A fiduciary is required to act in the best interests of the person he or she is working with. Fiduciaries have been legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profits. Trustees, pension administrators, custodians and investment advisors are all prohibited from engaging in any fraudulent, deceptive or manipulative behaviors when working with beneficiaries or clients.

All securities professionals have fiduciary responsibility to handle client funds and advice in a professional, ethical and responsible manner. If you are a securities professional, you are a fiduciary. This means you are held to a higher standard of ethical responsibility than the average person is.

Simply put, fiduciaries must put the interests of their clients above their own. Fiduciary duty covers agents, investment advisors, investment advisor assistants, issuers and broker-dealers.


Look Out!
It is very important to know that under no circumstances can an agent ask a client to sign an affidavit of liability waiver - better known as an Exculpatory Clause - which says that the agent is not responsible for any losses that may occur in the account.


When it comes to working with clients, investment advisors and investment advisor representatives have a much stronger fiduciary responsibility than broker-dealers and their registered representatives.


Under the Investment Advisers Act of 1940, the IA's obligations in the role of fiduciary include the following:

  • The duty to be loyal to the client
  • The duty to have a reasonable and objective basis for investment recommendations
  • The duty to make sure that any investment recommendations are appropriate considering the client's financial objectives, needs and situation
  • The duty to ensure best execution for securities transactions, if the IA can direct such transactions


Look Out!
The IA\'s primary fiduciary obligation is to put the client\'s (or the beneficiary\'s) needs before his or her own. When faced with an exam question on this topic, answers such as "ensuring the account does not lose money" or "investing in a fund desired by the trustee" are incorrect, since performance guarantees are prohibited, and the IA\'s obligation is to the beneficiary, not the trustee.

Other Prohibited Behaviors

Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. Retirement

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  5. 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.
  6. 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.
  7. 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.
  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

    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.
  10. Personal Finance

    6 Things That Make a Fiduciary Advisor Different

    Here are six ways fiduciary financial advisors are more beneficial to their clients.
Frequently Asked Questions
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, I can save 6.5%. Should I do this?

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ...
  2. My wife and I both converted our Traditional IRAs to Roth IRAs over a decade ago and have invested the maximum allowed each year since. We're buying our first home soon. Do we both qualify for one-time, tax-free, $10,000 distributions?

    You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction ...
  3. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ...
  4. Who manages the assets in a Roth 401(k) account?

    Learn how to personally manage the assets in your Roth 401(k) plan and determine the best options available to help meet ...
Trading Center