The investigation conducted on behalf of customers with accounts at these wealth management firms concerns whether these firms received payments by fund companies for putting clients in no-transaction funds, and whether receipt of these fees violated fiduciary duties and/or was not sufficiently disclosed to investors.
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On April 5, 2013 Jed Horowitz of Reuters reported in "Some Wealth Advisers Take a Fee For Clients’ Fund Assets" that these large wealth management firms, Sontag Advisory LLC, PHH Investments Ltd., Dion Money Management LLC and Luminous Capital, received payments from Fidelity or Schwab for putting clients in no-transaction funds. In this article, Horowitz reported that First Republic acknowledged that these payments create a conflict of interest between the investor and firm.
Zamansky & Associates LLC is investigating these payments and the recommendation of funds by these firms to investors. In a related situation, Zamansky & Associates LLC is co-lead counsel for a putative class of investors who allege that JPMorgan invested them into conflicted proprietary funds in breach of fiduciary duties. The case is Holtz v. JP Morgan Securities LLC, northern District of Illinois, Eastern Division, Case No. 12-CV-7080.
According to Jake Zamansky, "Wealth managers have fiduciary duties to recommend funds that are the most suitable and appropriate for their clients, not the ones that pay them the most in fees. Fees paid by investors for services should also not be duplicative or for services never rendered." He continues, "Investors who pay for high quality management deserve and expect to receive high skilled and ethical advice in return – they do not expect to have to themselves research the conflicts and fees of their advisor."
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