What is a potential outcome of a financial advisor not addressing a conflict of interest?

The potential outcome of a financial advisor not addressing a conflict of interest is indeed the risk of potential legal repercussions. Financial advisors have a fiduciary duty to act in the best interest of their clients. When they fail to disclose conflicts of interest, that duty is compromised. This negligence can lead to legal actions from clients who may feel misled or harmed by the advisor’s decisions that prioritized personal gain over their interests.

When conflicts of interest are not properly addressed, clients are left in a position where they may not be fully informed about the potential biases affecting the advice they receive. This lack of transparency could have serious ramifications, including regulatory sanctions or lawsuits, which can damage the advisor's career and standing in the financial services industry.

In contrast, leaving such conflicts unaddressed typically does not lead to greater client satisfaction, increased trust, or an enhanced reputation for the firm. Instead, it can create distrust, dissatisfaction, and potential damage both to individual relationships and the firm's overall credibility in the market. Hence, the correct outcome of ignoring conflicts of interest clearly aligns with the risk of facing legal issues.