What Is the Definition of Fiduciary?


Quick Answer

"Fiduciary" is used to describe a person or institution (such as a bank or financial manager) trusted by an investor to handle financial decisions such as investment and brokerage. It is also used as an adjective to describe the relationship between the investor and the trusted party: in a fiduciary relationship, an investor places complete trust and confidence in the person he has chosen to administer his finances, and the trustee acts in good faith to care for the assets.

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Full Answer

A fiduciary's primary responsibility is to manage the assets of an investor or group of investors and to act in the best interest of those investors. A fiduciary's role has many legal obligations, including managing finances in a way that directly benefits the investor, rather than seeking personal profit. For example, the fiduciary of a trust may legally own property or assets but is bound to manage those assets to benefit the investors and report any profits.

Some of the most common fiduciary relationships outside of trusts include executors who have fiduciary responsibilities to disburse funds according to wills, as well as lawyers who have fiduciary relationships with their clients and are expected to resolve legal matters related to clients' finances.

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