What's a Fiduciary?





What Is a Fiduciary and the Fiduciary Standard of Care

For the record, the 1940 Investment Advisers Act, which regulates the investment activities of all Registered Investment Advisers, defines the following as principles advisers must follow when serving in a fiduciary capacity:

  • Advisers must act in the best interests of their clients and provide investment advice that represents those best interests. 
  • Advisers owe their undivided loyalty to their clients and must always act in good faith. 
  • Advisers should not engage in any activity that conflicts with their clients' interests or, at the very least, disclose the nature of these conflicts to their clients and minimize their potential impact. 
  • Advisers must provide full and fair disclosure of all material facts related to any advice they offer their clients and prospects. 
  • Advisers must seek the best price and execution for their clients' securities transactions. 
  • Advisers must fully document and communicate their portfolio management processes, trading practices, marketing strategies and safeguards for protecting clients' assets against loss and theft.

Fiduciaries are held to a “prudent expert” standard, which means they are expected to act with the skill, diligence, and good judgment of a professional. The fiduciary standard is a process standard. Tools and techniques used by fiduciaries that have proven track records are a confidence factor to the unsettling influence of volatile economic and market conditions.

Key fiduciary services, such as assistance in preparing investment policy statements, formulating asset allocation strategies, conducting investment due diligence, defining financial and holistic family goals and objectives, providing comprehensive reporting and monitoring services and networking with allied professionals will simplify the complexities of your financial life while managing your wealth in a systematic way for the long term.

Becoming a fiduciary is not something you learn by getting a designation or taking a class. It comes with years of experience, education, training, being a leader in your profession and in the community, differentiating yourself by building trust and competence in your relationships with others, or by becoming a specialist to specific client types. And most of all, you must always be willing to commit to serve your clients' best interests first.