Fiduciaries are persons or organizations that act on behalf of others and are required to put the clients’ interests ahead of their own, with a duty to preserve good faith and trust. Fiduciaries are thus legally and ethically bound to act in the other’s best interests.

A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task usually involves finances—for example, managing the assets of another person or a group of people. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibilities. 

Key Takeaways

• Fiduciaries are legally bound to put their client’s best interests ahead of their own.
• Fiduciary duties appear in various business relationships, including between 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 and insurance agents have a fiduciary duty to their clients.
• Broker-dealers may be subject to the less stringent standard set by the Securities and Exchange Commission (SEC) Regulation Best Interest, implemented in 2019.

Fiduciary duties appear in a wide variety of common business relationships, including the following:

• Trustee and beneficiary (the most common type)
• Corporate board members and shareholders
• Executors and legatees
• Guardians and wards
• Promoters and stock subscribers
• Lawyers and clients
• Investment corporations and investors
• Insurance companies/agents and policyholders