Fiduciary Ethics 101: Here are Five Things Your Fiduciary Should Never Do

When entrusting your money to a financial advisor, it is essential you do your research beforehand. This professional will be handling your wealth and investments you have worked hard to accrue, and it should be your fiduciary’s utmost priority to ensure that your finances are handled with care. While uncommon, fiduciary negligence and misappropriation of funds has, unfortunately, occurred. Here, the financial advisors at Fiduciam Wealth Planning warn of red flags to look out for when working with a fiduciary, and how our team can guide you through the wealth management process without any of these fears or anxieties. 

Fiduciary Duty and Five Things to Avoid

Fiduciaries have the responsibility to uphold a fiduciary duty that requires them to make decisions in the best interest of their client. General fiduciary relationships include, but are not limited to, broker and principal, principal and agent, trustee and beneficiary, and executor and heir. There are many forms of fiduciary duty and liability, and it is vital to understand the responsibilities of a fiduciary before entering into an agreement. If you are a fiduciary and are looking to ensure that you are abiding by fiduciary standards, or you are working with a fiduciary and wondering if the individual you are working with has breached their duty, below are five things that fiduciaries should never do:

Commingle Personal Assets and Estate Assets

One of the first things that should be avoided at all costs is the co-mingling of finances in accounts as it relates to fiduciary duties in estate planning. When entrusted with a loved one’s finances, or if your loved one has given a financial advisor access to their finances, at no time should these accounts be merged unless explicitly stated in the individual’s will. This can result in legal repercussions, and will ultimately harm the additional beneficiaries your loved one has selected. 

Self-Deal as a Fiduciary 

When it comes to fiduciary duty, another common breach of responsibility can be seen through self-dealing. As the name suggests, self-dealing relates to using the finances an individual has control over to make decisions based on a self-serving motive. As a fiduciary, it is your top priority to ensure that your client’s wishes are met or exceeded. Self-dealing goes against the main premise of a fiduciary relationship. 

Handle Debts and Assets Improperly 

When entrusted with a client’s finances, a fiduciary is not only responsible for handling their wealth, but also handling their debts. If this individual has debts related to mortgages, credit cards or any other extraneous payments, and the fiduciary willingly does not cooperate or communicate with the creditors, then they can be held in breach of their fiduciary duty. Especially when it comes to time-sensitive matters, these debts will continue to grow until additional financial or legal action is taken against the individual and their family. 

Fail to Disclose Conflicts of Interest 

While this relates more to fiduciary relationships regarding a professional and their client, conflicts of interest can bring about many legal issues if not addressed. As a fiduciary, it is your responsibility to disclose any information that may sway or alter your financial choices against the interests of the client. For example, if you are a financial advisor that has personal relationships with investment companies, choosing to invest your client’s money with them before disclosing that information can result in severe repercussions. 

Overpay Themselves for Fiduciary Duty

Finally, as it relates to trusts and estates, a fiduciary should not make excessive payments to themselves for their fiduciary duties. In Maryland, a trustee is allowed to provide reasonable compensation to themselves and other designated beneficiaries for carrying out their duties, but this cannot be taken advantage of. A fiduciary may not overpay themselves, or overpay a beneficiary without response from the court. 

Seek the Help of Qualified and Experienced Fiduciaries with Fiduciam Wealth Planning 

At Fiduciam, it is our top priority to ensure that our clients’ finances are handled with care. Our team of highly qualified financial advisors works diligently to uphold transparency and authenticity in all financial matters, so that you can have peace of mind knowing you are in good hands. Contact our Towson office today to learn more.