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Beyond the case: how wealth-management services can help your clients

At a glance

  • Expert wealth managers can play a key role in supporting victims of personal injury or clinical negligence at a particularly vulnerable time in their lives. This is invaluable during the proceedings of a claim, as well as when deciding what to do with an award of damages.
  • A wealth manager can work with lawyers, clients and their families on cash-flow modelling to determine how much income they will need and what the required settlement should be.
  • After a case is settled, a wealth manager can provide expertise in how to arrange your client’s finances so they can make their damages last as long as they need to – which may be an entire lifetime.

If you’re a lawyer representing clients with a personal-injury or negligence claim, you’ll know that you’re often working with people at an especially vulnerable time in their lives. Such clients need a great deal of support – and a wealth-management adviser can play a key role.

Crucially, that role begins well before the claim is settled and there is a lump sum award to manage – although professional financial advice will be important at that stage, too. A wealth manager can provide lawyers with the data and analysis they need to claim the right amount in the first place.

Here are some of the key areas they can support with:

Assessing the claim

Cash-flow modelling is incredibly important. A wealth manager will work with the client and their family to understand exactly how much money is going to be needed each year for the rest of their lives, and what upfront settlement sum will be required to generate that income. That enables the lawyer to go into the legal process with detailed evidence to back up the settlement claim.

The sums at stake may be significant, depending on the client’s situation, and they may need financial support for many years to come. Negligence claims, for example, very often relate to children, who may need to depend on the settlement for decades into the future.

Moreover, the considerations underpinning the claim are often complex. Lawyers will potentially need advice on factors including loss of earnings, the cost of care, requirements for property modifications, the availability of benefits and more. Only with a full picture of their client’s situation, today and in the future, can they make an appropriate claim.

What might seem like a huge sum of money in these cases can often turn out to be an inadequate settlement. The defendants in the case will naturally be seeking to minimise the payments awarded. Lawyers therefore need expert advice to counter such efforts.

Managing the award

Having worked with the lawyer to secure the best possible settlement for the client and their family, the wealth manager then has a vital role to play in ensuring that the money is used securely and effectively.

Awards in personal-injury and negligence claims will typically be placed in trust, so that the cash can be ringfenced for the benefit of the client. The wealth manager will then advise the trustees – often the lawyer and family members – on how to manage this money. The arrangement is important to fulfil the trustees’ legal responsibilities to the client, but most crucially, it gives the client the best possible chance of ensuring their award pays for their needs into the foreseeable future.

In practice, wealth managers will need to provide different types of advice, both at the outset and on an ongoing basis. Trusts should be structured in the most tax-efficient way possible, while providing trustees with the flexibility they require to meet the client’s needs. The cash must be invested to generate long-term returns, but advisers will have to take into account the attitude to risk of the client and their family. There will also need to be a plan to ensure the flow of regular income.

Regular reviews of the pot will be important, too. For example, are investments still generating the level of income required? Is the capital in the pot being depleted more quickly than originally envisaged? Does the client have any additional needs not previously planned for? Over time, the wealth manager’s role is to advise the trustees on any adjustments to their investment strategy that are necessary.

Relationships of trust

A good wealth manager doesn’t only possess sound financial acumen. The adviser is building a long-term relationship of trust with the client and their family. They need a range of softer skills, such as openness, honesty and empathy.

For example, there may need to be some difficult conversations. There is often some educating to be done, because most people receiving a large award in a negligence or personal-injury case don’t have any experience of handling such large sums. A wealth manager needs to help the client prioritise – to understand exactly what the money is for.

It may also be that the final settlement isn’t large enough to meet the client’s needs in full or last for as long as is necessary. In that situation, the wealth manager should be able to identify the shortfall, have a frank conversation with the client and advise on ways to mitigate the problem. This might include accessing benefits or any charitable awards that are available, for example.

The bottom line is that by working with you from as early on in the legal process as possible, a wealth manager can make a huge difference. They will support you to secure the right financial settlement for the client – and ensure that the client maximises the benefit of that award long into the future, even if their circumstances change.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

SJP Approved 29/04/2024

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Email us: tweed.wealth@sjpp.co.uk