Fiduciary --- The Heart Of Agency Law
Fiduciary relationships and agency law go hand in hand - without agency law there are no fiduciary relationships. We know from our text that agency law is a relationship between an agent (a person authorized to act on the behalf of another and subject to the other's control in dealing with third parties) and a principal (a person who authorizes an agent to act on her or his behalf and subject to her and his control). A key point to remember though is that all agency relationships are fiduciary relationships but not all fiduciary relationships are agency relationships (Sukys, 2019).
As an agent, there are duties that they must uphold to their principal. These duties include care, loyalty, good faith, confidentiality, prudence, and disclosure (Cornell Law, n.d.). I have had many fiduciary relationships where I have been the agent at times and the principal at times. For work, because of my position, I am the agent for my company when dealing with our manufacturing partners. In this relationship, I uphold the duties of a the fiduciary relationship to my employer - this is especially important because the company could be held liable for any decision that I make on their behalf.
Luckily as a principal working with a financial advisor, I have had a great experience thus far. In 2016, financial advisors were separated into two divisions - fiduciary and non-fiduciary when the Department of Labor's Fiduciary Rule was released. This is very important because if you are working with a non-fiduciary advisor they are not obliged to the same standards as fiduciary advisors. Fiduciary advisors need to adhere to the duties owed to their principal and will always need to act in the best interest of the client and follow a strict approval process of their monetary moves (Hicks, 2018). I have a fiduciary advisor so I know they are working to invest my money to help me make the best investments for me, not for their pocket.
References
Cornell Law. (n.d.). Fiduciary Duty. Retrieved from https://www.law.cornell.edu/wex/fiduciary_duty#.
Hicks, Coryanne. (March 21, 2018). What Is A Fiduciary Financial Advisor? Retrieved from https://money.usnews.com/investing/investing-101/articles/what-is-a-fiduciary-financial-advisor-a-guide-to-the-fiduciary-duty
Sukys, P. (2019). Business Law with UCC Applications (14th ed.). New York, NY: McGraw-Hill.
Adam,
ReplyDeleteThe difference really is simply because of the "non". With a fiduciary relationship there is an agent and a principal where the agent is acting on the behalf of the principal for their best interests. This is not just a moral stance but a legal stance as well. Being in a non-fiduciary relationship, there is still an agent and a principal but the agent is not legally obligated to act in the best interest of the principal. Personally, I believe that anyone in an agent/principal relationship should act in the best interest of the principal because of morals and ethics, but as you have found, that is not always the case. There are greedy people in the world and if they can get ahead even if it harms or costs others, they will still do it.