Fiduciary
Fiduciary
- Who it is
- A person obliged to act in the interests of another, not their own
- The main duty
- Loyalty: putting the client’s interests above their own benefit
- What is prohibited
- Conflicts of interest, hidden commissions, using information for their own benefit
- Where you encounter it
- Trustees, members of a foundation council, asset managers, directors
- Why it matters
- It is a standard of liability higher than an ordinary contractual one
In plain words
A fiduciary is someone who is obliged to act in the interests of another person, not in their own. This is not simply a contractor under an agreement: a fiduciary bears a heightened standard of liability known as fiduciary duties.
There are several main duties. Loyalty — putting the client’s interests above one’s own. Reasonable care and prudence — acting with due care, as a reasonable professional would. Disclosure of conflicts of interest — if they arise, they must be reported, not kept quiet. A prohibition on hidden benefit — no undisclosed commissions and no use of information for personal ends.
This role is held by trustees, members of foundation councils, asset managers and, in some legal systems, company directors in relation to the company itself. For the client, the practical point is simple: understand which of your counterparties bear fiduciary duties and which are simply providing a service and selling you a product.
Where it matters
What the duties include
- The client’s interests above one’s own
- No hidden benefit
- No use of information for one’s own benefit
- Due care
- A professional standard
- Well-founded decisions
- Disclosure of conflicts
- Reporting to the client
- Documenting decisions
- For breach of duties
- Compensation for losses
- Removal from the role
How to check a counterparty
- 01Understand their role and status
- 02Confirm whether they have fiduciary duties
- 03Review their remuneration model
- 04Request disclosure of conflicts
- 05Record it in the contract
What you need to know
- The fiduciary standard is higher than the ordinary contractual one
- Conflicts of interest must be disclosed
- Hidden commissions are a breach of duties
- Not every adviser is a fiduciary
- Liability may be personal
Common mistakes
- Assuming every adviser acts in your interests
- Not finding out the counterparty’s remuneration model
- Ignoring undisclosed conflicts of interest
- Not recording duties in the contract
- Relying on verbal assurances of loyalty
What this means for a BRIDGES client
We advise always asking advisers how they earn their money. It is a simple question that explains a great deal — both in investment and in the immigration sphere, where remuneration is also structured in different ways.
Frequently asked questions
01 /Who is a fiduciary?
A person obliged to act in the interests of another, not in their own. They bear a heightened standard of liability.
02 /What are their duties?
Loyalty, prudence, disclosure of conflicts of interest and a prohibition on hidden benefit from the client’s transactions.
03 /Is every adviser a fiduciary?
No. Many simply provide a service or sell a product. Status depends on the role, the contract and the legal system.
04 /Why does the remuneration model matter?
A fee from the client and a commission from the product seller create different incentives. The second is a potential conflict of interest.
05 /What if a fiduciary breaches their duties?
Liability is possible, up to compensation for losses and removal from the role. The specifics depend on the jurisdiction and the documents.
06 /Is a company director a fiduciary?
In some legal systems, yes — in relation to the company itself. They must act in its interests, not their own.
See also
Read next
This material has undergone editorial review by BRIDGES.
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