Conflicts of Interest and Referrals
Probably the two biggest areas for potential conflicts of interest in estate planning are:
1. Where the estate planner represents husband and wife (I discussed this here); and
2. Where the estate planner represents multiple generations of the same family (I discussed this here).
A third area of potential conflict involves referrals. Let's say that I as an attorney receive a fair amount of business from a financial planner with Firm X. Firm X refers me a new client. To whom do I owe a duty: the client, or Firm X?
The answer should be simple -- I owe the duty to the client. I spell this out clearly in my engagement letter to the client; I also talk to the financial planner about it, to make sure he or she understands who I represent.
In most cases, there's absolutely no problem, but a problem can arise if the financial planner wants me to benefit Firm X in some way, particularly if the financial planner wants Firm X to act as a fiduciary. In that case, I discuss the issue with the client, and present the client with the pros and cons of having a corporate fiduciary (and of having Firm X in particular). The client makes the final call, of course.
What happens if Firm X wants me to do a "hard sell," and convince the client that Firm X needs to be the fiduciary. At that point, I tell the client what Firm X is trying to do, and try to make it clear yet again to whom I owe my duty. If that means no more referrals from the financial planner, so be it. This MUST be the approach that an ethical estate planning attorney takes.
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