This one coulda come straight outta Hollywood. Because in FinanceLand, the same kind of client-agent thing exists...albeit with a lot less than 10 percent per transaction commissions usually as standard.
You are Granny Golddigger. Your 97-year-old husband just died, leaving you, at 43, a wealthy woman. You meet with your stockbroker, now turned private wealth manager, Handsomy McHandsome, and assess the, uh...relationship here.
Well, Handsomy has a fiduciary obligation to you to act on your best behalf. He is effectively an extension of you. He is your agent in the same way your right hand is your agent when your back has an itch.
He must be open about his fee structure. Like…a common agency arrangement these days has the client paying 1% of the assets under management with the agent, whether the agent does a ton of work for the client, or whether he does a whole lot of nothing.
The dicey conversations then revolve around whether that agent encouraged his client to put money in the very high-fee hedge and private equity funds run by the agent’s firm…and then, uh…does the agent get a spiff or tip or free trip for him and his family to Hawaii at the end of the year?
The basic idea here is that an agent must act in the best interests of their client no matter what…even if the advice the agent is giving the client is directly opposite the best personal interests of that agent.
And yeah…that is the only relationship you want to have with an agent.
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Finance: What is an Agency Relationship?202 Views
Finance a la Shmoop! What is an agency relationship? Alright well this
one could have come straight out of Hollywood.
Because in finance land, no relation to Disneyland, the same kind of client agent
thing exists. I'll deal with a lot less than ten
percent per transaction commissions. That's usually standard in the old
Hollywood. Well you are granny gold digger, you're 97 year old husband, just[people at funeral]
died. Leaving you at 43 a wealthy woman. You meet with your stockbroker, now
turned private wealth manager, handsomey mic handsome and assess the
relationship here. Well handsomey, has a fiduciary
obligation to you, to act on your best behalf. He is effectively an extension of
you. He is your agent, in the same way your right hand is your agent when your
back itches. He must be open about his fee structure.
Like a common agency arrangement these days, has the client paying 1% of the[pile of money in mansion]
assets under management with the agent. Whether the agent does a ton of work for
the client like tons of trading, or whether he does a whole lot of nothing.
Well the dicey conversations here then revolve around whether that agent
encouraged his client, to put money in the very high, free hedge and private
equity funds run by the agents firm. And then, well you know, you could ask does
the agent then get a spife, or tip, or free trip for him and his family to[man on vacation]
Hawaii at the end of the year? Hmm does that happen? Could that happen?
Agency relationship. All right well the basic idea here is that an agent must
act in the best interests of the client no matter what. Even if the advice the
agent is giving the client is directly opposite, the best personal interests of
that agent. Like getting a lot of commission and that free trip to Hawaii.
And yeah that is the only relationship we want to have with an agent.[three people in office]
Sorry there.
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What does it mean to have fiduciary obligation? To have a fiduciary obligation means that a third party has been given the trust and responsibility...