Updated
GL-F-06
Glossary · Structures and trusts
Fiduciary - someone bound to put your interests above their own
01 / In 30 seconds
The short answer
- 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
02 / In plain words
What Fiduciary means
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.
A case from practice
A client was offered an investment solution, and the adviser’s remuneration depended on the sale of a particular product. A question about the payment model, asked at the start, immediately made clear whose interests stood behind the recommendation.
Where it matters
- Managing a trust or foundation
- Discretionary asset management
- Working with an investment adviser
- A director in your company
- Managing assets in case of incapacity
- Executing a will
03 / What it covers
What the duties include
Loyalty
- The client’s interests above one’s own
- No hidden benefit
- No use of information for one’s own benefit
Prudence
- Due care
- A professional standard
- Well-founded decisions
Transparency
- Disclosure of conflicts
- Reporting to the client
- Documenting decisions
Liability
- For breach of duties
- Compensation for losses
- Removal from the role
04 / How it works
How to check a counterparty
Understand their role and status
Who you are dealing with: a manager, an adviser or a seller.
Confirm whether they have fiduciary duties
Whether they have a duty to act in your interest.
Review their remuneration model
Who pays them and for what.
Request disclosure of conflicts
Written disclosure of links to products and sellers.
Record it in the contract
The duties and liability are set out in the contract.
05 / Key facts
What you need to know
01Who it is
A person with a higher duty
A trustee, a foundation council member, an asset manager, and in some countries a company director.
02Duties
Loyalty and care
Act in the client's interest and with the care a reasonable professional would take.
03Prohibitions
Hidden gains and conflicts
No undisclosed commissions. Conflicts of interest are disclosed, not concealed.
04Not everyone
An adviser is not always a fiduciary
Many simply sell a product. The status depends on the role, the contract and the country's law.
Common mistakes
Assuming any adviser is on your side
Ask directly whether they owe you fiduciary duties.
Not finding out who pays the adviser
Learn the fee model: paid by you or by the product seller.
Relying on verbal assurances
Put the duties and conflict disclosure in the contract.
06 / Expert advice
How to prepare in advance
When choosing a manager or adviser, two things are established: whether they bear fiduciary duties and how they earn their money. A fee from you and a commission from the product seller are fundamentally different models, and the second creates a conflict of interest. Duties and the procedure for disclosing conflicts are recorded in the contract.
What we do for you. 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.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
A person obliged to act in the interests of another, not in their own. They bear a heightened standard of liability.
Loyalty, prudence, disclosure of conflicts of interest and a prohibition on hidden benefit from the client’s transactions.
No. Many simply provide a service or sell a product. Status depends on the role, the contract and the legal system.
A fee from the client and a commission from the product seller create different incentives. The second is a potential conflict of interest.
Liability is possible, up to compensation for losses and removal from the role. The specifics depend on the jurisdiction and the documents.
In some legal systems, yes — in relation to the company itself. They must act in its interests, not their own.
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