What is a fiduciary?

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Slashing through the BS and putting common personal finance expressions in plain terms.

“Fiduciary” sounds a little like an insult you’d hear on The Sopranos. (“Ay, what do I look like? Some kinda fiduciary?”) But it’s actually a good thing when it comes to finding personal finance partners you trust. So, what is a fiduciary?

A fiduciary is an entity that is legally required to put your interests first. That can be a person (accountants, trustees, and lawyers to name a few) or an organization, like an investment brokerage. One very important thing to note: Not all financial players are fiduciaries. Banks do not generally owe fiduciary duties to account holders, although they may act as fiduciaries in specific circumstances. (Financial advising, for example.)

As you might’ve guessed, breaching fiduciary responsibilities is, uh, extremely illegal. Take everyone’s favorite former billionaire, Sam Bankman-Fried, who stands accused of mishandling client funds via his trading firm, Alameda Research. Some argue he’s guilty of a big, funky fiduciary fail. It’s like this: If my investment advisor, Phil, dumped my life savings into his wife’s scrapbooking IPO, that’d be a violation of Phil’s fiduciary responsibility. (Phil, if you’re reading this, I’m watching you!)—Lillian

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