In my 30 years of practice, I have noticed that aside from those with sincere malicious motivations, Fiduciary Responsibility is especially in peril when you mix business with pleasure.
For instance, I recall one troubled patient who lived with a high producing major firm broker for more than 15 years. They were never married and have since parted. They had co-owned an elaborate, beautiful home together in an exclusive suburb of Connecticut.
He managed her money and she proceeded to watch while he lost a million dollars during the dot com bubble in 2001. He didn’t hedge any of her positions. In a panic, when she asked him what to do, he retorted, “I don’t have a crystal ball.”
To exacerbate the situation, her disorder involved pathological avoidance, fear, and rationalization. She held on hoping against hope that her positions would come back. Not surprisingly, they never did. She initially made back some of the money by directing her account. This enraged the broker, and he insisted on retaining control. So, she again turned control of the trading back over to him and he recouped some of her money, but left her way short.
Amidst this, they also had a deal where they shared all house expenses, including real estate and school taxes. The house was in his name, but they had an understanding whereby she would get a prorated piece of his tax return based on her tax bracket which was lower than his. He made one payment then reneged on all others, essentially stealing her blind. She was forced to consider legal action. He finally threw her out, after discovering her in a compromising position with another man, and they subsequently sold the house. He got all the tax benefits of home ownership, and she got gone even though she paid in 50% of all carrying costs including all taxes.
He denied all culpability in everything that went down. He was arbitrary, self-righteous, and obsessively controlling.
But this sad saga is nowhere near from over. These two will be unable to extricate themselves from each other because of the allegations that are basically violations of Fiduciary Responsibility.
She is currently interviewing lawyers and will likely bring a securities malpractice suit against him.
When you are a financial services professional and you have certain expertise, it is incredibly hard to keep that from carrying over into your personal life.
With the Wall Street Psychologist’s Gyroscope, I attempt to establish a recurring pattern to reaffirm your personal application of Fiduciary Responsibility. Among other things, when you inevitably enter into financial relations with family or friends, you are more likely to blur the lines of Fiduciary Responsibility.