• Neal Shikes

Fiduciary Dilemma: Is your Clearing Firm transferring their risk to you?


In the Financial Services Industry, it is not enough to fulfill Fiduciary obligations in isolation. Business partners must be committed to this standard as well. Clearing Firms and associated technology must enable a Fiduciary to meet client obligations.

Like Employer Sponsors of Retirement Plans, Registered Investment Advisers (RIAs) are responsible for monitoring investment “content” and provider oversight. Each provider agreement must be reviewed carefully as it has a tendency to morph in heightened regulatory environments.

Predictably, attempts to transfer various types of risk become visible during contract renewals or amendments. Without warning, terms like “custody,” “technology integration,” and “client data” become legal ambiguities and justifications to shift risk to the Independent Broker Dealer or RIA. These risks are inherent to their business. Are Clearing Providers no longer responsible for custody, settlement, payments, wire transfers, and their own business partners that facilitate these functions?

The Fiduciary has a legal and ethical duty to oversee the integrity of their business partners to protect the interest of their clients. According to Black’s Law Dictionary a Fiduciary is a person holding the character of a trustee, or a character analogous to that of a trustee, in respect to the trust and confidence involved in it and the scrupulous good faith and candor which it requires. Is your Clearing Firm enabling you to do so for your clients?

#FiduciaryAwareness #Oversight #Clearing

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