A fiduciary is a person or organisation that is legally and ethically bound to act in the best interest of another party. The relationship is built on trust — the fiduciary manages assets, makes decisions, or provides advice on behalf of someone who is relying on their expertise and integrity.
Fiduciary duty is the highest standard of care recognised in law.
You’ll hear this when…
The term comes up most often in financial advice, estate planning, and corporate governance. A registered investment adviser (RIA) in the US has a fiduciary duty to clients — they must recommend investments that serve the client’s interest, not their own. A trustee managing a trust has a fiduciary duty to the beneficiaries.
The fiduciary question matters when choosing a financial adviser. Not all advisers are fiduciaries. Broker-dealers, for example, are held to a lower “suitability” standard — their recommendations need to be suitable for you, but don’t have to be in your best interest. The distinction sounds subtle, but it affects which products get recommended and why.
In corporate governance
Company directors owe fiduciary duties to shareholders. This includes the duty of care (making informed decisions) and the duty of loyalty (not putting personal interests ahead of the company’s). Breaching fiduciary duty can result in personal liability.
Source: US Securities and Exchange Commission (SEC) guidance on investment adviser fiduciary duty