Read the dilemmaThis 'Grey matters’, published in the Q1 2018 print edition of The Review, raises a tricky matter for a financial adviser, Karlie, who finds herself worried that one of her client’s personal relationships may damage their financial security. Walking a balance between personal and professional relationships with clients often presents difficult dilemmas for professionals, and this is reflected in the variety of responses received.

This dilemma was suggested by a CISI member – for which we offer our thanks. Should you wish to suggest dilemmas, please contact us at principles@cisi.org

Options offered and results from survey

A. Things change, and Karlie’s concern is an overreaction. Jan is happy, and still has ample funds in her name. It would not be appropriate for Karlie to take any action at this stage. (5%)

B. She should tell Jan that she is not prepared to give piecemeal advice, and that unless her access to the pension policy is reinstated she will have to stand down as a point of principle. (6%)

C. She should insist on meeting with Jan alone when she has returned from holiday, and set out her concerns, including how marriage to Paul might affect the wishes she set out when she initially appointed Karlie as her adviser. (59%)

D. Karlie should have realised that Jan’s brain haemorrhage made her a vulnerable client all along. It is clear that Paul is now controlling her and, as Jan has no close family, in orderto safeguard her interests Karlie should report her concerns to the care authorities. (31%)

The CISI verdict

Most of the comments speak about the duty of care Karlie owes to Jan, but opinions differ about what form that should take. The most popular option is that Karlie speak to Jan alone (option C), which also gives Karlie the opportunity to establish whether her worries that Jan is a vulnerable client are founded.

However, 31% of respondents say the information they have to hand is enough to identify Jan as a vulnerable client (option B), and that immediate steps should be taken.

The signs that Jan is (and has been) a vulnerable client are compelling – she previously suffered a significant health problem, is widowed, recently appeared confused and forgetful, and is now making choices which seem incompatible with her goals. While waiting for a face-to-face discussion with Jan is an appealing option, Jan and Paul are meant to be away for several weeks, and the situation may escalate during that time. They may even get married.

For this reason, it is recommended that steps are taken now to safeguard Jan’s interests. The care authorities and/or Jan’s remaining family should be informed of the situation, and Karlie should consider consulting with a compliance professional. Option D is the CISI’s preferred option.

Some reader comments

"Karlie has previously been appointed by Jan as her adviser, therefore she should give Jan the benefit of her opinion in respect of her current situation as to how this has changed significantly and potentially 'out of character' from where their client/adviser relationship began."

"Karlie should inform the police immediately and insist on seeing Jan alone. If I were her I would check my insurance policy asap in regard to negligence."

"I don`t really like any of these options as they are all quite drastic. C is closest to my preferred approach – gently try to have a meeting with Jan alone to review her wishes and future plans – which Jan is entitled to change if she wishes. I do think that there is a vulnerability risk, but option D is too drastic at this stage without further information. Option B, again, would be walking way from the issue and I would prefer to make another attempt to discuss with Jan. At this point there's insufficient information to assess the risk of Jan being taken advantage of and more work is required."

"Answer C appears to be the most appropriate, although I don't like the use of the word `insist`. However, given the long relationship with her and her deceased husband, the most appropriate route seems to be to have a conversation with her and see if her concerns have substance or if she considers she is a vulnerable client."

"This is a rather tricky matter. I would suggest that she detail an appropriate report to management and consult her legal and compliance colleagues on both obligations and possible actions that can be taken if it is deemed fit by the firm. The loss of the business will happen if Jan passes on based on Paul's disposition so I don't feel that should concern Karlie. Duty of care, duty of care."

"Agree that this is tricky. I would consider Jan to be a vulnerable client given that she is widowed and potentially still ill. Karlie should speak to her manager and the compliance officer about what has occurred so far. Karlie has a duty of care to do something."

"While no direct action should be taken, the care authorities should be notified so they can make an informed decision on how to proceed. This is not in Karlie's remit to decide. However, by passing on her concerns to the care authorities, I feel she would have met her moral obligations without overstepping her bounds."

"I have chosen option D, but option C should be a first step as Jan seems to be  changed since meeting Paul. Jan's well-being is paramount, particularly if she is truly happy with her new marriage, that's fine. Jan might alternatively be upset and afraid and hiding that. She might also be relieved that Karlie is protecting Jan's interests and help her to resolve what she now might feel is a huge mistake that she cannot get out of. (I think Jan might confide in Karlie if that is so.) It's a very difficult situation. I also think that before she does anything, she should seek the guidance of the compliance team, who may need to take external legal advice to help them with how to approach this. It's a complex area. Karlie should set out the sequence of events clearly (with the evidence on file from earlier meetings and correspondence) and ask her compliance team. For me, the catalyst is Paul's attitude and that meeting in several weeks should proceed."

“This is challenging as Karlie has to be careful about where the lines are drawn. From my response, B, I'd anticipate further discussions. Karlie has to advise her client appropriately.”

“Keep an eye on withdrawals from the investments and any change to the destination of funds. This might be done by alerting compliance unless Karlie is a sole trader and responsible herself for the duty of care. Soft skills will be required to talk to Jan about how she is feeling, and to come from the perspective of a friend and trusted adviser. Perhaps Karlie could extend this to get to know Paul and do a bit of research on him. An entry into this discussion might be to talk to Jan about who she might want to make health decisions for her in the event she is unable to, eg, if there was a relapse.”

“I would look at C first and then, depending on the results of that, I would consider option D.”

“Jan has to be treated as a vulnerable client and Karlie should have taken this into account much earlier in the process. Option D is the 'better late than never' option, but is the only one offering Jan any protection from Paul.”