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. For Sale By Owner - FSBO

    A method of selling property without the use of an agent or broker. ...
  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. Fiduciary Designations For Financial ...
    Professionals

    Fiduciary Designations For Financial ...

  2. Peter Lynch On Playing The Market
    Active Trading

    Peter Lynch On Playing The Market

  3. An Estate Planning Must: Update Your ...
    Options & Futures

    An Estate Planning Must: Update Your ...

  4. 10 Tips For Choosing An Online Broker
    Options & Futures

    10 Tips For Choosing An Online Broker

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center