Financial Abuse in a HNW context
Wealth can protect you from a lot of things. It can give you a good home and access to quality medical care. It can provide peace of mind that your family will have a secure financial future. But the chances of someone being subjected to financial abuse are not dependent on your net worth. It can happen to anyone.
Financial abuse is the manipulation of money or other economic resources (both during and after a relationship), and usually forms part of a wider pattern of coercive control, a criminal offence in England and Wales. It can be found alongside physical and emotional abuse, but it can also appear so subtly and insidiously that victims might not realise what is happening is abuse.
Financial abuse can take many forms. Running up debts in someone else’s name, withholding funds, demanding receipts and explanation for spending, taking significant financial decisions unilaterally, or even putting assets in the name of the abuser. It is not always only in a relationship context – it can also involve abuse by a friend, carer, or family member – and a person’s vulnerability can be a key factor in this.
“Financial abuse isn’t really abuse of the money or the assets as such – more often than not it is about imposing power and control.” Said Jessica Crane Executive Director at London & Capital.
In the scenario when a couple is getting divorced, there have been numerous instances when the financially weaker party cannot afford legal fees because one spouse controls all the finances.
In a high-net-worth context, the perpetrator can take advantage of offshore or international asset structures (like trusts or companies) and relocate or conceal their assets.
Financial abuse yields immediate stress and indignity, with longer-term consequences potentially affecting one’s credit score, savings, and overall financial independence.
A 2020 joint report by domestic violence charity, Refuge, and the Co-operative Bank highlighted that approximately 39% of UK adults said they had experienced economically abusive behaviour in their current or former relationship. This figure is likely to be a considerable understatement as so many instances go unrecognized or unreported.
Financial abuse can happen to both women and men, but women are statistically more likely to be the victims. The manipulation of money and other economic resources deprives women of the material means needed for independence, resistance and escape, according to UK charity Women’s Aid. It can act as a barrier to leaving and pose an increased risk for the victim. It can also impact the ability of a woman to rebuild her life after leaving a relationship. It would be easy to assume that this type of coercive control would finish after a separation, but it can often continue once a relationship has concluded.
According to Refuge and the Co-operative Bank, Covid-19 and the resultant lockdowns marked a particularly difficult period for issues around financial abuse. The report pointed towards the link between economic difficulties in a country and the potential for financial abuse. With the United Kingdom, along with many other countries, currently experiencing a period of economic turbulence, awareness of this link should be kept front of mind.
The FCA is increasingly aware of the implications for clients in these situations – particularly with respect to vulnerability and the new Consumer Duty which came into force earlier this year and aims to ensure that all consumers, irrespective of their situation, receive a good outcome.
What can advisers do if they suspect Financial Abuse?
- Ask clients about Powers of Attorney that might be in place – ensure this is not being abused.
- Make sure clients have their own bank account.
- Look out for sudden changes in financial behaviour.
- Be aware if there is a new person coming into a client’s life who starts making financial decisions for the client.
At London & Capital, we take client welfare seriously and tackling issues such as financial abuse is very important to us. Our specialist advisers are available to discuss these issues with discretion in mind and your wellbeing as a priority.