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Reflections on the "Trusted Advisor"

We increasingly see use of the term "trusted advisor", particularly in the arena of financial and estate planning services.

But what is a "trusted advisor" as opposed to someone simply providing advice? At its root I would submit is the requirement that a trusted advisor acts in the best interests of the client which are primary, and any self-interest of the advisor is a clear and resounding second.

The primacy of the client's interest is the essence of true professionalism. The professions have played a unique role in society, which historically required certain groups be subject to fiduciary obligations because of the essential and critical nature of the services they provide. In return is the privilege of self-regulation, whether it be medicine, accountancy, law or other professions as part of their "social contract" with society. A professional provides his or her selfless independent advice and judgment, and does not "sell" products or services for commercial gain.

This distinction is topical as the investment industry and regulators in Ontario and elsewhere move towards consideration of the adoption of legislated fiduciary duty for investment advisors and dealers in providing investment advice to their clients. The objective is to ensure the client's interest is placed first, breach of which will leave an advisor liable civilly in damages. A consultation paper dated October 25, 2012 released by the Canadian Securities Administrators has been released to stakeholder groups dealing with these issues for their input.

In the provision of wealth management and estate planning advice, independence is critical, and the advisor must be in a position to provide it. The range of problems and choice of solutions is complex and challenging. It is no wonder that clients are often overwhelmed, vulnerable and dependent on the advice of their advisor. The importance of these decisions from a societal perspective, which impact many others, including future generations to come, must be grounded in the best available objective advice and the client's interests must be paramount and protected.

This issue is becoming only more relevant and pressing with the aging of the baby boomers, and the massive intergenerational transfer of wealth which is attracting renewed interest and growth in the wealth management sector and new entrants to the field. Conflicts of interest are sure to abound.

I was reminded of this as I recently conferred with a U.S. lawyer who needed advice for a long-time friend who is a dual U.S./Canadian citizen. Concerned with his exposure to U.S. estate tax, the friend had received "advice" from an "estate planner" that given the size of his estate, there would be a large estate tax liability and the appropriate solution was to buy a very expensive life insurance policy - and guess what, the advisor would be able to place it! The U.S. lawyer and I both acknowledged our mutual chagrin given the many ways in which this possible liability could be planned for to minimize or eliminate it, none of which required life insurance.

As the familiar saying goes, "you can buy most things, but you can't buy trust" - trust is earned. And trust although perhaps increasingly rare in our modern commercially-focussed society, is a value that clients will increasingly need to have - and a trusted advisor - as they navigate many challenging choices in their estate and financial planning.

The question is - will our financial institutions and others providing estate planning and wealth management services take the high road and gather the will to rise and meet this challenge in a timely fashion or will they ultimately be forced to?

Margaret O'Sullivan

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

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