I remember the first time I heard the word "fiduciary." As any Latin student was taught to do, I mentally clicked through the Latin vocabulary in my mind, and I knew that "fiduciary" was from the Latin root "fiducia" and that means "trust"
Fiduciary is pitched around by bankers and stock brokers and real estate salespeople, even lawyers, and let's be sure we don't leave out administrators of estates, guardians of old folks and mentally incompetents, and business advisors.
Fiduciary is pitched around by them as though it were the silver bullet they were shot with the day they got their license to practice their chosen profession.
They infer that that silver bullet gives them an honesty above reproach, and further, that that acme of honesty doesn't exist for those who are not fiduciaries; the ones not shot with the silver bullet.
I have grown to hate the word primarily because when I hear someone tell me "I have a fiduciary responsibility," it's a red flag that he 1) either doesn't know what it means, 2) he's getting ready to try to violate it, or 3) he is inferring he has the knowledge to be a fiduciary in a particular subject when he doesn't.
I sometimes think ministers and rabbis should be added to those who have fiduciary responsibilities. For an example, many have near-phony credentials, yet they present themselves as "Dr. So-in-So." That doesn't cut the mustard either. Give them a list of a hundred Bible characters who did not play a part in the stories they had in Sunday school when they were kids, and they can't tell you who five of them were.
You see, that a person is a fiduciary means he has greater knowledge and expertise about the business he is handling for someone else, and he has asked that they trust that he does and that he will exercise it on their behalf.
"A fiduciary must be held to a standard of conduct and trust above that of a stranger or of a casual business person," one jurist wrote.
Like a stockbroker, a real estate agent must consider the best investment for the client and not taint his advice on the basis of what will bring him the highest commission. And this is the trap that those who the court defines as fiduciaries frequently break or are caught with little or no documentation to shore up the business decisions they made in their agency capacity.
While a fiduciary and the beneficiary may join together in, say, a joint venture investment in a piece of property, the best interest of the person who is not the fiduciary must be primary and further, all thoughts, recommendations, advice and actions of the fiduciary must be made with absolute candor to his joint venture partner. When something goes wrong, that that candor was prevalent while the business was being conducted is usually hard to prove.
Frankly, I'm a real estate adviser when I am paid a fee for my services. That's when I will agree that I am a fiduciary. However, when I'm working for a commission, I don't throw that "fiduciary" word around. I prefer it be inferred. I don't want anyone to ever testify that I instructed them that I was their fiduciary. I do my very best, but when the plaintiff's attorney asks, "Where you paid a commission for your advice and work?" and you have to answer, "Yes," in my opinion you have just let yourself be impeached in the eyes of the jury.
Copyright 2008 - William S. Cherry
All rights reserved
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