The ticking time bomb facing fiduciaries

Will Sidery, 21/04/2022

Like many professions, the fiduciary sector prides itself on client service quality and integrity. Where the fiduciary sector differs from other professions (lawyers, bankers, accountants) is in the ongoing duty of care that underpins a fiduciary relationship, specifically the inherent requirement to always act in the best interest of the client.

There are times when this can be directly contrary to the client’s wishes. This enduring duty is interpreted in different ways, whether as industry best practice, or as a requirement enshrined under law to ‘protect, preserve and enhance’ the value of the assets held on behalf of the client.

Fiduciaries specialise in ensuring awareness of international regulation so that they can complete all the filings to tax authorities, governments, financial institutions and other regulatory bodies such that their clients discharge all their obligations in today’s remarkably complex world.

Directors and trustees oversee a wide range of highly complex and technical issues from regulatory and tax filings, to the purchase and sale of businesses, to accounts prepared on a timely basis in accordance with the relevant international standards.

While fiduciaries reassure their clients and their fellow advisors, that they keep abreast of all changes to regulatory requirements, are they as informed about court rulings that create an opportunity to pro-actively act for their clients in a way that increases their clients’ asset value by up to ten percent?

Having spoken with professionals involved directly with clients looking to claim back monies owed, eprivateclient is given to understand that this may not be the case.

For example, Swiss and Lichtenstein court rulings have determined that when a client successfully asserts a claim to the Retrocessions that have been earnt on a Swiss or Lichtenstein investment portfolio, the asset manager and/or custodian is required to repay these amounts retrospectively going back either 10 years (in Switzerland ) or 30 years (in Liechtenstein) from the date the claim is registered, as well as pay a five percent penalty charge per annum for the previous decade.

How many fiduciaries are aware of this? And of those that are aware, how many have acted promptly in the best interests of their client?

This is where the concept of ‘Fiduciary Duty’ is so important. Professional fiduciaries must act in the best interests of their client, meaning that even if their underlying client likes the Swiss or Lichtenstein investment arrangement, a professional fiduciary needs to recognise that the court rulings are clear that Retrocessions should be paid back to the client. If the fiduciary fails to act, they are likely to be liable themselves for any Retrocessions that should have been claimed.

Readers involved in the fiduciary sector should note that a number of litigators would now, deem them to be ‘on notice’ having read this article, making any lack of action very difficult to defend in the future.

About PAM

PAM Insight is the world’s leading independent provider of essential specialist news, analysis and comparative data for the fast-evolving world of wealth management.

Read more about PAM


eprivateclient is the leading website and news service for private client practitioners, including lawyers, accountants, trustees and fee-based IFAs.

Read more