Read the June 2021 dilemma
This Grey Matter, published in the June 2021 edition of The Review, presents a scenario where Erica, a long-term client of Ashwin’s, has died and left him £5,000 in her will. Her daughters are contesting the will, saying she was vulnerable. So, what should Ashwin do now?
Suggested solutions and results are as follows:
- Renounce his financial gift of £5,000 from Erica's will. (56%)
- Proceed with granting Erica's wishes in her will and take the £5,000 that was gifted to him. (15%)
- Speak to Erica’s daughters and assure them that she was not a vulnerable client when she came to see him. (29%)
- Proceed with legal action against the family if they don’t concede that he is entitled to the money. (0%)
Responses received: 254
The CISI verdict
The dilemma considers the sensitive nature of vulnerability, assessment of which has been increasingly discussed in the financial services sector. In the UK the FCA recently published guidance on this subject. It identifies four key drivers that increase the risk of customers finding themselves in vulnerable circumstances. These are health, life events, resilience, and capability.
While option 4, to take legal action against the family, received no votes, 15% of voters believe that Ashwin should take the £5,000 that was gifted to him. However, would this have increased if the amount gifted to Ashwin was a smaller amount? Additionally, alongside using an assessment framework consistent with the FCA's guidance, what other policies and procedures should have been followed to make Ashwin’s decision easier?
Our recommended solution is option 1. As per the updated Code of Conduct principles ‘Conflict of interest’ and ‘Client focus’, it is important to always put the interest of clients and customers first, and to effectively manage any personal conflicts. After Ashwin was notified by A-Z Legal, he may have benefited from immediately speaking with his director to be as clear and informed as possible. In hindsight, it could have helped the director’s conversation with Erica’s two daughters.
Selection of comments received from members
- Option 1 would be an implicit admission that the allegation of 'taking advantage' was true. This must be strongly rebutted, or Ashwin’s professional standing could be called into question.
- Ashwin wasn't involved in drafting the will and therefore cannot be responsible for altering/influencing the changes to the will made by Erica. The daughters should be checking this with the lawyer who made the changes to the will as it's their responsibility to ensure the person is in the right state of mind when making changes.
- He should speak with the daughters and assure them Erica was not vulnerable when he last spoke to her, but he should renounce the bequest as it is causing distress to the family at a difficult time. He should also have checked with his compliance officer and senior management if it was appropriate to accept a bequest from a client before doing so. Any action he takes will affect the reputation of the firm.
- While he is perfectly entitled to accept the gift, it will most likely cost him the same to contest in court, also a court case would cause him considerable distress while defending his case.
- He should renounce the legacy immediately, while emphasising in writing for the firm's records that he was not aware of it nor of any vulnerability of Erica when last they met. He may choose to write in the same terms to the executors. Sadly, this is the only way to avoid a potentially long drawn out and painful dispute which might harm both Ashwin and his firm.
- Ashwin could arrange a meeting with Erica's lawyer and her daughters to show them the financial report was asked for by Erica when she was in stable health, and the lawyer should prove that the will was written in that time.
- This is a professional relationship so he should not benefit personally from it. His firms gift and hospitality procedures may require him to turn this down anyway, but even if it's allowed, then he shouldn't accept.
- Ashwin could donate the money to the charity.
- While Ashwin might be confident that Erica did not need to be treated as a vulnerable client, there is no way to prove that. He was unaware that he would be left £5,000 and for the sake of both his and the firm's reputation, renunciation is the only viable way to come out of the matter with any credit. Even though Ashwin is in the clear, there is a perceived conflict of interest. From a professional perspective he should take this course of action even though he is entitled to the gift. He should also speak to the daughters to explain his actions.
- Erica was clearly vulnerable at the time she drafted her Will and while she may well have left £5,000 to Ashwin he should not accept it as it brings himself, his firm and the sector into disrepute.
- Taking legal action against the family would be the wrong thing to do even though one might feel Ashwin is entitled to keep the gift in recognition of his advice to and friendship with Erica over the years, for which she wanted to show her gratitude. I think Ashwin should accept the gift but be allowed to tell his side of the story and confirm in his opinion that at the time of his last meeting with Erica, he did not consider her as vulnerable but as someone who was keen to ensure her final wishes were arranged to her satisfaction. He could, of course, donate his gift to a charity, perhaps an organisation that Erica may have supported herself but I do not feel the family have enough evidence of Erica’s vulnerability to prove Ashwin was dishonest and took advantage. He should accept the gift as was intended, knowing that until Erica’s last day he remained a trusted adviser and true friend.
This verdict is published in the October 2021 edition of The Review.
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