What Does “Fiduciary” Mean And When Is It Used?

The law can be complicated enough without the absurd jargon associated with many legal scenarios. The word fiduciary can be defined easily enough, but the situations in which it is used are varied and complex.

When used as an adjective, the word refers to the confidence between a trustee and beneficiary. As a noun, it refers to the trustee. Both of these apply in similar ways in a legal framework. It can also refer to a relationship based on ethical understanding, like that of a lawyer and client. A fiduciary is often responsible for money or assets belonging to a second party.

In law, you might hear of “fiduciary duty,” which refers to the obligation one party has to another party. Anyone who has a fiduciary responsibility is required to hold high standards of transparency. There must be no personal benefit for a fiduciary if it comes at the expense of the other party. When this agreement is not upheld, there is a breach of fiduciary duty. The guilty party can be held liable for any resulting damages.

When President Trump took office, he requested a review of the “Fiduciary Rule” in 2017. This rule would require financial advisors to act in the best interests of their clients, which seems like an obvious enough standard. Naturally, Trump wants to kill it (it was Obama’s child, after all). The rule is not yet set in stone, and a review could also allow those in charge of retirement accounts to put their own financial needs ahead of clients whose lives and livelihoods could be adversely affected. The point of the rule is to promote a fiduciary-like relationship between financial advisors and clients much like lawyers and their clients, or doctors and patients.

Although legal jargon can be complicated, sometimes it’s important that the average American knows a term or two for the continued wellbeing of all relevant parties. Fiduciary is one such term, especially where the Fiduciary Rule is concerned. If we don’t have the knowledge to keep our government in check, then it won’t hold itself or others to the necessary standard.