Johnny Depp and the Importance of Understanding Fiduciary Responsibility
posted by Fisher 401(k) February 7, 2017
UPDATE: This case was settled for an undisclosed amount in 2018.
The New York Times reported in late January 2017 that actor Johnny Depp sued his former financial adviser for what he claims is a breach of their fiduciary duty in managing his money, adding a high-profile figure to a legal disagreement common to investors and retirees.
Depp’s former adviser, the Management Group, whom the star hired in 1999, “engaged in years of gross mismanagement, self-dealing, and at times, actual fraud,” according to a lawsuit the actor filed against the company. The Management Group has filed a countersuit stating that Depp’s spending habits were unsustainable, and that they tried to protect him from “his own irresponsible and profligate spending.” *
Depp’s situation illustrates the importance of understanding exactly what your financial or retirement adviser is doing for you. Don’t be afraid to ask tough questions, and demand proof of the following:
- Does your adviser share a fiduciary responsibility with you, or do they have no stated duty to act in your best interest?
- Does your adviser receive a commission for selling you one product over another?
- Is the growth you’re seeking worth the fees you’re paying, or are there other, less expensive options available with a similar expected rate of return?
Johnny Depp’s situation reminds us that client scrutiny is never a bad thing when it comes to the investing industry.
* Lawsuit information sourced from the New York Times article “The Depp Conundrum: Who Should Keep Tabs on the Money?” Published January 31, 2017.