Peace Of Mind For Your Family And Your Future

The legal responsibilities of your financial planner

On Behalf of | Jul 6, 2021 | Business formation

No matter your age, there are benefits to working with a financial planner to remain financially healthy and fiscally responsible and to grow your wealth. Whether you need advice on investments, you want to begin estate planning or you simply want assistance with budgeting, a financial planner is the best place to start. But are you aware that under business law in Delaware, your financial planner has strict fiduciary duties?

Rules for financial planners

Whether your financial planner is independent or works for a larger corporation, there are basic duties they must adhere to under business law. These include:

  • Asking the right questions
  • Showing care and loyalty
  • Following the business judgment rule
  • Exercising good faith, oversight and disclosure
  • Keeping detailed records
  • Understanding red flags in the financial industry

Overall, a financial planner is required to protect your assets and keep your best interests at heart when managing your financial matters. This includes investment accounts as well as any trusts created as part of your estate planning.

What happens if a financial planner violates these duties?

If your financial planner violates their fiduciary duties, such as failing to disclose conflict of interest, acting in a way that is not in your best interest or doing something that benefits the advisor rather than you, it is possible that you could file a claim against the advisor. Should the courts determine that your advisor violated their duties, they could be required to pay damages. The courts might order the advisor to pay compensatory damages, actual damages you incurred and punitive damages, which are designed to punish the advisor. In addition, your financial advisor could face professional consequences, such as loss of a license to act as a financial advisor for a certain time or forever.

Legal advice

The first step in determining if your advisor breached their fiduciary duties under business law is to talk to an attorney. Fiduciary duties can be extremely complicated cases, and some could actually be difficult to prove. An attorney may review your case and guide you through the steps you need to take to protect your financial future.

Like all professions, financial advisors not only have a moral obligation to protect their clients, but they also have a legal obligation to do so. Understanding the fiduciary duties of your financial advisor can help you protect your assets and allow you to recognize when the advisor may not be acting in your own best interests.