Understand how businesses use agency theory in corporate governance. Dollar Hit By Profit Taking. There are many good reasons to make a power of attorney, as it ensures that someone will look after your financial affairs if you become incapacitated.
What is a 'Power of Attorney'
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Here's the lowdown on the four essential legal documents you need — right now — to have in place before you die. If you work in the financial industry, the secret to keeping clients happy is to be consistent. What would happen if you were suddenly unable to manage your financial affairs? Even though the power of attorney fora managed account typically specifies the fees or costs associated with a particular program, this is not necessarily so. The POA's of some brokerage firms do not state the fees, in which case they would provide the investor an additional fee disclosure document with the specific charges management fees, performance fees, etc.
The brokerage firm is the one responsible for withdrawing the manager's fees from the customer's account. The LPOA protects both the investor and the money manager, who must also sign the power of attorney. The client is protected because the brokerage firm becomes the intermediary responsible for withdrawing only the stated amount of fees from the account so that the manager does not have access to the funds.
The manager is protected because the brokerage firm will make sure that he'll get paid the fees he's owed. The broker will also provide trading access to the manager and "view-only" also known as "read-only" access to the investor, since the investor by signing the LPOA designated the manager as the only one in charge of making the trading decisions. Another way an investor can protect himself is by revoking the POA at any time, which will restrict the manager from continuing to trade in the account.
Once the revocation is processed by the broker, the account becomes an individual that is, non-managed account, which the client can control. Depending on the technology used by the brokerage firm, the client requesting a revocation may first have to wait until open positions in the account are liquidated.
What is a Limited Power of Attorney? Managed Accounts cannot exist without a Limited Power of Attorney.