Fiduciary

Fiduciary duty is one of the highest standards of obligation recognized in law. A fiduciary must act loyally (no self-dealing or undisclosed conflicts), prudently (with the care a reasonable, knowledgeable person would apply), and in accordance with any governing document such as a trust agreement or investment policy. Breaching fiduciary duty can result in personal liability, removal from the role, and court-ordered remediation. The standard is stricter than a general obligation to act honestly or professionally.

Families encounter fiduciary relationships in several places at once. A trustee owes fiduciary duty to beneficiaries. An investment advisor registered as such under applicable securities law may owe fiduciary duty to the family office as a client. Directors of a family foundation owe fiduciary duty to the foundation's charitable mission. Recognizing who owes fiduciary duty. And to whom. Helps families assign roles clearly and hold service providers accountable. Families should work with qualified attorneys to confirm the specific duties that apply in their jurisdiction.

A common confusion is equating "fiduciary" with "fee-only", a description of how an advisor is compensated. These are separate concepts. A fee-only advisor may or may not be a fiduciary depending on their registration and the nature of the engagement, and a fiduciary can be compensated in various ways. When families are building their team, clarifying each advisor's legal duty. Not just their fee structure, is an important part of governance. The investment management and investment policy functions of a family office are particularly sensitive areas where fiduciary clarity matters.