Agency Relationship

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.