Financial Advisor Fiduciary Relationship Decision-Making Authority Consumer Transactions

Yenchi v. Ameriprise Financial, Inc., PICS Case No. 17-0964 (Pa. June 20, 2017) Donohue, J., Todd, J. (dissenting) (25 pages).

Superior Court erred in reversing the trial court's grant of summary judgment to defendants on whether there was a fiduciary relationship between the parties because a fiduciary relationship arose in the context of consumer transactions only if one party ceded decision-making authority to the other party and that did not occur in this case. Reversed in part.

A financial advisor for an insurance company made a "cold call" to appellees and for a fee, gave them a financial management proposal that included a recommendation to consolidate their life insurance policies. The proposal contained a notice that it was prepared by "your American Express financial advisor" and was recommending American Express products. One appellee cashed in his five life insurance policies to purchase a whole life insurance policy recommended by advisor. Five years later, appellees had their portfolio independently reviewed and were advised that the life insurance policy bought from advisor was underfunded and required increasingly high premiums and that the annuity appellee wife had purchased matured 20 years later than she had been told. Appellees sued advisor and other defendants, asserting negligence/willful disregard, fraudulent misrepresentation, bad faith, breach of fiduciary duty and violation of the UTPCPL. The trial court granted summary judgment to defendants on all claims relating to the annuity and dismissed the claims for bad faith, negligent supervision and breach of fiduciary duty relating to the purchase of the whole life insurance policy. The trial court found that no fiduciary relationship existed between appellees and the advisor because appellees continued to make their own investment decisions. The trial resulted in a verdict in favor of defendants on the fraudulent misrepresentation and UTPCPL claims.

Appellees appealed and the Superior Court held that the trial court erred in focusing on the nature of the relationship and the appellees' retention of decision-making authority over their investments and reversed the trial court's grant of summary judgment on whether there was fiduciary relationship between the parties. The Supreme Court granted discretionary review to consider the issue.

Appellees contended that a confidential relationship was created because defendants acted as a financial advisor providing investment planning advice for a fee. The court held that the Superior Court erred in relying on case law involving undue influence to support its conclusion of a fiduciary relationship where there was no evidence that appellees ceded their decision-making power. Appellees never contended that defendants' roles as sellers of insurance or as financial advisors created fiduciary relationships as a matter of law and the summary judgment evidentiary record did not establish a fiduciary relationship. A fiduciary relationship arose in the context of consumer transactions, only if one party ceded decision-making authority to the other party. This case was an arms-length consumer transaction in which appellees made the decision to purchase the policy and to reject other proffered products and services.

Justice Todd dissented, arguing that there were sufficient indicators of a fiduciary relationship to withstand summary judgment, noting that appellees paid for financial advice before any decision to purchase life insurance products from defendants and they testified they trusted and relied on advisor's superior expertise.