Conflict of interest & fiduciary responsibility

[squash500]

What about the ML advisors fiduciary duty...

What about it? Stock brokers don't have any fiduciary duty to their clients. That's the point. They're just salespeople no matter how they (mis)represent themselves.

Thanks for that link Bylo .

I wonder how the fiduciary rules rules work for canadian advisors? Or should I be afraid to ask?

I'll have to search the fwf threads to see if this topic has been covered before? I'm sure it has somewhere?

[Clock Watcher]

I guess this is a common story by now. My neighbor's father-in-law is in his mid 70s with Alzheimer's. He never revaled to his family his investments, but it turned out that he had everything invested via a financial advisor at one of his bank's branches.

My neighbor was dismayed to find that he was over 60% in equity funds, and the losses are significant enough that her mother-in-law is now concerned whether she will have sufficient income in the future.

She doesn't know what objectives he had stated to the advisor. Does the advisor have a fiduciary duty to regularly update the objectives, or is this something the client initiates? In fact, what fiduciary duty does the advisor have at all?

She also believes that he had withdrew his entire pension in a lump sum. I thought you can't do that after a certain age (he retired at 65, and continued working for a few years thereafter part-time as a consultant)?

[Bylo Selhi]

Bogle calls for fiduciary standards

Congress should enact legislation mandating that all investment advisers and money managers come under fiduciary standards, John Bogle, founder and former chief executive of The Vanguard Group Inc. of Malvern, Pa., said today... “Surely it should be clear to clients whether they are relying on a trained investment professional, paid solely through fully disclosed fees, or a sales rep who sells the products and services of the company he represents, whether life insurance, annuities, mutual funds or anything else,” said Mr. Bogle.

The full speech is available here [PDF].

[Bylo Selhi]

Beware of the lure of the "fiduciary" label

It is common in investor loss litigation for investor/client plaintiffs to allege that a fiduciary relationship existed between the dealer and IA, on the one hand, and the investor/client, on the other hand, and that the registrants engaged in misconduct that constituted a breach of their fiduciary obligations to the client. These allegations are usually accompanied by claims for negligence and breach of contract. It appears clear from our survey that courts find that a fiduciary relationship existed only in a minority of cases and that the characterization of the CPH of the relationship between investor/client and IA/dealer is in error and the CPH ought to be corrected.

The lesson for investor clients seeking compensation for investor losses through legal proceedings is to focus their allegations on the actual relationship that existed between the particular investor/ client and the IA/dealer, thereby to limit claims founded on the allegation of a fiduciary relationship to those where the relationship arguably merits such an allegation. The lesson for IAs, enamored of the term “fiduciary” to describe their relationships with clients, is to change their vocabulary, or risk a court accepting that characterization, with the possible consequent adverse effect on the court’s determination of compensatory and other damages, and the degree, if at all, that the client’s conduct will be taken into account by the court on liability and damages issues.