Fiduciary

Fiduciary duty is one of the highest standards of obligation recognized in law. A fiduciary must act loyally (no self-dealing or undisclosed conflicts), prudently (with the care a reasonable, knowledgeable person would apply), and in accordance with any governing document such as a trust agreement or investment policy. Breaching fiduciary duty can result in personal liability, removal from the role, and court-ordered remediation. The standard is stricter than a general obligation to act honestly or professionally.

Families encounter fiduciary relationships in several places at once. A trustee owes fiduciary duty to beneficiaries. An investment advisor registered as such under applicable securities law may owe fiduciary duty to the family office as a client. Directors of a family foundation owe fiduciary duty to the foundation's charitable mission. Recognizing who owes fiduciary duty — and to whom — helps families assign roles clearly and hold service providers accountable. Families should work with qualified attorneys to confirm the specific duties that apply in their jurisdiction.

A common confusion is equating "fiduciary" with "fee-only" — a description of how an advisor is compensated. These are separate concepts. A fee-only advisor may or may not be a fiduciary depending on their registration and the nature of the engagement, and a fiduciary can be compensated in various ways. When families are building their team, clarifying each advisor's legal duty — not just their fee structure — is an important part of governance. The investment management and investment policy functions of a family office are particularly sensitive areas where fiduciary clarity matters.