It may come as a surprise to Tucson residents that all financial advisors are not legally required to act in their client’s best interests. This means that many people put themselves at risk when they take biased and perhaps costly advice from an advisor who is under no obligation to put their client’s needs before his or her own. The requirement to act in a client’s best interest is only placed on fiduciaries.
A fiduciary can either be a person or legal entity that is responsible for working for someone else (usually beneficiary) in good faith. While trustees are commonly considered fiduciaries, it can be anyone who has placed in a situation of trust. For example, corporate officers are fiduciaries for shareholders and real estate agents for their clients.
A beneficiary gives the fiduciary discretionary control over their assets, allowing them to buy and sell assets on their behalf, without needing express consent. This means that fiduciaries are held to a higher standard of care than other advisors. A fiduciary is held to the highest standard of care, including always acting in the client’s best interest, even to a detriment to one’s own interest. The duty entails providing full disclosure, not misleading clients and not using a client’s assets for one’s own benefit.
Understanding what fiduciary services are and what a fiduciary’s duties are is essential for the success of one’s estate plan involving one. If a fiduciary has not lived up to the standard of care placed on them, they might be perpetuating fraud and exploiting their client to their own advantage. Those who feel their assets are being mismanaged should consider consulting an experienced attorney to understand their rights.