Custodial Care

Finance a la Shmoop! What is an agency relationship? Alright well this

one could have come straight out of Hollywood.

Because in finance land, no relation to Disneyland, the same kind of client agent

thing exists. I'll deal with a lot less than ten

percent per transaction commissions. That's usually standard in the old

Hollywood. Well you are granny gold digger, you're 97 year old husband, just[people at funeral]

died. Leaving you at 43 a wealthy woman. You meet with your stockbroker, now

turned private wealth manager, handsomey mic handsome and assess the

relationship here. Well handsomey, has a fiduciary

obligation to you, to act on your best behalf. He is effectively an extension of

you. He is your agent, in the same way your right hand is your agent when your

back itches. He must be open about his fee structure.

Like a common agency arrangement these days, has the client paying 1% of the[pile of money in mansion]

assets under management with the agent. Whether the agent does a ton of work for

the client like tons of trading, or whether he does a whole lot of nothing.

Well the dicey conversations here then revolve around whether that agent

encouraged his client, to put money in the very high, free hedge and private

equity funds run by the agents firm. And then, well you know, you could ask does

the agent then get a spife, or tip, or free trip for him and his family to[man on vacation]

Hawaii at the end of the year? Hmm does that happen? Could that happen?

Agency relationship. All right well the basic idea here is that an agent must

act in the best interests of the client no matter what. Even if the advice the

agent is giving the client is directly opposite, the best personal interests of

that agent. Like getting a lot of commission and that free trip to Hawaii.

And yeah that is the only relationship we want to have with an agent.[three people in office]

Sorry there.