He who recommends it shall be liable for itBen Raven - Director
When the adviser is matching the client’s ATR to an investment portfolio, the fund managers are all selling to them. The adviser must ensure the volatility of the portfolio remains appropriate at all times, and owns all the risk if the portfolio does ever deviate. The adviser is liable because they are the ones who recommend it, not the fund manager.
The interests of the adviser and the fund manager are clearly not aligned in this scenario. To this end, the FSCS article contained a quote from the Chief Executive of Investment Quorum. Commenting on the relationship between adviser and fund provider, Lee Robertson said: “Providers are queueing up at advisers’ doors with their products, but when they don’t perform as expected they are nowhere to be found and advisers carry the can.”
Advisers make investment recommendations & own the risk if the client complains
The interests of the adviser and the fund manager are not aligned
The adviser must make decisions in the best interests of their clients.
All too often I hear “my manager takes an active view on currencies” or “currency markets even themselves out over the long run” or that “currency trades form a part of my manager’s overall macro strategy”. If you ever receive one of these responses you must remember:
It is not good enough for advisers to say their fund manager “takes care of it” for them. Nor is it good enough to ask a fund provider a series of questions, accept whatever answers they give and simply attach the notes to the client file.
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