Conflicting “fiduciary duty” – who is first, the client or the company selling the product or service?

Ian Whiting Banks, Finance, Financial Planning, General, Insurance, MONEY®, Personal Finance

Assuming this comes to pass, how do the institutions sort out the conflicts? Over the past year or so, I have been looking at a number of codes of conduct for employees and advisors within the financial services industry and they do make interesting reading.

The all have some type of statement along the lines of: “I hereby agree to conduct the affairs of XYZ Financial Institution in a manner consistent with standard operating practices and procedures and acknowledge that I have at all times, a fiduciary duty and responsibility to XYZ Financial Institution.” This is wonderful, but interestingly enough, in all of my reviews, I have NEVER once seen a statement that says that the employee also has a fiduciary duty or responsibility to the clients. This same scenario applies to advisors who have to sign codes of conduct or similar statements acknowledging that they will treat the companies they represent fairly, etc.

The conundrum therefore is – which fiduciary duty has supremacy? The duty to the financial institution or the duty to the client? Consider the following two examples.

So far, none of the work from the Canadian Securities Administrators has examined these issues and nor, does it appear, that the rest of the financial services industry has considered them either. IMHO, this needs to be very carefully examined by all constituents. I believe, speaking personally of course, that the priority must be with the interests of the client. Any comments??

Ian Whiting

Ian R. Whiting CD, CFP, CLU, CH.F.C., FLMI (FS), ACS, AIAA, AALU With more than 40-years of experience in the industry, Ian has qualified 3 times for MDRT, completed LUATC in 1979, the LUAC Financial Planning Skills Course and attended numerous Schools in Agency Management and Sales Management through LIMRA. He obtained his CLU in 1987 while also completed his IFIC qualification and completed his Fellowship in the Life Management Institute with a specialty in Financial Services in 1988. In 1989, he completed qualifications for his Chartered Financial Consultant designation. In 1992, he qualified as an Associate of the Academy of Life Underwriters (Head Office underwriter qualification) and in 1993 he completed his Associate, Customer Service designation program through LOMA. In 1997, he qualified as a CFP and also completed his courses and exams to obtain the Associate, Insurance Agency Administration designation. In 1999, he completed the study and examinations to qualify as a Trading Officer, Partner and Director for Mutual Funds with the BC Securities Commission. As a result, he is also qualified as both a Branch Compliance Manager and Head Office/Provincial Compliance Officer. He served for nearly 18 years with the Canadian Forces (Air) Reserve (reaching the rank of Captain) primarily working with Air Cadets and was award the Canadian Forces Decoration (CD) in 1982. Long known as a maverick and forward thinker in the financial services world, Ian enjoys the challenge of learning new material and planning for the future evolution of his chosen profession.