by Noriyuki Morimoto
In the Anglo-American legal system, fiduciary duty is at the basis of the investment management business. Fiduciary means to fulfill responsibilities based on the special trust of others, and professionals in the investment management industry represent this concept. In investment management, individuals are obligated to act as fiduciaries, which in essence boils down to acting in the best interest of the customer.
This requires the highest level of loyalty, i.e., to never consider one’s own or a third party’s interests, as well as the highest level of care, i.e., doing one’s best as a professional expert. But if we consider the case of an asset manager managing their own assets, there is no doubt that the manager will pursue their own interests without considering other people. Therefore, fiduciary duty will be clearly fulfilled if the manager invests other people’s assets in exactly the same way.
In the case of asset management, since it is impossible to guarantee performance, doing one’s best for the customer’s benefit as a professional can never be more than doing what one believes is best. Even if one’s social reputation is based solely on performance, one has no choice but to accept any evaluation as long as it is about the outcome of one’s beliefs. A professional has to live with this tough principle.
The toughness of this principle becomes even starker when you bet your own assets on your own beliefs. Conversely, unless you approach the job with this level of rigor, you will not be able to truly fulfill fiduciary duty.
The Financial Services Agency adopts the Anglo-American legal concept of fiduciary duty in Japan, which has a different legal system, and the principles of this duty are applied to the country’s investment management industry. Now, then, those who manage investment trusts should invest their own assets in them. Similarly, those who sell investment trusts to customers should also invest their own assets in them. In this way, fiduciary duty will be ensured.
[Category /Fiduciary Duty]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.