What is 'Limited Power Of Attorney - LPOA'

Limited Power of Attorney (LPOA) is authorization for a portfolio manager to perform specific functions on behalf of a client in that client’s account. An LPOA gives the portfolio manager discretion to perform functions, such as trading authorization, disbursement authority, fee-payment authority and permission to have forms sent straight to a broker (proxy statements, tender offers, etc.). Before a client signs an LPOA, they should be aware of the specific functions they have authorized the portfolio manager to perform, as the client will be liable for the decisions made by the manager.

BREAKING DOWN 'Limited Power Of Attorney - LPOA'

The "limited" in LPOA refers to the fact that certain critical account functions are still only available to the account holder, such as cash withdrawals, a change of beneficiary or other significant account actions. Clients need to clearly state which powers they wish to retain.

LPOA authorizations have become more prevalent in the past decade as many investors move their accounts from standard brokerage firms to boutique money management firms such as Registered Investment Advisors (RIAs). LPOAs allow the manager to execute their investment strategy for the client without continually having to contact the client to approve the order before it gets executed.

Limited Power of Attorney Types

  • Springing Powers: An LPOA that has springing powers only becomes active if it is triggered by a stipulated event. Springing power LPOAs are typically used with a will or family living trust. Basically, this type of LPOA only comes into effect when a client dies or becomes incapacitated and can no longer manage their accounts. It cannot be triggered if the client is capable of handling his or her own affairs.
  • Durable and Non-Durable: Durable LPOAs give the portfolio manager continuing authority to perform certain functions, even after the client dies or becomes incapacitated. The majority of LPOAs are Non-Durable, which means they become void when the client dies or becomes disabled. (For further reading, see: Advanced Estate Planning: Durable Power of Attorney for Finances.)

Limited Power of Attorney Forms

Clients typically complete a Power of Attorney (POA) form when they open their account with a portfolio manager. Most forms give clients the option to choose between an LPOA or a full power of attorney. The client must provide details about their attorney in fact, who is usually the portfolio manager. Additional managers who intend to make investment decisions on behalf of the client must also have their details provided on the form. Once completed, both the client and the attorney(s) in fact must sign the form.

Usually, portfolio managers help their clients complete POA forms. Clients who are unsure about what functions they are authorizing or have a complicated account structure may want to get an attorney to review the POA form before signing it.

  1. Full Trading Authorization

    A level of trading authorization that grants an agent or broker the ...
  2. Client Base

    The core means of generating revenue for a business is by appealing ...
  3. Investment Objective

    An investment objective is a client information form used by ...
  4. Investment Manager

    An investment manager is a person or organization that makes ...
  5. Investment Management

    Investment management is a generic term that most commonly refers ...
  6. Know Your Client - KYC

    The Know Your Client form ensures investment advisors know details ...
Related Articles
  1. Retirement

    The Importance of Durable Financial Power of Attorney

    Having a durable financial power of attorney in place can save you from having the court decide who handles your finances when you can't.
  2. Financial Advisor

    Why Advisors Should Sidle Up to Estate Attorneys

    Financial advisors who building relationships with estate attorneys can better help all parties.
  3. Financial Advisor

    How to Construct an Annual Review for Clients

    One of the greatest value drivers advisors can provide to clients is an annual review of their financial situation. Here are some guidelines for conducting a well-considered review.
  4. Financial Advisor

    Losing a Client Is Not Always The End of The World

    Losing a client is never pleasant for a financial advisor, but sometimes this is a better outcome than continuing the relationship.
  5. Retirement

    Don't Give Away Control Over Your Assets Without Planning

    Most people don't realize what they agreed to when they signed a power of attorney, and are blissfully unaware of the possible harm from poor planning.
  6. Small Business

    How Often Should You Contact Clients?

    Figuring out how often an investment advisor should contact clients is not easy.
  7. Financial Advisor

    Managing Client Expectations in a Volatile Environment

    Managing client expectations during periods of market volatility is challenging. Here are some ways to go about it.
  8. Financial Advisor

    How to Impress Clients: The First Meeting

    When meeting a prospective client you don’t want your first impression to be your last. Here are some tips to make sure there's a second meeting.
  9. Tech

    Tips for Assessing a Client's Risk Tolerance

    Determining a client’s risk tolerance is a critical piece of the puzzle in designing and appropriate asset allocation.
  10. Financial Advisor

    Top Tips for the Recently Unemployed

    When a major life change such as a job loss comes up the advice and counsel of a trusted financial advisor can prove to be invaluable.
  1. What do real estate attorneys do?

    Understand the role of a real estate attorney, professionals specialized in legal matters related to property, to help you ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center