What is a fiduciary duty?

A fiduciary duty refers to the legal and ethical obligation of one party to act in the best interest of another. This relationship is characterized by trust, confidence, and a reliance on the fiduciary to manage the affairs of the other party. For example, financial advisors, guardians, and trustees typically have fiduciary responsibilities that compel them to prioritize their clients' interests over their own, ensuring that they make decisions that will benefit those they serve.

This obligation is crucial in various sectors, especially in finance and law, where individuals depend on the expertise and judgement of fiduciaries. The fiduciary must fully disclose any potential conflicts of interest and must avoid scenarios that could undermine the trust placed in them. Thus, the essence of fiduciary duty lies in the commitment to act honorably and as a steward of another's interests, which solidifies the trust that is central to such relationships.