Conflicts of Interest
Material conflicts must be eliminated or fully disclosed.
What is Conflicts of Interest?
As fiduciaries, advisers must eliminate conflicts or disclose them fully enough that clients can give informed consent, and must never put their own interests ahead of the client's. Common conflicts: compensation from product sponsors, proprietary products, soft-dollar arrangements, principal trading, and recommending a rollover into an account that pays the adviser more.
Conflicts of Interest: a worked example
Recommending a proprietary fund that pays the firm more, without disclosing the arrangement, breaches the duty of loyalty.
More terms in Ethics & Fiduciary Obligations
Form ADV Part 2 Brochure Delivery
Deliver 48 hours before the contract, or at signing with a 5-business-day exit.
Advisory Contract Requirements
Written, specific about fees, no assignment without consent, no waiver of rights.
Assignment of an Advisory Contract
Transferring a client contract requires the client's consent - including by change of control.
Performance-Based Fees & Qualified Clients
Allowed only for qualified clients: $1.4M with the adviser or $2.7M net worth (from June 29, 2026).
Prepaid Fees & Financial Requirements
Prepayment over $500, six months ahead, triggers net worth and balance sheet rules.
Custody
Holding, or having authority to obtain, client funds or securities.
Discretionary Authority
Deciding the asset, the amount, or buy versus sell - without asking first.
Third-Party Trading Authorization
Anyone other than the owner needs written authority to trade the account.