• The principle of accurate consulting
• Duties in detail
• Responsibilities of the asset manager in principle
• Breach of contract
• Damage
• Causation
• Indicators of faulty asset management

Breach of contract

Careless exercise of an order for asset management is legally viewed as a breach of contract.

Thereby the first conversation with the asset manager may even give rise to a liability: If the asset manager did not clarify the client`s requirements carefully and did not point out the risks of the chosen investment strategy or suggested a strategy which was too aggressive and likely to result in losses, this would qualify as a breach of contract.

If the asset manager exceeds his authority by purchasing risky investment tools although his instructions read differently, this may qualify as breach of contract. If the asset manager is to only invest in bonds and he nevertheless invests in shares, his actions will constitute a breach of contract.

Also, failure to monitor the investments constantly or to inform the investor about any threatening loss has to be considered as careless breach of contract which gives rise to liability. If the asset manager becomes aware that certain shares against all expectation will develop negatively and he fails to inform the investor accordingly, such negligence may constitute a breach of contract.

Thereby it has to be considered, that not every breach of contract results in an injury: If the asset manager contrary to the agreed upon strategy invests in a product which subsequently due to market conditions makes a profit, he will breach the asset management contract however such breach does not result in an injury.