What is a fiduciary duty?

Fiduciary duties include:

• Duty of care: The fiduciary has sound judgement based on helping the best interests and reasons for the client.
• Duty of loyalty: The fiduciary always puts the client’s wellbeing first whether it be about their  financial or their personal situation.
• Duty of good faith: The fiduciary must abide by the law and never pursue legal actions when helping the beneficiary or client.  
• Duty of confidentiality: The fiduciary must take due care to protect the client’s privacy and confidentiality.  
• Duty of prudence: Fiduciaries must utilize their professional skills, caution, and awareness of risk to make decisions in the interest of the beneficiary. 
• Duty to disclose: Fiduciaries must display forthright behaviour when disclosing relevant information in the best interest of the party in their care. 

There are multiple types of fiduciary relationships, such as:

• Trustee/beneficiary
• Guardian/ward
• Agent/principal (in the business and education sectors)
• Attorney/client
• Company/stockholder
• Physician/patient
• Board of directors/non-profit organization

Not all financial advisors are held to a fiduciary duty, however. For example, some commissioned investment dealers may suggest investments to clients that earn the dealer the highest fees, giving rise to a potential conflict of interest. Certain professional designations in Canada such as Certified Financial Planner and Chartered Investment Manager require their accredited members to have a fiduciary duty.

Example: “Sara was looking online for a certified planner with CFA or QAFP credentials to ensure they had a fiduciary duty with respect to her finances.”

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About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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