The below is based on a Sense member-only webinar featuring discussion between Colin Tomlinson, Compliance Auditor for Sense and two Sense members; Sebastian Elwell of Switchfoot Wealth and Tim Cotton of Upper Street Financial Planning:
How do you define later life planning?
Seb: If you’re looking at Voyant or any cashflow tool then I’d say it’s anything over in the ‘right hand quarter’. IHT planning, retirement income, care scenarios and downsizing all fall into it, but it could also include things you might not think of; pensions for grandchildren and babies, for example. We do also discuss it with younger clients though. Clients say things like ‘we’re going to stay in this beautiful property our entire lives’ and we’ll ask: ‘is this suitable?’ We’ll talk about the potential of moving to something more appropriate. Too many houses are built for developers, not people with mobility issues. People still want to entertain and have a big dining space, but do you need five bedrooms and two acres of land?
What do you define as a later life client?
Tim: I don’t have a strict definition, but I guess that in most cases we’re really talking about people who need advice about paying for care fees, whether that’s at home or in a residential setting.
I think what I’ve found in the main though is that what you learn is applicable to all sorts of clients in all sorts of cases. What you learn and start employing in your work is transferable to a lot of other cases. My definition nowadays is much broader than people who need care right now. My work with people at retirement, for example, often considers later life care needs.
What I’ve found is that when people require care and they start to make financial decisions, often they can be made at a point of crisis, because people tend not to think about care until the last minute, so they’re making decisions when their options might be limited, or they may not have prepared for it. So my later life planning is often starting to think now about something that might happen in five years time, for example.
When would you start to think about later life care then?
Tim: If I was to put an age to it I would say mid-70s, but it could be earlier.
I think it’s good to start thinking about it at point of retirement. It's good to have an idea then of what could happen in the future. After you’ve been retired for a while, maybe you have excess capital, maybe you’re thinking about inheritance tax. At that point you’re starting to have conversations around ‘how much can I give away?’ As soon as you have that conversation, you have to think about ‘how much do I need to keep back?’
I know you’ve done a lot of personal and professional development in this space. Can you give us an idea of what you’ve done and how what you’ve done has helped you?
Seb: The first thing I did was CF8 back in 2008, which allows me to advise on care annuities and ER1 for equity release (I don’t advise on equity release, but it’s important to know about it). More recently I did the STEP diploma in advising vulnerable clients and the SOLLA accreditation.
The STEP diploma has two levels; certificate and membership. It’s not mapped to QCF levels, but it’s very close to QCF Level 6. It’s very legal; you’re sitting legal exams and noting legal arguments to back up your decisions.
Tim: I started off by doing the SOLLA accreditation and to do those I had to have the equity release and long term care exams, which I had done a few years previously. You have to accredit your qualifications every five years and it’s quite an involved process in terms of how you deal with people and the processes you have set up to make sure you’re taking care of vulnerable people properly. It’s an ongoing process; there are always new things coming out and I’m always looking to find out more. CareBots online is a very good source of reference material, for example.
Why did you take those qualifications? How has the knowledge they provide helped you and your clients?
Seb: Natural interest for my clients really. One of our core values is lifelong learning. It never stops. You always need to do something and these qualifications were of interest, relevant to my clients, helped to build professional connections, so I just went for it.
Tim: The qualifications have been absolutely invaluable. Until you start to find out what actually happens around social care and who pays for what and who’s involved you don’t realise.how in-depth it is. It is so complex. I don’t understand how someone who doesn’t have that learning can have a hope of negotiating their way around the system.
How do you look to bring other professionals into the advice process?
Tim: What I’ve found extremely useful is referring my clients to care consultants. They’re often people who have a lot of experience in social services and what they’re able to do is help you to draw up a care plan and figure out whether you can use domestic care, for example.
Quite often clients will already have solicitors in place, so we will of course work closely with them.
Seb: At every opportunity, but by being very picky and choosy about who we use. We know our clients well and see them at least once a year. Solicitors can be much more transactional. We use the ability where we highlight needs and make a positive referral that we’ve vetted and chosen.
We have a tick box on our fact find on LPAs which says ‘do you have an LPA?’ If the answer is yes then we ask more questions: ‘do you have safeguarding clauses in it?’, for example. If the answer is no then we’re going to make a referral to have the LPA reviewed by a solicitor that we know is confident in that area.
As part of the condition of having your SOLLA accreditation you have a vulnerable clients policy. How do you use that with clients?
Seb: We talk about it in initial disclosure, whether they’re vulnerable or not. You just don’t know if they’re vulnerable or not because there is such a spectrum of vulnerabilities; from dementia to colourblindness. Vulnerability could be big and permanent, or it could be temporary like divorce. It could be things that are easy for you to solve. Having the conversation allows you to potentially solve what could be a very minor issue.
What are the hallmarks of vulnerability and how do you respond to them?
Tim: I used to think vulnerability was about mental capacity, but I started using the FCA matrix last year for all of my clients and I was amazed about how many people are classed as ‘vulnerable clients’. I realised talking to a client just last week that they had potential vulnerability.
You obviously can’t say: ‘are you vulnerable?’ It’s asking about lifestyle and concerns. If someone starts talking about the fact that they don’t go out much, because they’re worried about what may happen to them, or they don’t use the computer because they’re worried about being ripped off, maybe those are things that are indicative of vulnerabilities.
I think the questions have to be tailored to the situation. It’s not necessarily a direct question, it’s more about how they’re coping with their life.
Seb, you have been involved with the Transparency Task Force. What is that and why do you think it’s important?
Seb: It’s a group of people who work across all aspects of financial services. They care about all aspects of the industry but recognise that we consistently show up in polls as being not the most trusted of industries. We think about what we can do to improve trustworthiness.
They have a lot of projects going and I was involved in their anti-scams group, which focuses on pension scams. I’m now leading an initiative around Lasting Powers of Attorney (LPA) and pensions.
In 2015 pensions freedom came along and all of a sudden you can drain your pot in one swoop, but there was no step up in terms of protection around LPA. LPA are largely unsupervised unless you’ve written specific supervision clauses. In theory the Office of the Public Guardian has mandate to investigate, but how can they investigate if they’re not aware: it’s a transparency thing.
My fear is that imagine a lot of people aged 65 are going into drawdown. The level of cognitive impairment is going to be pretty rare. But roll on 5, 10, 15 years and it’s going to be more common. There’s going to be a number of people in drawdown contracts, with some level of vulnerability, with no assistance or supervision in place. At society level that’s likely to be quite dangerous.
Vulnerability, accessible wealth and lack of transparency: it’s a fire triangle waiting to happen. It’s going to be problematic to the reputation of financial services and devastating for individuals. We’re collecting together individuals to think about what we need to do to change the LPA and pensions regime to head off that risk, before it becomes too large scale.
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