Fiduciary
Definition
Involving trust, especially with regard to the relationship between a trustee and a beneficiary.
Deep Dive
A fiduciary describes a relationship founded on trust and confidence, where one party (the fiduciary) is entrusted to act in the best interests of another party (the beneficiary or principal). This duty is one of the highest standards of care recognized in law, requiring the fiduciary to prioritize the beneficiary's interests above their own and to avoid conflicts of interest. Fiduciary relationships are prevalent in many professional and business contexts, including those between a trustee and beneficiary, a corporate director and shareholders, an attorney and client, or a financial advisor and their investor clients. The core obligation is loyalty and utmost good faith.
Examples & Use Cases
- 1A financial advisor managing an investment portfolio for a client is obligated to make decisions that are solely in the client's financial best interest, not their own
- 2A corporate board of directors has a fiduciary duty to act in the best interest of the company and its shareholders when making strategic decisions
- 3A trustee managing a trust must act prudently and solely for the benefit of the trust's beneficiaries.