Legal Implications of “Agents” to “Advisors”

From Peter Lobasso, General Counsel, ASTA

Since ASTA rebranded earlier this year to become the American Society of Travel Advisors, a number of our members have contacted us to ask us whether the association’s name change and the increasingly widespread use of the term “advisor” rather than “agent” has any legal implications of which they should be aware. It’s an interesting question and one that is worthy of some consideration.

To begin, whether we choose to call ourselves agents or advisors, we remain “agents” in the legal sense of the term, meaning that we have been authorized to act on behalf of another. The other person or entity we are authorized to act for is known as the principal. In most cases, the agent’s principal will either be a supplier or a traveler or, most commonly, both at the same time. Obviously, advisors are not only agents in the strict legal sense, as they regularly impart specialized expertise and knowledge to their clients beyond what would be expected of a mere intermediary. That said, however, they are nonetheless agents in the first instance. This means, of course, that advisors owe certain obligations or duties – collectively known as the “duty of care” – to their principals. As that term suggests, agents are expected to exercise reasonable care and diligence when acting, and the failure to do so can result in the agent being held liable to the principal for whatever damages result from that failure.

Under certain circumstances, agents will be deemed their principals’ fiduciaries, meaning they will be held to a higher standard of conduct as compared with the ordinary duty of care. Where a fiduciary relationship exists the agent must, among other things, place the interests of the principal ahead of his or her own, resolving any conflict in the principal’s favor, as well as provide the best, as opposed to merely suitable, advice. The distinction between “best” and “suitable” becomes significant when multiple options are available and the parties’ interests with respect to those options do not align. For example, the “best” cruise for a client’s family vacation may pay the agent a lower commission than a “suitable” one.

Whether an advisor will be held to the higher fiduciary standard will typically depend on a number of factors. The law of the jurisdiction is certainly relevant, as courts in a number of states have determined in earlier cases that travel agents are indeed their clients’ fiduciaries. Courts may also consider the source of the agent’s compensation in determining the appropriate standard. Advisors who charge their clients service fees (something ASTA encourages its members to do) as opposed to receiving only commission compensation are more likely to be considered by the courts in making the determination. Agents possessing credentials such as the ASTA Verified Travel Advisor designation earned by satisfying specific educational requirements typically hold themselves out as experts capable of providing professional advice, and accordingly should expect to be held to a higher standard of care than their uncertified counterparts.

So how does a decision to call yourself an advisor (or for ASTA to refer its members as advisors) impact all of this? Well, for those operating in jurisdictions where travel professionals are plainly held to the fiduciary standard, not much should change. But where the reported case law as to the applicable standard is either unclear or is non-existent, courts will be more inclined to consider the totality of the circumstances when deciding on the standard. In those situations, what you call yourself potentially could make a difference, as the connotation associated with the term “agent” is different than that associated with “advisor.” The former term suggests an intermediary acting at the client’s direction, while the latter term suggests an expert who possesses knowledge in a particular field and receives compensation for providing that knowledge to his or her client.

In a close case, the distinction between the two terms might tip the balance in favor of a determination that the advisor is his or her client’s fiduciary. That of course is not a reason to continue using the traditional appellation, but rather is a reflection of the fact that “agent” no longer accurately describes what it is we do. To the contrary, today’s advisors do indeed render valuable professional advice to their clients. As this is one of the primary benefits of using an advisor rather than going it alone, it only makes sense that our association’s name – and yours – should reflect this.

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