Fiduciary Risk

AAA

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.

INVESTOPEDIA EXPLAINS '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. Fiduciary Fraud

    Illegal practices committed by financial institutions and financial ...
  2. Principal-Agent Relationship

    An arrangement in which one entity legally appoints another to ...
  3. Employee Trust

    A trust fund established by an employer on behalf of its employees ...
  4. Management Fee

    A charge levied by an investment manager for managing an investment ...
  5. Agency Costs

    A type of internal cost that arises from, or must be paid to, ...
  6. Agent

    1. An individual or firm that places securities transactions ...
Related Articles
  1. Professionals

    Fiduciary Designations For Financial Advisors

    Attaining the AIF or AIFA could help both you and your clients enjoy a comfortable retirement.
  2. Active Trading

    Peter Lynch On Playing The Market

    Everyone can appreciate great advice from a professional. Read on to benefit from the vast experience of Peter Lynch.
  3. Options & Futures

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  4. Options & Futures

    10 Tips For Choosing An Online Broker

    This important investment decision happens before you pick your first stock. Find out how to get it right.
  5. Options & Futures

    Upon my death, will the beneficiaries of my IRA be compelled to take the entire amount in the IRA as ...

    It depends. If the beneficiary of your IRA is your spouse, he or she will be eligible to transfer the amount to his or her own IRA, from which distributions are not required until age 70.5. If ...
  6. Retirement

    My uncle died recently. He designated my mother and father as his beneficiaries in 1997, after his divorce, ...

    It depends. If the retirement plan is a qualified plan, then the plan administrator would refer to the plan document to determine who the designated beneficiary is. The plan document explains ...
  7. Professionals

    Why Investors Need to Rebalance Their Portfolios

    The best way to explain why one should rebalance their portfolio is to show what could go wrong if one doesn't.
  8. Personal Finance

    What Exactly Does A Portfolio Analyst Do?

    Portfolio analysts have the exciting role of working between the investment team layers and they touch various aspects of an investment organization.
  9. Investing Basics

    Why is buying a utility stock known as defensive move?

    Utility stocks are known as defensive stocks for investors due to the fact that consumer demand will remain high even when the economy is performing badly.
  10. Investing Basics

    How are dividends usually paid out?

    Discover the two compensation methods commonly used by companies and mutual funds to make dividend payments on equity investments.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center