A fiduciary relationship is one where a person or organization acts on behalf of another person or persons, putting their client’s interests ahead of theirs, with a duty to preserve good faith and trust. This kind of relationship requires a binding both legally and ethically (morally) to ensure that the fiduciary acts in the best interest of the other party. This means that in this kind of relationship, the fiduciary is legally bound to put their client's best interests ahead of their own.
Fiduciary duties appear in a range of business relationships, including a trustee and a beneficiary, corporate board members and shareholders, and executors and legatees.
- An investment fiduciary is anyone with legal responsibility for managing somebody else's money, such as a member of the investment committee of a charity.
- Registered investment advisors have a fiduciary duty to clients; broker-dealers just have to meet the less-stringent suitability standard, which doesn't require putting the client's interests ahead of their own.
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