How to Write a Good Letter of Authority

One of the core services we offer at PowerPlanner is assistance with gathering information from providers. At the beginning of this process is the production of a Letter of Authority (LOA), which the client needs to sign to give a financial planner permission to act on his/her behalf.

Getting the LOA right is very important. Providers will typically reject an LOA if it doesn't contain all the required information to identify the policy or the client. Mistakes leading to rejected LOAs not only cost financial planners a lot of time, but can also make an adviser appear unprofessional, as the client will have to be revisited to sign a corrected LOA to restart the process.

Then there's the information request that accompanies the LOA. Obtaining authority to act is one thing, but eliciting the appropriate plan information at the first time of asking is also important to ensure an efficient advice process.

As it happens, PowerPlanner can help with this too. Here is our guide for writing a good LOA.

Letter of Authority Checklist

To give your LOAs the best chance of getting accepted by providers, you should ensure they contain all of the following:

IFA Firm Information

• Company Name & Logo
• FCA Register Number
• Full Registered Address

Financial Adviser Details

• Financial Adviser Name
• Contact Details (telephone number and email address)

Client Details

• Full Name
• Full Address
• National Insurance Number
• Date of Birth

Policy Summary

• Provider/Scheme Name (as per the branding of the policy)
• Plan Type (be as specific as possible; avoid putting just "pension" if you can)
• Policy Number(s)

Instructions

• Instruction to release plan information to the named financial planning firm on request.
• Request to include all the client's plans in addition to specifically referenced policy numbers (if any).
• If needed, an explicit request to transfer full servicing rights to the financial adviser.
• Instruction to notify the adviser once authority has been granted.

Including all of the above information clearly and concisely should ensure that your LOAs get accepted first time by providers. When preparing your LOA template, keep in mind that the instruction to grant authority is coming from the client, as this may influence the way in which you set out the letter.

Information Gathering Checklist

As mentioned previously, obtaining authority to act on your clients' behalf is one thing, but to deliver good quality financial advice it's crucial to get the required information from the providers efficiently.

Typically, this is achieved by sending a request for information alongside the signed letter of authority. Providers generally respond to these requests promptly and directly to the questions asked, so it's a good idea to ask specific questions to ensure nothing is missed.

As an example, here is a set of points about which we typically request details while issuing an LOA for a pension:

1. Confirmation of plan type
2. Current fund and transfer values (including details of MVR/terminal bonus if applicable)
3. Full breakdown of the funds the contract is invested in and charges
4. Details of the funds that are available within the contract and any limits or charges that would apply to switching
5. Projections to NRD (or age 75 if already past that date) assuming contributions continue
6. Projections to NRD (or age 75 if already past that date) assuming no further contributions
7. Full details of the scheme's charging structure
8. Details of regular premiums currently being paid
9. For with-profits funds, details of bonus rates for at least the last five years
10. For with-profits funds, details of current asset allocation
11. Full details of guaranteed annuity rates if applicable
12. Full details of guaranteed basic annuities or GMP if applicable
13. Full details of guaranteed minimum retirement fund values if applicable
14. Full details of guaranteed growth rates if applicable
15. Full details of protected tax-free cash entitlement if applicable
16. Details of a protected retirement age if applicable
17. Whether waiver of premium applies and if not, whether this is available within the contract
18. Full details of additional life cover or term assurance if applicable
19. Details of any MVR-free or penalty-free dates which apply
20. Details of the retirement options available and applicable death benefits
21. If in drawdown, details of any regular income being taken and the crystallised/uncrystallised split
22. If a defined benefit scheme, CETV and deferred benefit statement
23. Details of nominated beneficiaries (full names and percentage holdings)
24. Transfer/discharge forms

The items of information requested for investments differs slightly from the above, but it is equally comprehensive. It may seem like a lot, but spelling everything out like this reduces the likelihood of information being missed.

Being specific in your information requests also has compliance benefits too. If, for example, you ask a provider whether a pension has any guarantees or protected benefits and the provider answers negatively, you have written confirmation from the provider about it. If it later transpires that the plan had, say, protected tax-free cash that the client lost on transfer of the plan, you can reference this written confirmation and thus transfer liability for any claim to the provider for issuing incorrect information.

Summary

As shown above, getting your LOAs right first time and submitting them with clear and concise requests for information is crucial for running an efficient financial planning business.

Not only this, but templating your requests for information in this way adds scalability to your processes, and there are compliance benefits to having a comprehensive set of questions that you pose to each provider. Organising your firm in this way allows you to take control of the data harvesting process and give your clients a better experience as a result.

Need Help with Your LOAs and Data Gathering? Contact Us Today!