Company Investments

Essential Tips From Hauser Insurance on How To Minimize Fiduciary Risks

When one acts as a fiduciary, one must have the duty to avoid conflicts of interest and ensure that investments are appropriate for their clients. In this article, you will find tips on how to minimize fiduciary risks.

Arbitration Agreements

Hauser Insurance recommends that both parties need to agree on the arbitration agreement before they start acting as fiduciaries. The client must be aware of all the grounds their adviser can use to withdraw from the contract, while the adviser should have a clear idea of what they can sue on in case there are disputes between them and the client. Being familiar with the arbitration agreement will prevent high costs and lengthy litigation.

Class-Action Waivers

Hauser Insurance suggests that if a client agrees to waive their right to file class-action lawsuits, they will be required to pay more fees because there is no protection from unreasonable professional charges collected by the adviser. The law permits the maximum annual fee to be equal to 1% per year of assets under management. Having waived the right will limit the client from collecting an amount that is over this limit.

Compliance With Safe Harbor Provisions

It is essential for an adviser to ensure that their advice is compliant with safe harbor provisions. This might keep a client from challenging any recommendation and claims made by the adviser in connection to it. The best way to prove compliance is to implement a written communication program that lets clients know whether their actions are consistent with the safe harbor provisions.

QDIA Protections

The advice provided by a fiduciary must be in accordance with the QDIA provisions. An adviser must provide investment advice about qualified default investment alternatives. Also, they should make sure to work through them if they are available and appropriate for the client.

Frankly, the tips mentioned above from Hauser Insurance will help to minimize fiduciary risks. They are very simple and easy to implement, and they can save time and money for both the client and their adviser.