What it is:
In a broader sense, a fiduciary is a person or entity responsible for acting in the best interests of others -- typically an beneficiary.client, a company's shareholders or a
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 $3,000,000 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.
A trustee holds , assets, or title to property for the benefit of the . The trustee's job is to manage the assets in the trust appropriately and to ensure that they are disbursed in the best interests of the .is a person or entity that has a fiduciary to another person or entity, called the . The
The purpose of the board of directors is to make sure management is acting in the best interests of the shareholders. This is why the board of directors lays at the heart of the notion of corporate governance: It has a fiduciary duty to the shareholders, and only to the shareholders. This can be difficult, especially when the vast majority of information that boards receive about corporate performance comes from management.
Why it Matters:
Fiduciaryis 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.