Conflicts of Interest: What You Need to Know

New article by Colin McLean in CFA Institute’s Inside Investing. Conflicts of interest are now getting more attention from clients and regulators. It is not enough just to “do the right thing” for clients. Instead, a rigorous framework for managing and reporting conflicts is needed. Clients need to know which questions to ask and what information they deserve. Informed consent is no longer best practice; firms should now bring some independence into identifying conflicts and should have controls in place that measure the effectiveness of conflict management. Even the definition of conflicts is changing. Conflicts can arise between clients themselves, leaving asset managers with a problem. The policies that clients might like to see include fair allocation/ incomplete orders, and error resolution, along with an annual conflicts report.

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