The Fiduciary Standard requires IAs to serve a client’s best interests with the intent to eliminate, or at least to expose, all potential conflicts of interest which might incline an investment advisor—consciously or unconsciously—to render advice which is not in the best interest of the IA’s clients.
As a fiduciary, Weatherhelm is always mindful of the “Prudent Man Rule.” This rule, based on the common law and stemming from the 1830 Massachusetts court formulation laid out in Harvard College v. Amory, directs fiduciaries “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.”
Weatherhelm’s choices when rendering advice are therefore governed by the question: “What would a prudent, well-informed actor choose given a duty of diligence and a full and thorough consideration of material facts?”
Given two substantially similar products, Weatherhelm must always choose the best one for the client, regardless of any incentive or benefit potentially available to the firm itself. This may seem obvious to the average person, but as in many things related to the financial services industry, obvious is not always the way things are structured.
