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Finance a la Shmoop! What is an agency relationship? Alright well this

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one could have come straight out of Hollywood.

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Because in finance land, no relation to Disneyland, the same kind of client agent

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thing exists. I'll deal with a lot less than ten

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percent per transaction commissions. That's usually standard in the old

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Hollywood. Well you are granny gold digger, you're 97 year old husband, just[people at funeral]

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died. Leaving you at 43 a wealthy woman. You meet with your stockbroker, now

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turned private wealth manager, handsomey mic handsome and assess the

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relationship here. Well handsomey, has a fiduciary

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obligation to you, to act on your best behalf. He is effectively an extension of

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you. He is your agent, in the same way your right hand is your agent when your

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back itches. He must be open about his fee structure.

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Like a common agency arrangement these days, has the client paying 1% of the[pile of money in mansion]

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assets under management with the agent. Whether the agent does a ton of work for

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the client like tons of trading, or whether he does a whole lot of nothing.

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Well the dicey conversations here then revolve around whether that agent

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encouraged his client, to put money in the very high, free hedge and private

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equity funds run by the agents firm. And then, well you know, you could ask does

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the agent then get a spife, or tip, or free trip for him and his family to[man on vacation]

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Hawaii at the end of the year? Hmm does that happen? Could that happen?

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Agency relationship. All right well the basic idea here is that an agent must

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act in the best interests of the client no matter what. Even if the advice the

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agent is giving the client is directly opposite, the best personal interests of

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that agent. Like getting a lot of commission and that free trip to Hawaii.

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And yeah that is the only relationship we want to have with an agent.[three people in office]

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Sorry there.

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