Fiduciary Risk

DEFINITION of 'Fiduciary Risk'

A type of risk that accounts for the possibility of a trustee/agent who is not optimally performing in the beneficiary's best interests. This does not necessarily mean that the trustee is using the beneficiary's resources for his/her own benefit; this could be the risk that the trustee is not achieving the best value for the beneficiary.

BREAKING DOWN 'Fiduciary Risk'

For example, a situation where a fund manager (agent) is making more trades than necessary for a client's portfolio is a source of fiduciary risk, because the fund manager is slowly eroding the client's gains by incuring higher transaction costs than are needed. This would be a situation where the agent is clearly not optimally creating value for his or her client

RELATED TERMS
  1. Trustee

    A person or firm that holds or administers property or assets ...
  2. Primary Beneficiary

    A beneficiary in a will, trust or insurance policy that is first ...
  3. Absolute Beneficiary

    A designation of a beneficiary that can not be changed without ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, ...
  5. Named Beneficiary

    This term refers to any beneficiary named in a will, a trust, ...
  6. Discretionary Beneficiary

    Discretionary beneficiaries are those named in a trust or similar ...
Related Articles
  1. Personal Finance

    Can You Trust Your Trustee?

    Ignorance and incompetence can cost you money. Make sure your trustee is up to the task.
  2. Financial Advisor

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  3. Personal Finance

    Who is a Beneficiary?

    A beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
  4. Financial Advisor

    How to Handle Client Beneficiary Designations

    Beneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
  5. Retirement

    Mistakes In Designating A Retirement Beneficiary

    Make sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
  6. Financial Advisor

    Top Estate Planning Beneficiary Mistakes to Avoid

    Asset transfer can be fraught with twists, but adhering to a few practical procedures can go a long way in navigating these potentially choppy waters.
  7. Financial Advisor

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.
  8. Retirement

    Ensuring That Your Trust Is Trustworthy

    There are many cases of trusts being mismanaged, so find out how to make sure yours is on the right track.
  9. Financial Advisor

    Add Beneficiary Designations For Divorcing Clients

    Failing to update beneficiary designations following a divorce can cost your loved ones dearly.
  10. Managing Wealth

    Trusts: Prevent Beneficiary Designation Mishaps

    Wills and revocable trusts are the cornerstone of estate planning, learn how you may spend considerable time and money maintaining these documents.
RELATED FAQS
  1. What should I do with the beneficiary forms my employer gave me for my 401k if I ...

  2. Can an IRA beneficiary roll the IRA over into another account and designate another ...

    It depends on the provision of the IRA plan document. Some (though very few) do not allow the designation of successor beneficiaries. ... Read Answer >>
  3. What are the pros/cons of naming a trust as the beneficiary of a retirement account?

    This has been the topic of an ongoing debate in the financial community between estate planning attorneys and financial advisors. ... Read Answer >>
  4. How do I change my contingent beneficiary?

    Learn what life insurance companies and retirement plan accounts require from you to change your contingent beneficiary designations. Read Answer >>
  5. What does U.S. law say about contingent beneficiaries?

    Learn about regulations the United States has on the naming of contingent beneficiaries, the types of contingencies that ... Read Answer >>
  6. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center