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Statement of

Investor rights

Ten rights that any investor should expect from financial service providers.

1

Honest, competent, and ethical conduct that complies with applicable law

Globally, financial laws and regulations differ, but all investors have the right to honesty from financial professionals. Honesty does not just mean a truthful answer to your questions; it also means transparency and forthrightness on the part of the financial professional.

Ideally, the financial professional should give you all the information that affects the financial decisions you make as well as the information that pertains to the financial decisions made on your behalf.

2

Independent and objective advice and assistance based on informed analysis, prudent judgment, and diligent effort

Financial professionals must base decisions on:

  • Thorough discussions with you about your needs and circumstances
  • Thorough analysis of your needs and circumstances
  • Thorough analysis of the products and services that may be used to meet your needs
  • Carefully considered and supported judgments that match products and services with your needs and circumstances
3

My financial interests taking precedence over those of the professional and the organization

As the owner of the money or the assets in a financial transaction, your welfare must be considered before the welfare of the financial professional and his or her organization. It is through outstanding work and service to your interests that financial professionals earn your trust and continued business. Your money is paying the bills and salaries of these professionals, and your interests need to come before their personal interests.

4

Fair treatment with respect to other clients

Fair treatment is not always equal treatment, particularly regarding all of a financial professional’s clients. For example, other clients may have different objectives and different risk tolerances, resulting in investment portfolios that are very different from your own. You should not consider it unfair treatment when another client with a riskier portfolio earns higher returns or when another client’s less risky portfolio performs better when financial markets decline.

Fairness also means that you should not feel pressured or rushed to make financial decisions.

5

Disclosure of any existing or potential conflicts of interest in providing products or services to me

Advice from a financial professional should be based solely on the benefits to you, your financial circumstances, and your financial goals; advice should not be based on a financial professional’s personal interests. All financial professionals have an interest in being paid for their work, so you should always ask how the financial professional is paid (e.g., commission, flat fee, etc.) to ensure that his or her personal financial interests are closely aligned with your own.

A financial professional must clearly tell you about any existing or potential conflicts of interest. Because conflicts of interest are not always avoidable, that information must include not only what the conflicts of interest are but also the steps taken to reconcile them in your best interests if they cannot be avoided.

Common examples of potential conflicts of interest include:

  • Being compensated for sales, not performance. Financial professionals are often not compensated based on how your investments perform but on how many investments they have sold to you or how much money you have invested with them.
  • Selling higher-paying financial products instead of nearly identical but cheaper products.
6

An understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints

Financial professionals must base decisions on facts directly relevant to your financial circumstances, needs, and goals. Financial advice should feel comfortable to you, and if it does not, you have the right to question financial professionals so that you understand how their advice fits you and your circumstances. The best way to make sure that you understand the advice being given to you is for the financial professional to put the plans created for you in writing. This plan is commonly known as the Investment Policy Statement. If you do not have an investment policy statement, ask the financial professional to create one. If you are just starting a relationship with a financial professional, then make sure that you and the financial professional create one together.

7

Clear, accurate, complete, and timely communications that use plain language and are presented in a format that conveys the information effectively

To understand the performance of a financial product, whether it is a checking account, life insurance policy, mutual fund, or another product, you must be able to understand the information provided by the financial professional or firm. Thus, you must receive communications — electronic, written, verbal, or otherwise — that make sense to you. If you do not understand the information given to you, you have the right to ask questions, request an explanation, and delay agreeing to the advice until the information is made clear.

8

An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable

You have the right to fully understand the expenses you are paying for investment services and products. This is true even if your financial product is as simple as a checking account. Financial professionals should be able to:

  • Show that the fees you are paying are based on the same fee schedule as for all other clients who are similar to you
  • Show that you are not paying more than other clients with accounts of similar size
  • Share information about the fees and costs charged by competitors offering similar products, if such information is publicly available
9

Confidentiality of my information

You have the right to privacy of your personal and financial information. Only financial professionals and their staff directly involved in the investment decision-making or reporting processes should have access to your personal and financial information. Furthermore, your personal financial information should be disclosed to others only if it is required by law, such as through a subpoena, or by a regulator with lawful jurisdiction.

10

Appropriate and complete records to support the work done on my behalf

Financial professionals working on your behalf must document and make readily available to you:

  • All information given to you
  • All products discussed with and offered to you
  • Any decisions that have the potential to affect or have affected your finances (including decisions in which you say no to the product or advice)
  • Any and all other pertinent information
1

Honest, competent, and ethical conduct that complies with applicable law

2

Independent and objective advice and assistance based on informed analysis, prudent judgment, and diligent effort

3

My financial interests taking precedence over those of the professional and the organization

4

Fair treatment with respect to other clients

5

Disclosure of any existing or potential conflicts of interest in providing products or services to me

6

An understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints

7

Clear, accurate, complete, and timely communications that use plain language and are presented in a format that conveys the information effectively

8

An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable

9

Confidentiality of my information

10

Appropriate and complete records to support the work done on my behalf

Robert Shiller

2013 Nobel Memorial Prize in Economic Sciences

Why It Matters

Only half of investors trust investment management firms to do what is right. To restore trust, compliance with a voluntary code of ethics and maintaining independence and objectivity are the actions that matter most to investors.

(Edelman Investor Trust Study, August 2013)

When hiring an investment manager, 35% of investors cite “trusted to act in my best interest” as the most important attribute, versus 17% who cite returns and 7% who cite fees.

(Edelman Investor Trust Study, August 2013)

9 out of 10 financial executives agree that aspiring to a set of globally recognized standards would make the financial services industry more resilient.

(EIU Study, November 2013)

John Taft

Member, Future of Finance Advisory Council
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The future of finance starts with you.

Know the 10 investor rights and share them with others: