I have googled Loan Trusts and they are a complex wrapper designed to minimise/avoid IHT by taking the growth on the assets out of the person's estate, so there is no giving away of capital on the initial loan, only if the loan is waived (which appears to be an option). They are likely to be worthwhile if held as a long term investment, not short term. HMRC have a habit of getting upset about any IHT planning(avoidance) and have legislated retrospectively on some schemes.
There are no HMRC rules on giving away capital and HMRC are only interested in the tax position.
But if a person has no capacity their assets have to be managed in their best interests to maintain them, so divesting of capital is not maintaining their assets in their best financial interests and discretionary decisions cannot be made on their behalf. If likely to be self funding then this can cause problems, although if at the level of assets to be considering IHT avoidance this may not be an issue.
A financial adviser is not tax trained and so anyone considering a product of this nature should only go into it with good quality IHT advice from a suitably qualified tax practitioner (Reputable firm of accountants or tax advisors)
If it is with the same adviser it sounds like he has had a chat with colleagues about something he wasn't sure about.