Monday, November 05, 2007

In the Client's Best Interest

Help me!!! I need comments on this one.

I was speaking with a real journalist (instead of a wannabe) who used the phrase in the "client's best interest" quite a bit in an article. I commented that I thought his use of the phrase was almost becoming cliched because the circumstances he cited seemed to me to warrant the phrase " In the adviser's best interest." A friendly discussion ensued and I asked the question exactly what is meant by " In the Client's Best Interest" and he said everyone knows that answer. Well that was good except what everyone knows and what the regulators know may be two different definitions.

I asked some advisers for their definition and I was somewhat surprised by the diversity. Now I would like to ask the question of you. Please tell me what you think that noble phrase means.

In the "clients best interest" means...........................

11 comments:

Anonymous said...

It means making lots of money on the investments!

Jeff Hunter said...

"Client's best interest" means you can give objective advice regardless of how much you will personally make off that advice.

Valerie said...

In the client's best interest means doing what is most important for me - whether that be making the largest gains or reducing my tax impact.

An adviser should know what I don't know and help educate me, so both my money and I grow in financial value/knowledge.

Betsey said...

The client's best interest is about doing what's right for the client in both the short and the long term. An advisor should advise, educate and make suggestions in the context of the client's financial portfolio and goals.

Jason said...

In order to do something in the clients best interest it's necessary to know the long and short term goals of the client. Then it is the responsibility of the advisor to act in accordance with that knowledge.

Linda said...

In the client's best interest means using your professional knowledge of investing and finances in conjunction with your understanding of the client's long and short term goals, and advising him/her based on that information, not based on what choice you might personally make. This may include, however, demonstrating a number of potential scenarios and allowing the client to determine which makes the most sense for him/her. In addition, it means not advising a client based on a potential profit/commission you, the advisor, would make.

Anonymous said...

you need to know your client, inside and out. what are their expectations, aspirations and what is their reality.

Anonymous said...

To me, "in the client's best interest" is supposed to mean the advisor provides the best advice possible enabling his/her client to make appropriate decisions to achieve success. If this is an advisor making his living by commissions, the advice is sometimes in his/her best interest regarding the amount of $$$ he makes on the advice he gives. Am I too cynical?

Anonymous said...

"In the best interest of the client" to me means that an investment or management of the client's funds is done with the intention that the client will, at best, increase the value of his/her holdings or, at the worst, have a low risk of losing the value of the holdings.

Anonymous said...

Depending on the advisor's comp structure and certification, there's probably a great deal of variability in the rigor that the "best interests" principle is upheld, if at all. But in general, I think this standard refers to the duty of the professional--irrespective of his own personal interests--to provide advice anticipated to generate the greatest benefit to the client. "Benefit" here is measurable in terms that carefully balance financial returns with the client's situation and risk tolerance.

"Planners" at brokerages, for example, may not necessarily put this policy into practice, although I'm not familiar with laws protecting investors or of the standards that most brokerages observe. That said, I would assume that most are not bound by fiduciary obligations. Rather, where there is a commission-based structure, I think that investment sales naturally supercede client interests. And in the absence of the most egregious conduct, there's sort of a gray area that can't really be described as illegal or fiduciary.

Anonymous said...

"In the best interest of the client" must be a legal term.

That said, to me it means actions meet the "man on the street" test. Most people would know - supplied a set of circumstances - if the professional in question had been honest, diligent, and able in performing duties and supplying services clients rightfully expect as, perhaps, outlined in an agreement or contract. The object of the professional's actions need be directed toward clients' welfare and the satisfaction of their objectives in seeking the professional's services. The professional benefits only to the degree stipulated between him/her and their clients without gaining benefits unknown to clients.