A fiduciary relationship is one of the highest implied by law. When you select another person or business to act as your fiduciary, you are trusting them to manage and protect your assets. That trust requires that the party who has agreed to act as your fiduciary acts with the highest level of good faith in advancing your interests. Failure to do so represents a breach for which a fiduciary can be held liable. However, not everybody with whom you have a financial relationship necessarily has a fiduciary duty.
The businesses, professionals, or business relationships that are most likely to be liable for a breach of fiduciary duty claim include attorneys, brokers, agents, trustees, and executors or administrators of an estate. Proving their responsibility requires demonstrating that they were in a trusted position and that their actions violated that trust – and specifically that they did so by putting their own interests ahead of yours. It is putting themselves first instead of acting in loyalty and care to you that represents the breach.
To understand exactly what constitutes a breach of fiduciary duty and who can be held liable for a failure of that duty, it may help to know what is expected of fiduciaries. Their duties are best summarized as:
- Duty of Care – This represents keeping informed regarding all answers and decisions to be made and then using the information gathered to protect the beneficiary’s interests.
- Duty of Loyalty – This represents putting the beneficiary’s interests first, and excusing themselves when a conflict of interest exists between their own best interests and that of the beneficiary.
- Duty of Good Faith – This refers to always acting within the law when working in the beneficiary’s interests.
- Duty of Confidentiality – Maintaining confidentiality of the beneficiary’s information, including not using it for their own personal gain.
- Duty of Prudence – Responsible for using the highest degree of professionalism and consideration of risk.
- Duty to Disclose – Act transparently with reference to any information that could impact their ability to act in the beneficiary’s best interests.
Note that none of these duties indicate that fiduciary duty requires that the fiduciary is always right. Giving accurate advice is not the same as being liable for a breach of duty. A breach is defined by a failure of the fiduciary to act in the beneficiary’s best interests rather than their own. Notably, the Pennsylvania Supreme Court further refined the boundaries of who could and could not be held liable several years ago, when they noted that a fiduciary duty can only arise in the context of consumer transactions if the beneficiary cedes decision-making control. A client cannot rely on an agent’s skill or knowledge in an arm’s length transaction and then accuse them of fiduciary duty if things don’t go as hoped.
For more information on the obligations owed by a fiduciary and understanding what constitutes a breach, contact our experienced law firm today.