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Fiduciary

A fiduciary is an individual or organization that is legally and ethically obligated to act in the best interests of another party. Commonly found in financial advising, estate planning, and corporate governance, fiduciaries are bound by duties of loyalty and care, ensuring that they prioritize their clients’ needs above their own. Fiduciaries must provide honest and transparent advice, avoiding conflicts of interest and always acting with their clients' best financial interests at heart.

Example

A financial adviser managing a retiree’s investment portfolio acts as a fiduciary, making investment decisions that align with the client’s goals, risk tolerance, and long-term needs. Even if a higher commission could be earned by recommending another product, the adviser must choose the option that best serves the client's interests.

Key points

Legally obligated to act in the best interest of the client.

Common in roles like financial advisers, estate planners, and trustees.

Must avoid conflicts of interest and uphold high standards of trust and accountability.

Quick Answers to Curious Questions

It requires advisers to select investments that best suit the client’s needs, not those that generate higher commissions.

Risks include legal liabilities for breaching fiduciary duties; benefits include fostering client trust and maintaining professional integrity.

It ensures that financial decisions align with ethical standards and client-focused strategies, reducing potential conflicts.
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