Over 60 Years Of Litigation Experience

Advisor duties depend on ERISA requirements

Over 90 percent of those polled in Tennessee and across the country agree that a financial advisor should act in the best interests of his or her clients just as a doctor or lawyer does. Physicians and attorneys take oaths promising to uphold the best interests of those who entrust them with their medical or legal issues, but financial advisors do not. Because an appellate court recently overturned the Department of Labor attempts to clarify the role of advisors under the Employee Retirement Income Security Act, also called ERISA, many may wonder how to protect themselves.

In many cases, a financial advisor may be trying to sell a product, and the more the client purchases, the bigger the commission for the advisor. However, implementing rules to restrain advisors from offering guidance without fear of litigation would apparently be expensive for the financial advising industry and cost prohibitive for those seeking advice on their investments. This is why it is important for investors to understand when their advisors are fiduciaries and when they are simply salespeople.

Fiduciaries are legally bound to act in the best interests of the clients at all times. However, almost 40 percent of investors in the U.S. do not know if the person giving them financial advice qualifies as a fiduciary or as a broker. The difference can be confusing but important since ERISA laws protect investors from fiduciary wrongdoing.

If one entrusts his or her hard-earned money to the investment advice of a fiduciary, that investor expects the fiduciary to avoid any conflict of interests. When the fiduciary breaches this trust, it may place a Tennessee investor’s future in jeopardy. Seeking legal counsel when faced with ERISA issues is always an option, especially if one is unsure of the legal duties of an advisor.