What it is:
How it works/Example:
For example, let's say Company XYZ gets a 401(k) plan. The employees and the company contribute to the plan, which soon has $3 million of assets. A named fiduciary, which works for the 401(k) administrator, is responsible for ensuring that the assets are invested according to the employees' wishes and that Company XYZ is matching the employee contributions as promised. The named fiduciary is not responsible for making Company XYZ happy; it is responsible for making the 401(k) plan participants happy.
Why it matters:
Fiduciary is one of the most revered and powerful aspects of the financial world. Fiduciary requires a person to act in the best interest of his or her clients, and when a named fiduciary does not do so, the consequences can involve civil or even criminal penalties.