The term fiduciary is often mentioned in legal and financial circles. However, the precise meaning of this term can be hard to pinpoint.
As a client or beneficiary, you have a right to know what you can expect from professionals who you entrust with your finances or other important aspects of your business. You need to know what a fiduciary duty is. Outlined below is a more in-depth analysis of this crucial term.
Acting with due diligence
You haven’t entrusted important aspects of your business to someone else based on a whim. You are owed a duty of care if you go to someone to seek advice on investments and other financial matters. You are equally owed a similar duty by those who are entrusted with your financial records, such as your tax advisor or accountant.
Before offering you advice or taking steps on your behalf, the professional you entrust with your business concerns must carry out due diligence. For instance, a financial advisor must assess the risks and potential benefits of an opportunity and advise you accordingly. Using your money without first carrying out due diligence or acting in bad faith could amount to a breach of fiduciary duty.
A duty of loyalty
One of the most fundamental responsibilities of someone who is in a fiduciary position is to act in your best interests. A fiduciary cannot be motivated by making a profit for themselves and leaving you behind. Your company’s investment advisor, for example, cannot encourage you to invest in a company just because it would boost their own investment portfolio.
Individuals or corporations that are placed in fiduciary roles within an organization usually take this very seriously, but this isn’t always the case. If you feel that your best interests have not been protected, it will benefit you to look into your legal options.