Concept
Investment consulting is defined as the active involvement of a banker (or other specialist) in the individual planning of an investment or the redisposition of assets.
Legal nature
Investment consulting is generally considered to be subject to contract law.
Limits
In the case of investment consulting the customer is willing to receive advice but does not surrender responsibility for management (e.g. customer places his own stock market orders). By contrast, the management of investments by a manager entrusted with the performance of such tasks is described as asset management.
Duties
The typical duties of an investment adviser are:
- Duty of investigation/duty to provide information
- Objective explanation
- Investor-oriented explanation
- Warning to investor (if required)
- Possible elaboration of investment strategy
- Correct information
Liability
The more specific the information or recommendation and the longer or deeper the contractual relationship between adviser and customer, the more pertinent is the question of the liability of the adviser in the event of malpractice.
Practical note
Investment advice may be rendered in the form of a permanent relationship or for an extended period and may include both advice and specific trading recommendations (e.g. buy shares in Company X); or in the form of individual information. The latter is described as the mere communication of facts (e.g. the price of share X on 7.11.2008 is CHF 5.34) and seldom causes problems. If advice represents part of the principal obligation in a contract, unsolicited explanation must also be given in each individual case.
