April Focus: Fiduciary Duty & Advisory Agreement Discipline
Howdy, April is a good time to get back to fundamentals.
With fiduciary expectations under continued SEC scrutiny and advisory agreements serving as the backbone of your client relationships, now is the time to make sure your obligations, disclosures, and documentation are all aligned and working together.
Recent enforcement actions and exam trends reinforce a consistent message: risks occur when there are gaps between what firms say, what they document, and how they operate.
Fiduciary Duty: What Regulators Expect in Practice
Fiduciary duty isn’t just a standard-it’s an ongoing responsibility that touches every part of your business.
At its core, the SEC continues to emphasize two key pillars:
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Acting in the best interest of clients through informed, suitable advice
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Maintaining full transparency and loyalty, especially around conflicts
Where firms often fall short is in the ongoing duty to monitor and align advice with the client relationship over time.
Examiners are looking beyond intent. They’re assessing whether your firm has:
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A clear understanding of client objectives
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Processes in place to support ongoing advice and monitoring
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Documentation that reflects how decisions are made
In other words, fiduciary duty isn’t static, and your processes shouldn’t be either.
Advisory Agreements: Where Gaps Turn Into Findings
Advisory agreements shouldn’t sit on the shelf. They should clearly reflect how your firm operates today, including your services, fees, and responsibilities, not how things looked a year ago.
Areas drawing increased regulatory attention include:
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Misalignment between agreements and Form ADV disclosures
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Unclear fee language or inconsistent billing practices
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Missing or inadequate assignment and consent provisions
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Use of impermissible hedge clauses that suggest fiduciary duties can be limited
Regulators are paying close attention to whether agreements could mislead clients, especially around liability and rights. It’s not enough for agreements to exist. They need to be accurate, current, and consistent with actual practice.
Valuation & Custody: Expanding the Fiduciary Lens
As firms take on more complex investments, fiduciary responsibility extends into valuation and custody practices.
Key areas of focus include:
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Accurate valuation of illiquid or hard-to-price assets
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Consistency between valuation, fee calculations, and performance reporting
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Understanding when authority over client assets may trigger custody implications
Exams continue to flag weak documentation, inconsistent processes, and lack of independent validation.
The expectation is clear: firms must be able to support their numbers and the process behind them.
Operational Reality: Identity, Cyber & Vendor Oversight
Regulation is moving beyond policy into operational execution. Recent developments, like FINRA’s upcoming identity verification requirements and expanded expectations under Regulation S-P, signal a shift toward tighter control over:
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User identity and system access
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Cybersecurity readiness and breach response
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Vendor oversight and accountability
Notably, firms are expected to ensure vendors can meet requirements like 72-hour breach notification and to document that assurance.
This is where compliance, IT, and operations start to converge.
Bringing It All Together
Fiduciary duty, advisory agreements, valuation, and cybersecurity aren’t separate issues; they’re deeply interconnected. Firms that take a fragmented approach often feel the strain in the form of inconsistent disclosures, operational gaps, and increased exam risk.
The firms that stay ahead:
- Keep agreements and disclosures aligned with real operations
- Build repeatable, documented processes
- Integrate compliance with technology and day-to-day workflows
That’s where True West operates: helping firms simplify complexity, align their operations, and stay prepared for what’s ahead.
Looking Ahead
As we move through 2026, expect continued focus on fiduciary execution, documentation, and operational controls.
Here’s to keeping your agreements sharp, your processes tight, and your firm moving forward with confidence.
