Does Your Financial Advisor Owe You a Fiduciary Duty in Canada?

Trust matters, but fiduciary duties depend on the circumstances of the particular advisor-client relationship.

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“I trusted my financial advisor.” We hear that frequently from investors who have suffered losses. But legally, trust alone does not automatically make every financial advisor a fiduciary. The relationship matters.

Led by Harold Geller and Matthew W. Taylor, the Sotos Investor Protection Group assists investors in investigating losses involving financial advice, investment products and financial institutions.

What Is a Fiduciary Relationship?

At its simplest, a fiduciary relationship involves particularly demanding obligations of loyalty arising from the circumstances of a relationship. Whether those obligations exist in a particular advisor-client relationship is fact-specific.

From a legal perspective, there are five considerations in the fiduciary analysis: vulnerability, trust, reliance, discretion and professional standards. Rather than starting with labels, an investor can ask some practical questions.

How Dependent Were You on the Advisor?

Did you have significant investment knowledge of your own?

Or were you relying upon the advisor to tell you:

how much risk to take;
which investments to buy;
how your portfolio should be structured; and
whether recommendations remained appropriate?

How Much Discretion Did the Advisor Have?

There can be a meaningful difference between an investor directing individual trades and one effectively handing responsibility for investment decisions to a professional.

What Did the Advisor Promise?

Look at:

engagement documents;
websites;
presentations;
emails;
professional designations;
descriptions of the services being offered; and
statements concerning independence or acting in the client’s interests.

How a professional describes responsibilities and decision-making in the relationship may become important evidence about what the client reasonably understood that relationship to be.

How Do Fiduciary Duties Differ From Suitability?

These concepts shouldn’t be collapsed together. An advisor can be subject to regulatory and common-law obligations without every advisor-client relationship necessarily becoming fiduciary. Conversely, particular circumstances may justify asking whether obligations going beyond ordinary suitability arose.

What Duties Did This Advisor Owe This Investor?

Instead of simply asking: “Are financial advisors fiduciaries?”

Ask: “Given how this particular advisor-client relationship actually operated, what duties did this advisor owe this investor?”

That produces a much more useful legal inquiry.

For information about our services, see financial advisor misconduct.

Investor Protection Experience, Backed by Litigation Strength

Harold Geller brings more than 30 years of investor-protection, financial-services and complex-product experience.

Matthew W. Taylor brings complex investment, securities and class action litigation experience, particularly where losses affect many investors or involve several potential defendants.

Frequently Asked Questions

Does trust automatically make every advisor a fiduciary?

Is fiduciary status fact-specific?

Are fiduciary duties and suitability the same thing?

Fiduciary duties and suitability should not be collapsed together. An advisor can be subject to regulatory and common-law obligations without every advisor-client relationship necessarily becoming fiduciary. Conversely, particular circumstances may justify asking whether obligations going beyond ordinary suitability arose.