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    February 2013
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    Conflicting “fiduciary duty” – who is first, the client or the company selling the product or service?

    Ian Whiting

    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??

    The MONEY® Network