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. Financial Advisor

    Identifying a Breach of Fiduciary Duty

    Pension fund managers are not the only entities owing a fiduciary duty to stockholders. Corporate officers and directors have key fiduciary roles.
  2. Retirement

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  3. Retirement

    What You Should Know About the New Fiduciary Rule

    These key questions and answers clarify the DOL's new fiduciary rule and how it impacts individual investors saving for retirement.
  4. 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.
  5. Financial Advisor

    Fiduciary Designations For Financial Advisors

    Attaining the AIF or AIFA could help both you and your clients enjoy a comfortable retirement.
  6. Tech

    Fiduciary Rule Impact: How it's Already Being Felt

    The fiduciary rule will be announced today but it's impact is already being felt. Here's how.
  7. Financial Advisor

    What You Need To Know About The Fiduciary Standard

    The financial industry has spent a boatload of money to prevent more stringent fiduciary requirements. Here’s what’s at stake.
  8. Personal Finance

    Does It Matter If My Financial Advisor is a Fiduciary?

    Should your advisor be a fiduciary? Here's what that means, and why you should ask your advisor if they already are one.
  9. 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.
  10. Managing Wealth

    5 Ways to Limit Your Fiduciary Liability

    Learn the best practices plan sponsors can use to limit their fiduciary liabilities while improving their plan's overall effectiveness.
Frequently Asked Questions
  1. Where else can I save for retirement after I max out my Roth IRA?

    The first option to explore is to determine if you can contribute to a 401(k), 403(b), or 457 plan at work. If your employer ...
  2. How did George Soros "break the Bank of England"?

    In Britain, Black Wednesday (September 16, 1992) is known as the day that speculators broke the pound. They didn't actually ...
  3. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

    It's important to know your debt-to-income ratio because it's the figure lenders use to measure your ability to repay the ...
  4. Who are Monsanto's main competitors?

    Learn about Monsanto Company's two main operating divisions and its main competitors within each sector, including The Mosaic ...
Trading Center