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. Financial Advisor

    Meeting Your Fiduciary Responsibility

    Being a fiduciary comes with a certain level of responsibility. These four steps will reduce your liability when managing other people's money.
  4. 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.
  5. 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.
  6. 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.
  7. Personal Finance

    Blurred Lines: Whom Can You Trust for Financial Advice?

    The question of whether your financial advisor is truly a fiduciary isn't always clear. What to ask – and what to be careful about signing.
  8. Personal Finance

    Protecting Your Investments With a Fiduciary

    Protect your investments from brokers with conflicting interests by hiring a fiduciary.
  9. Retirement

    Which Firms Are Sticking with Fiduciary Rule Changes Anyway?

    The Fiduciary Duty Rule is under scrutiny again and may be scrapped altogether, but that doesn't mean all financial firms will abandon the standard.
  10. Financial Advisor

    Fiduciary Designations For Financial Advisors

    Attaining the AIF or AIFA could help both you and your clients enjoy a comfortable retirement.
Frequently Asked Questions
  1. What is arbitrage?

    Arbitrage is basically buying a security in one market and simultaneously selling it in another market at a higher price, ...
  2. What is the difference between upstream and downstream oil and gas operations?

    The closer to the end user a function or firm is, the further downstream it is said to be. Raw material extraction or production ...
  3. What is the difference between a capital expenditure and a revenue expenditure?

    Capital expenditures represent major investments of capital that a company makes to expand its business and generate additional ...
  4. What is the difference between revenue and income?

    Revenue is simply the total amount of cash generated by the sale of products or services associated with the company's primary ...
Trading Center