Many advisers incorrectly believe they automatically have no fiduciary obligations with respect to legacy investments that clients bring into the advisory relationship.
However, in the absence of an explicit understanding to the contrary, this is not true. By default, advisers still owe a fiduciary duty of care with respect to such investments (i.e., to conduct a reasonable investigation into such investments and to determine if they are suitable for the client) as they do for other investments they proactively recommend.
Advisers that do not wish to undertake the responsibility of conducting due diligence on and to make suitability determinations with respect to such legacy investments must take steps to clarify these points in their advisory agreements with clients.
