The concept of fiduciary duty has a long history, going back more or less eight centuries under English common law. Fiduciary duty is essentially a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary, who justifiably reposes confidence, good faith, and reliance on his trustee. The fiduciary is expected to act at all times for the sole benefit and interests of the principal, with loyalty to those interests. A fiduciary must not put personal interests before that duty, and, importantly, must not be placed in a situation where his fiduciary duty to clients conflicts with a fiduciary duty to any other entity.
Way back in 1928, New York’s Chief Justice Benjamin N. Cardozo put it well:
Many forms of conduct permissible in a workaday world for those acting at arm’s length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the marketplace … As to this there has developed a tradition that is unbending and inveterate … Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior … Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. [Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928)]
It has been said, I think, accurately, that fiduciary duty is the highest duty known to the law.
Action Line: When lesser standards are followed, such as a suitability standard, there’s no protective language about working for your “sole” interests. Are you working with a fiduciary? It can’t hurt to ask. When you’re ready to work with one, let’s talk.
E.J. Smith - Your Survival Guy
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