What’s a Fiduciary and Why Should You Care?

You may have heard the term fiduciary before but not really understood what it meant. A fiduciary is someone who manages property or money on behalf of someone else. This could be anything from managing a trust fund to being a financial advisor. When you become a fiduciary, the law requires you to manage the person’s assets for their benefit—and not your own. In other words, you have to put their interests ahead of your own.

Fiduciaries have key two duties when managing a beneficiary’s money: duty of care and duty of loyalty. Let’s take a closer look at each of these duties.

Duty of Care. Under the duty of care, fiduciaries must make informed business decisions after reviewing available information with a critical eye. Financial advisors might fulfill this by analyzing comprehensive information about your financial life before making recommendations or plans.

Duty of Loyalty. To abide by the duty of loyalty, fiduciaries must not have any undisclosed economic or personal conflicts of interest. They cannot use their position to further their private interests. For example, they can’t recommend certain investments because they stand to benefit financially from those recommendations.

Why Does This Matter?

The reason why this all matters is that you want to be sure that the person managing your money is looking out for your best interests—not their own. With a fiduciary, you can rest assured knowing that they are legally bound to do just that. So, if you’re working with a financial advisor, be sure to ask if they are a fiduciary. If they are not, then you may want to consider finding one who is.

In Summary:

A fiduciary is someone who has been legally bound to manage another person’s money in that person’s best interest—not their own. If you are working with a financial advisor, be sure to ask if they are a fiduciary so that you can be confident knowing that your interests always come first.