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You Aren't the Only Fiduciary

Although a lot has been said and will be said about the DOL rule respecting fiduciaries, and even though an RIA and its representatives are by definition fiduciaries, there are other persons and entities who also are under a fiduciary duty to their customers or others. It is important not to confuse these fiduciaries with the current hot topic and to understand that there is more to the question of fiduciary status than the role of an investment adviser.

If, for example, you are the beneficiary of a trust, then the trustee will owe you a fiduciary duty. This obligation extends beyond simply the fiduciary duty of acting in the best interests of beneficiaries in recommending investments or in choosing the person or firm that will make those decisions. All other actions or decisions by the trustee in administering the trust must be made in accordance with the terms of the trust and the best interests of the beneficiaries. This is not a low bar for the trustee and shows how important the selection of a trustee will be for the person funding a trust to be confident that the trust will meet its stated goals.

Other situations where you may find a fiduciary duty to exist where a person is, for example, (1) the executor of an estate (owing a fiduciary duty to the heirs thereof), (2) an attorney for his or her client, (3) an agent, such as a real estate broker, and the principal for whom the agent is to act. As you can see, there are a number of common situations where a fiduciary duty may exist beyond that limited area that holds such current interest where the Department of Labor rule seeks to control retirement advice.

What is common across these relationships is that the person with the fiduciary duty must place the best interests of the other party first and must operate with full transparency and honesty in the performance of that duty. Failure to do so may result in severe penalties for a fiduciary who isn’t. Such problems – and the penalties – should be a consideration before you take on a fiduciary duty or think to place your own interests, financial and otherwise, ahead of the person(s) to whom that duty is owed.


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