Liability issues related to the management of a wealth management office
Successful wealth management offices take care of financial, philanthropic, legal and administrative affairs, and ensure that family goals are met from generation to generation. However, these responsibilities expose the manager and staff of the wealth management office to many liability risks. Like all directors, officers and professionals, people who work in wealth management offices can be prosecuted for any reason, from professional negligence to mismanagement of funds to discrimination in employment.
The risks to which a manager of a wealth management office is exposed are comparable to those faced by directors and managers of a company. A manager of a wealth management office provides many of the services generally associated with trust operations and assumes the same duties and obligations. Finally, wealth management offices, as employers, have the same workplace concerns and responsibilities as large corporations. The head of the wealth management office should be aware of the risks associated with running a wealth management office.
Role of directors and officers
The primary role of a director or officer of a wealth management office is to responsibly represent the interests of the family as a whole, as well as other operational interests, in the management of the activities determined by family. Wealth management office managers can be held liable, just like a director or public company officer, for negative consequences for family members that would result from their poor appraisal.
Professional and fiduciary services
The professional services provided by a wealth management office require compliance with high trust standards. Wealth management office managers should administer their accounts in accordance with office policies and the law. Here are some examples of the many claims that can arise from professional or fiduciary services:
Inappropriate delegation of authority to a third party.
Bias treatment of family members.
Non-compliance with the conditions of the charter or the account.
Payment of invalid claims against the family.
Inadequate bookkeeping.
Malpractice in real estate or tax planning, or deviation from investment strategy.
Insufficient or inadequate supervision of investment managers.
Employment practices
Claims for wrongful dismissal, discrimination, harassment and defamation put employers and their directors, officers and supervisors at significant risk. Different provincial and federal laws can be used to bring an action against an employer, including managers of wealth management offices.
Protective measures - compensation and insurance
Often the best protection a manager of a wealth management office can have is to obtain compensation from the wealth management office. However, even written compensation has its limits:
The office may be insolvent or may not have the resources to fund the indemnity.
2 Indemnification clauses may not be general enough to cover a claim for compensation.
3The board of directors of the wealth management office may not authorize compensation.
Insurance programs, which are sufficiently broad in scope, will also help protect the professional of the wealth management office against risks related to directors 'and officers' liability, omissions and malpractice, and professional practices. employment. In addition, appropriate insurance coverage may supplement existing indemnity clauses, or even exceed them in certain circumstances, and absorb indemnification costs borne by the wealth management office.
Warning signs concerning the responsibility of management
Does your wealth management office have the following characteristics:
Does it have professionals within its workforce?
Does it provide accounting or tax planning services to clients?
Does he offer estate planning assistance to his clients?
Does it provide investment advisory services to clients?
Does he set up and manage private investment funds or investment companies?
Does he choose and supervise professionals
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