The Pension Lab recently released a whitepaper ‘What lies beneath Letters of Authority’ as part of its collaborative campaign, #LogYourLoAPain. 

The sheer volume of Letter of Authority’s (LoAs), coupled together with the inherent complexity and lack of standardisation across different providers, has become a source of extreme of frustration for the industry. LoA’s also have many manual processes, such as paper forms, wet signatures and documents being submitted via fax or post, which exacerbates the problem. This can cause delays for customers, and added effort and costs to firms, resulting in increased errors and time being wasted on administrative tasks. 

An LoA is a legal document that authorises a third party to correspond with providers on behalf of its clients. When clients approach an adviser for advice, they often have numerous existing policies in place. Obtaining a LoA is critical for the adviser to determine the most appropriate course of action and ensure they make the best financial decisions for their clients’ future financial well-being. 

The #LogYourLoAPain initiative was launched by the Pension Lab with support from Criterion and several other organisations. The aim of the campaign was to encourage advisers, planners, and wealth managers to count LoAs to enable a more detailed picture of the current situation and drive digital solutions. 

The campaign received 59 entries, which represented approximately 880 financial advisers. The whitepaper reported on data provided by these respondents and LoA volumes, supplied by D2C platforms and pension consolidators. 

The research revealed that 3.9 million LoAs are sent annually across the industry, with an average of 6.5 LoAs sent per month, per financial adviser. Every LoA processed takes 130 minutes, which doesn’t include the time elapsed that this takes to complete. This can often take months, during which time clients can’t get access to the advice they need, data can need refreshed and overall, the experience for the customer is poor.  

The data also highlights the significant cost that advisers are spending on processing LoAs with a whopping £442 million estimated to being spent annually across the industry, which is around £111 per LoA. 

The whitepaper noted seven drivers for change in the LoA process, that included the Consumer Duty rules and customer experiences, both of which reinforce the importance of reducing the amount of time it takes to process LoA, to concentrate efforts on the customer. Five enablers for change were also cited as being key to drive this initiative forward: 

  • Criterion Standards;
  • ID verification and digital signatures;
  • technology;
  • business case; and, 
  • collaboration and momentum.

If the LoA process is going to improve, a holistic approach that encompasses all these enablers for change is needed, with the whole industry involved. 

Criterion's LoA API Standards support advisers that are onboarding new clients, by providing an automated method of gathering information about clients’ existing policies. This enables a more effective process, whilst reducing human errors and inconsistencies, and freeing advisers up to spend more time on providing advice to their clients. Building an automated service using Criterion’s Standards is far more cost and time efficient than manually obtaining information and will allow for accelerated decision making and clients receiving a better experience.  

It’s easy to understand why the LoA process issues are often overlooked; however, their cumulative impact proves to be a significant financial burden for advisers and the system at large. If the issues continue to be left unaddressed, this problem will not only persist, but could worsen with the introduction of the pension dashboard and the potential of an increased volume of LoAs, ultimately resulting in increased costs to firms and further bugbears for clients. 

Billy Burnside, Managing Director: 

Pension Lab’s research into the LoA process has provided valuable insight into the true extent of LoAs impact on both advisers and consumers. With a massive 3.9m LoAs sent out every year and 10% of these needing wet signatures, it’s crucial that firms take steps towards a more efficient LoA process. The drivers for change highlight the main areas the industry needs to come together to resolve, with collaboration the key to driving this forward. By fostering collaboration alongside leveraging Standards and technology, we are paving the way for a more streamlined and automated process, alleviating the burdens of managing large volumes of LoAs on a daily basis, while reducing costs.