A fiduciary is someone who agrees to act in the best interests of another person. In a financial relationship, a fiduciary manages assets for the benefit of the other person rather than for his or her own profit.

Children or elderly people typically need a fiduciary. The person who looks after the assets on the other's behalf is expected to act in the best interests of the person whose assets they are in charge of. This is known as "fiduciary duty".

Types of fiduciaries

  • Trustees of individual trusts
  • Pension and retirement fund trustees
  • Custodians
  • Corporate directors and officers
  • Investment advisors

Fiduciary duties
A fiduciary is held to a higher standard than a professional because of the responsibility to care for and handle the funds and affairs of a trust beneficiary, retirement plan participants, shareholders and others.
  • Investment Advisers Act of 1940 ­- Holds investment advisers and investment adviser representatives as fiduciaries to a higher standard than broker-dealers and their registered representatives.
    • Obligations:
      • Duty to be loyal to the client.
      • Duty to have reasonable and objective basis for investment recommendations.
      • Duty to be sure investment recommendations are appropriate considering client's financial objectives, needs and situation.
      • Duty to ensure best execution for securities transactions if IA can direct such transactions.
  • Uniform Prudent Investor Act - Sets out investment responsibilities for a fiduciary.
    • Obligations:
      • Duty to diversify.
      • Duty to invest according to suitable level of risk.
      • Duty to avoid unnecessary expenses.
      • Duty to seek advice when necessary.
  • Employee Retirement Security Income Act of 1974 (ERISA) - An individual or organization exercising discretionary authority or control over management of any type of employee benefit plan is deemed a fiduciary.

Consumer Protection Laws

Related Articles
  1. Retirement

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  2. Financial Advisor

    Coverage of Fiduciary Liability Insurance

    As fiduciaries, retirement plan sponsors have tremendous personal liability exposure. Find out how fiduciary liability insurance can protect personal assets.
  3. Personal Finance

    What Is a Fiduciary and Why Does It Matter?

    Not all financial advisers have your best interests at heart. Here's why fiduciary duty is key to building a mutually beneficial adviser-client relationship.
  4. Financial Advisor

    Why Realtors Have Fiduciary Responsibilities

    Find out why real estate agents are considered to have a legal fiduciary responsibility to uphold the best interests of their clients.
  5. Financial Advisor

    Why the Fiduciary Rule is Good for All Investors

    The new fiduciary standard should help lower what middle- and lower-income investors pay, on average, to brokers for retirement planning advice.
  6. Financial Advisor

    Why Fiduciary Rule is Good News for Small Plans

    Under the new fiduciary rule small business owners may be subject to less risk for the plans that they sponsor. Here's why.
  7. Financial Advisor

    What the ‘Fiduciary Rule’ Means for Investors

    This proposed rule may help people saving for retirement, but it also adds cost and complexity for brokers and insurance agents.
  8. Financial Advisor

    DoL Fiduciary Rule May Face Legal Fight

    Now that the DoL's Fiduciary Rule has been released, it'll be subject to a legal fight by opponents. Here's an overview.
  9. Retirement

    Why Retirement Plan Sponsors Could Face Litigation

    A Supreme Court decision makes it easier for retirement plan participants to sue their employers. Apathy is not a strategy for plan sponsors.
  10. Financial Advisor

    The SEC Fiduciary Rule Explained

    The SEC plans to propose its own set of fiduciary rules next year. These are some of the potential implications for advisors.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center