Most financial planners write a cover letter or transmittal letter to accompany the written financial plan. Although a transmittal letter is not required by law or regulation financial planners believe that it is a convenient method to introduce the plan to the client.
The following topics are commonly covered in a transmittal letter:
- A description of the plan, including details regarding how the plan is organized.
- A description of the sources of data used to prepare the plan.
It is important to include in the transmittal letter that the plan is based on information provided by the client and that that plan is only as reliable as the information provided. If any advice is required from other professional advisers or other third parties the financial planner should communicate this in the transmittal.
- The limitations of the plan.
The transmittal letter should include a discussion of the essential assumptions upon which the plan is based. These assumptions would include estimates of income, investment performance, inflation rates, and projected retirement benefits.
- The implementation of the plan.
An action plan including suggested time lines and suggested responsibilities for the implementation of the recommendations should be documented in the transmittal letter.
- The limitation of advice.
Planners who are not to licensed by the appropriate regulatory agencies or who are not competent in the relevant areas should refrain from suggesting specific recommendations.
- The scope and limitations of the plan.
If the financial plan deals only with one topic area such as tax planning or risk management, the transmittal letter should clearly state that the results are not part of a comprehensive financial plan.
- Reliance on other professional advisers.
Financial planners who will rely on outside specialists should clearly delineate in the financial planning report the responsibility, if any, they are taking for the work provided by the specialists.
- Conflicts of interest.
The transmittal letter should clearly identify any conflicts of interest and these should be clearly disclosed to the client. Disclosure of conflicts of interest in the transmittal letter dispel any claims that the disclosures were in any way hidden. Conflicts of interest include sources of compensation especially where the planner receives commissions on any financial products acquired by the client through the implementation of the financial plan.
- The financial planning process.
Many financial planners will include in the transmittal letter a description of the financial planning process and the benefits of this process to client.
- Thank you.
Most financial planners will express in the transmittal letter some personal comments directed towards the client in order to strengthen the relationship that is created through the substantial amount of personal interaction that the financial planning process will often initiate between the client and the planner.