If you're a fiduciary and don't want to get sued — and fined — pay close attention to litigation expert Dominic J. Campisi.
Campisi, a partner in the San Francisco law firm of Evans Latham and Campisi, has been defending fiduciaries for about three decades and says he has no shortage of business these days. Indeed, lawsuits and arbitration cases concerning breach of fiduciary duties are increasing at a compound annual rate of 22 percent, according to an analysis of NASD figures by the Center for Fiduciary Studies, of Sewickley, Pa.
Speaking recently at the American Bankers Association's Wealth Management and Trust conference in Orlando, Fla., Campisi gave the following tips to fiduciaries:
Know the client's risk tolerance: Locate a client's precise goals for a plan or trust and document those wishes. Advisors must be able to give a detailed analysis of how they reached their conclusions and made their investment choices. Don't assume that it's only possible to err on the side of being too aggressive.
Serve the client's needs: Investigate and analyze all the available investment options. The advisor must be able to show that he correctly addressed alternatives — and the beneficiary's circumstances.
Keep careful records: The advisor should have enough paperwork and reports to prove that he analyzed all the options before giving investment advice. It won't matter that he and his team spent months doing brilliant, foolproof analysis and research if they don't have a paper trail to back them up.
Be particularly careful to document anything unusual: If an advisor steps outside his written role as fiduciary in the agreement or plan, he must document, document, document. In a case involving WorldCom, a federal district court in New York refused to dismiss a case against a so-called "directed trustee" (one who receives directions from the official trustee). "Just following orders" is no defense — even for a directed trustee, said the court.
