Fiduciary
Also called: fiduciary duty
Someone legally obliged to act in your interest rather than their own.
The distinction that matters when someone gives you financial advice.
A fiduciary must act in your best interest, even where that costs them income. Someone without that duty may only need to recommend something suitable — which can include the suitable product that pays them most.
Both people may be equally honest. The difference is what happens when their interest and yours diverge, and how the arrangement is structured when nobody is watching.
The most reliable signal is not the title but how they are paid. Someone paid directly by you — a flat fee, an hourly rate — has little reason to prefer one product over another. Someone paid a commission by the provider of what they sell has a reason built into their income, however scrupulous they are.
Two questions worth asking outright, in these words: Are you a fiduciary? and How exactly are you paid, including anything you receive from third parties? Both are entirely reasonable, and the reaction to being asked is itself informative.
The terms and their legal force vary by country, so check what the word means where you live.
Words on this page
- Interest — The price of using someone else's money — paid by borrowers, earned by lenders.
- Expense ratio — The percentage of your money a fund charges each year, taken automatically whether it performs or not.
Related terms
Covered properly in Learn.
This term appears in the glossary of The Quiet Fortune, Volume II.