BackgroundProfessionals are respected all over the world because they have special knowledge and insight that the average person does not. This is the reason we are wiling to pay large sums of money to these professionals so that they can give us the benefit of their wisdom and insight. It does not matter whether the professional in question is a doctor, a financial advisor, or an accountant; all such professionals need to take their responsibilities seriously, and often subscribe to a code of conduct so that they will not engage in activities that bring harm to their clients or put their colleagues and their professional association in disrepute.
Professionals, whether financial advisers or money managers, are expected to honour a duty of care to their clients. One case that highlights such a duty of care came to light in 1999 and involved Mercury Asset Management, which is a British asses manager that had been acquired by American companay Merrill Lynch and Unilever pension, the plaintiff. When the two established the agreement, the expectation was that Merrill Lynch would manage the 1 billion pound firm so that it would be at least 1% over an established benchmark, with not more than a 3% downlimit.
Since January 1997 when the investment agreement was set up there were five quarters in which the investment was 8.93 per cent below the benchmark. “The question at issue was: did Merrill Lynch fail to exercise the highest standards of care and expertise, or even reasonable care and expertise? ” (Ellison 2003). While most investment managers do not explicitly promise a return, this particular investment agreement spelled out clearly what the expectations were on the part of Merrilly Lynch.
In other words, Merrill Lynch believed in its expertise as professional money managers and Unilever fully trusted them to be able to execute the promise. Regarding the issue of duty of care, “There is no automatic duty in any relationship, whether contractual or not, but where a customer relies so much on the expertise, skills and integrity of an asset manager, who invariably holds out as being in possession of these skills and qualities, t he consensus seems to be incontestably that there is a duty of care to manage the investments in a reasonable manner” (Ellison 2003).
In the case of Monty and Giselle, the question is whether Giselle held herself out or encouraged the reliance on her advice by Monty. Especially since the two seemed to have known each other over a period of time, Giselle may have established her professional expertise in many ways, through for example, communication that she makes regarding her successes at work, successes that would no doubt encourage Monty to count on any such advice given by Giselle in what amounts to a professional capacity.
The government of UK is acutely aware of the problems that arise when consumers seek advice from financial planners and advisers and has sough to do something about it. “The government has directed its attention towards addressing the problem through the establishment of the Financial Services Authority and the introduction of the Financial Services and Markets Act 2000 and, in both cases, protection of the consumer and reglation of the provider’s behaviour are a priority” (Ethical marketing in financial services 2005).
In the current case, Monty has $20,000 that he has decided to invest. The money has taken him a long time to save and he relies on his friend, Giselle, who obviously must know how long it took Monty to save the money, and his desire to increase the value of the money through some kind of investment opportunity. Also, Monty, having known Giselle for a long time, knows that she does have the insight of a professional and that she can be trusted to give good advice.
When Monty asks Giselle if it is a good idea to invest in Mercantile Bank, Giselle gives every impression of giving serious advice because she looks around, making sure that nobody else hears what she is about to do. She gives the thumbs up sign, which signifies her belief in the value of the said investment. She does not indicate that she is joking and if Monty had known her to be a joker, he would not have taken the advice seriously. Monty learns that night that Mercantile Bank has been in serious trouble for a long time, information that those in the know within the financial services field would no doubt be aware of.
It seems that Giselle gave bad advice to Monty, for which Monty wants to explore all his options, including the possibility of filing a lawsuit.