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DEFINITION
OF FIDUCIARY
Black's
Law Dictionary describes a fiduciary relationship as "one founded
on trust or confidence reposed by one person in the integrity
and fidelity of another." A fiduciary has a duty to act primarily
for the client's benefit in matters connected with the undertaking
and not for the fiduciary's own personal interest. Scrupulous
good faith and candor are always required. Fiduciaries must always
act in complete fairness and may not ever exert any influence
or pressure, take selfish advantage, or deal with the client in
such a way that it benefits themselves or prejudices the client.
Business shrewdness, hard bargaining, and taking advantage of
the forgetfulness or negligence of the client are totally prohibited
by a fiduciary.
As fiduciaries,
financial planners must make fair and complete disclosure of all
material facts and must employ reasonable care to avoid misleading
their clients. The utmost good faith is required in all their
dealings. Simply put, fiduciaries must exhibit the highest form
of trust, fidelity and confidence, and are expected to act in
the best interest of their clients at all times.
The distinction
between a financial planner with a fiduciary interest and a salesperson
is crucial.A financial planner, under common law and by some statutes,
is a fiduciary. A financial planner must always provide services
and advice in the best interests of the client. Whereas salespeople
may have their own motives and interests at heart and offer goods
and services for a price, a fiduciary must serve the client, if
necessary at the cost of the fiduciary's own interests. It is
generally believed that fiduciaries perform their trades for reasons
other than money and feel a sense of responsibility that goes
beyond simply making a living. To paraphrase Supreme Court Justice
Brandeis: "It is an occupation which is pursued largely for others
and not merely for oneself. It is an occupation in which the amount
of financial return is not the accepted measure of success." Many
consumer advocates believe that fee-only planners alone can fulfill
a fiduciary duty, because fee-and-commission planners receive
commissions from the advice they give.
Disclaimer:The information in this
website is based on data gathered from what we believe are reliable
sources. This Web site is intended to give you information, not
investment advice. We do not guarantee its accuracy, nor completeness,
and it is not intended to be the primary basis for investment
decisions. It should not be construed as advice meeting the particular
investment needs of any investor. We may express opinions in this
site and elsewhere about allocating investments between asset
classes. This is NOT a specific investment recommendation to any
person or entity. We do not make 'personal investment recommendations'
to people or entities except to those who have engaged us expressly
for the purpose of providing professional investment advisory
and/or other financial advisory services. The process of making
specific and personal investment recommendations involves a close
understanding of our client’s objectives and expectations. Unless
we have this information, we are UNABLE to make ANY personal investment
recommendations.
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