Fiduciary Duty

Fiduciary duty is the highest standard of care recognized in law. It arises in relationships where one party places substantial trust and confidence in another — most commonly between a trustee and beneficiaries, between an investment adviser and a client, or between a corporate officer and shareholders. The duty has two core components: the duty of loyalty (act for the other party's benefit, not your own) and the duty of prudence (act with the care, skill, and diligence a reasonable, knowledgeable person would apply).

For wealthy families, fiduciary duty surfaces constantly. A trustee who invests trust assets in a business the trustee personally owns may have breached loyalty. An adviser who recommends a product generating a higher commission when an equivalent lower-cost option exists may face a similar question. Understanding which of a family's advisers and agents are legally bound as fiduciaries — and which operate under a lesser "suitability" standard — is a foundational question worth raising explicitly with each professional relationship.

A common confusion is assuming all financial professionals are fiduciaries. They are not; the standard varies by license type, account structure, and jurisdiction. Families should ask each adviser directly whether they are acting as a fiduciary and obtain that answer in writing where possible. A qualified attorney can clarify what fiduciary obligations attach to trustees and other agents named in governing documents.