ATEB believes that “Agent as Customer” is generally misunderstood and that this misunderstanding in turn has an impact on the market. We estimate that perhaps up to nine out of ten consultants who use portfolios of models provided by a discretionary manager do so as part of an agent-client agreement. The use of the AAFC model has advantages because the consultant retains control of the client relationship, but the model also carries risks for consultants, probably more than for the DFM. For the agent as a client, the relationship with the investment manager is directly with the advisor and not with the final client. We estimate that perhaps up to nine out of ten consultants who use model portfolios on a platform provided by discretionary investment firms work within an Agent as Client framework. While such an agreement addresses the central issue of whether consultants are responsible for the adequacy of a portfolio management service`s recommendation, it also has very undesirable consequences for the consultant, as described in the PFS document. If this is the case, C2 is not F`s customer with respect to this activity and C1. We believe that agent as Client is the most commonly used agreement between consultants using model portfolios provided by a discretionary manager. The paper called “Agent as Client: What you need to know” is a must for any advisor who uses a third party to provide investment services to clients, including model portfolios. When was the last time you checked your agreements with your suppliers? If you haven`t done so for some time, you should make it a priority, especially if your IP insurance needs to be renewed soon. What for? You could work as part of an agreement that your insurer will find too hot – agent as client. Inadequate facilitiesThere are investment vehicles that can be transported to professional customers, but which cannot be used for private customers. Under the AAFC model, the advisor can be considered a “professional client.” This may lead to the DIM including high risk and/or illiquidant assets in discretionary service that are incompatible with private clients.
As a result, the consultant has an obligation to provide the final client with appropriate controls and supervision, as well as the capacity and expertise to ensure that the discretionary service is and remains compatible with the actual investor/end customer. Under Agent as Client, a foreign investment manager can treat the consultant as a professional client. Let us be clear: there is nothing subtle in the basis of these agreements. If you do it wrong, it has potentially disastrous consequences for your business. In addition, an investment manager from a third-party supplier under Agent as Client can treat the consultant as a professional client. This means they could make investment decisions that are only suitable for business clients, but are not suitable for your private clients. This means that they could make investment decisions that are only suitable for business clients, but that are not suitable for the end customer. When the IMS conducts the ongoing aptitude review, consultants should consider the value that their own current service adds to the client, provided such value is proposed. No, words are not “insurance for compensation,” although this is obviously essential for peace of mind. I am referring to the difference between the client`s agent and the agent as a client.
The two little words between “agent” and “client” in the first one make it completely different from the latter — a difference that, if misunderstood, could expose advisors to a lot of risks. We believe that the majority of advisors have a client agent in agreement with their clients. Consultants who have signed an agent as a customer contract are exposed to complaints from their clients about the inadequacy of investments.