in-house financial advisors to look after the affairs of their clients.
Stacey Bryant, Chair of the PDF, said many questions remained following the judgment, such as how it would be applied to cases where an in-house financial advisor had already been appointed, whether they would be approved by the Court, and what the position was in respect of any charges paid to them to date.
Stacey said: “The view of the PDF is that this case raises many questions for deputies as the issues are not confined to one firm. Potentially, there are a significant number of clients affected and the implications could go beyond just investment services.
“We are committed to promoting best practice among our members, which includes ensuring that the best interest of clients remains central to all decisions made on their behalf. We will continue to work alongside our members and all key stakeholders, enabling us to best understand issues arising from this judgment.
“The Office of the Public Guardian has statutory responsibility for the supervision of deputies and for issuing appropriate guidance. We anticipate the Public Guardian will review all of the issues from this important judgment and provide up-to-date guidance to ensure all deputies can work consistently to the same high standards.”
In the case of PW [2024] EWCOP 16, Judge Hilder ruled that the position of a deputy in acting as the agent and fiduciary on behalf of vulnerable clients meant the appointment of an investment manager from the same organisation would break long-established rules against self-dealing.
Crucially, she found that the conflict of interest could not be avoided by the application of a ‘beauty parade’ in considering a number of possible investment managers, no matter how robust the process.
Despite the professional deputy in this case evidencing their selection process, which they argued was detailed and led to no conflict of interest, Judge Hilder’s ruling confirmed that none of the processes could eliminate a possible conflict.
In her judgment, she said specific court approval would be required where a deputy wanted to appoint an ‘in-house’ or connected investment manager.
The court heard that the professional deputy in this case acted for around 990 clients and about 37% of them had appointed the firm’s in-house investment manager, creating significant additional annual income for the firm.
The ruling makes clear:
- Appointing an investment manager where there is a financial connection or benefit to the deputy or their firm is a clear conflict of interest
- That conflict can’t be avoided by the application of a beauty parade, scorecard approach etc
- Court approval is required where the deputy wants to appoint an in-house or connected investment manager.
To read The Professional Deputies Forum’s summary of the judgment, go to https://www.deputiesforum.co.uk/network-news/case-update-re-pw-2024-ewcop-16
