Are All Fiduciaries Created Equal?


Fall 2021


Acquiring a “fiduciary” title comes with special obligations. But while all fiduciaries share a high-level similarity—a duty to someone else—the duties of a fiduciary can vary widely from one context to another. Some of the most common fiduciary—and surprising nonfiduciary—relationships are summarized below:


An attorney-client relationship involves a range of duties designed to safeguard the client’s interests. For example, attorneys must disclose any conflicts of interest, must focus on the client’s best interests, and must maintain strict confidentiality with their client’s information. Additionally, lawyers are obligated to use reasonable care when representing a client, which encompasses issues such as keeping the client informed and adequately understanding substantive legal concepts. In addition to fulfilling these general fiduciary duties, lawyers are governed by specific rules of professional conduct. Although the rules vary slightly by jurisdiction, the legal profession is one of the more highly regulated fiduciary relationships, and a failure by a lawyer to abide by applicable standards can result in a claim for legal malpractice or an ethics complaint to a bar disciplinary authority.


When a person undertakes the responsibility to administer another’s estate, they assume the duty to manage the assets appropriately and impartially. A trustee, whether corporate or individual, will have duties and obligations largely defined by the trust instrument, which can also insulate the trustee for liability in certain circumstances. The specific responsibilities of a trustee, and the potential liability for failing to meet those responsibilities, can vary greatly. At a fundamental level, though, trustees owe beneficiaries a duty to act in good faith and according to the trust’s terms. They generally cannot, for example, use estate assets for themselves or others who do not have a legal entitlement to the estate.

Personal representatives generally have a duty to administer the estate as an ordinary prudent person would, which typically includes opening the estate, preserving assets, preparing an inventory, paying expenses, and pursuing claims that an ordinarily prudent person would pursue.


Directors have a duty to maximize corporation and shareholder interests and to examine all related information critically. In addition to mandating that directors focus on the bottom line, some states explicitly permit directors to consider constituencies external, but related, to the business, such as community interests, customer interests, and environmental interests. Directors also must disclose any personal interests that might interfere with their ability to run their companies. Because businesses can face uncertainty and risks, directors generally will not be liable for making business decisions, so long as they were reasonably informed and acted in good faith.


Real estate agents owe clients full disclosure of any conflicts of interest or concerns that affect the value of the property. While real estate agents can represent both the buyer and the seller in a transaction, many states require each client’s informed written consent to do so.


There is a complex set of rules regarding when, whether, and to what degree financial advisors are fiduciaries. In other words, not all financial advisors must act in the best interest of their clients. For example, financial advisors who work for brokerages generally are not fiduciaries and are instead held to a nonfiduciary legal standard known as “suitability,” meaning that the advisor must provide advice and guidance suitable for the client’s particular situation. Thus, a nonfiduciary can recommend products that generally fit the client’s needs, even if those products include higher fees or a bigger commission for the advisor.

In contrast, fiduciary financial advisors by law must act in the best interest of the client. Like nonfiduciary advisors, fiduciary advisors must consider a client’s overall financial situation when making recommendations, but fiduciaries must also consider the most economical solutions and overall performance, which can include fee and commission structures. Both registered investment advisors and certified financial planners, generally, are fiduciaries. In any situation, it behooves both the advisor and the client to discuss their roles to avoid confusion regarding expectations and legal obligations.


Absent special circumstances, banks and bankers do not owe customers a fiduciary duty. In some circumstances, though, a special relationship could create a fiduciary duty, such as:

  • A special relationship involving trust and confidence.
  • Superiority and influence over the customer.
  • The customer’s detrimental reliance on the bank’s superior knowledge.
  • A disparity in business knowledge and invited confidence.

While these duties may seem common for many banks and their customers, the standard is high, and there is little precedent for banks or bankers to be categorized as fiduciaries.

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