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Fahim Imam-Sadeque Answers, What is a Fiduciary in the UK?

A fiduciary is an organisation or a person hired to act on behalf of someone else. As business development professional Fahim Imam-Sadeque explains, in this role, a fiduciary must put their clients’ interests above their own.

Through this relationship, a fiduciary builds confidence and trust in their clients as part of the arrangement that was agreed upon. There are times when you might contract with a fiduciary to conduct various financial transactions for you or to handle other responsibilities.

The article will explain the primary roles of a fiduciary and answer some critical questions about the position.

Who is a Fiduciary?

A fiduciary is a generic term that refers to a person who is responsible for another person’s overall well-being. In most cases, “well-being” refers to finances. For example, in most cases, a fiduciary will be tasked with representing the best interests of a person or group of people regarding assets rather than a person’s physical health.

In this regard, fiduciaries are often corporate officers, board members, executors of an estate, accountants, insurance agents, bankers, financial advisors, and other people who manage money on behalf of their clients.

A fiduciary is bound by law to put the best interests of their clients ahead of their best interests. Their job is to make sure that whatever things they do on behalf of their clients, they do first and foremost with their clients in mind — even if it may not be what they would do for themselves.

From an ethical standpoint, someone who has a fiduciary duty must also ensure no conflicts of interest exist in their work. Financial advisors, for example, are obligated to invest their clients’ money in the best portfolios, not just the ones offered exclusively by the company they work for.

What are the Responsibilities of a Fiduciary?

In the UK, the law is very straightforward in stating that a fiduciary can’t profit from the role they serve. However, the principal can consent to the fiduciary keeping any benefits that they receive from the position.

UK law states that the benefits can be in either a monetary form or be defined as broad “opportunity.”

At all times, the fiduciary is hired to exercise their powers to benefit their clients. There is an overarching expectation that the fiduciary will remain loyal to their clients and, as a result, not put their own interests first.

In English law, some fiduciary responsibilities are automatically assumed, such as between a solicitor and their clients, a trustee and the beneficiary of that trust, and a director and the company they oversee.

Can a Fiduciary Be Sued if a Plan Does Poorly?

The relatively short answer to whether a fiduciary can be sued is yes — but only in certain situations. The most common and straightforward reason a fiduciary can be sued is if they breached their duties. For example, if they put their own interests first over their clients’ and benefited financially while their clients failed, then they can be sued.

As Fahim Imam-Sadeque explains, any claims of negligence, malpractice, harm and/or outright mismanagement can be litigated in a court of law in England. There are some limits to this, though.

A client is unlikely to win a suit against a fiduciary because a plan didn’t perform well. A fiduciary only guarantees that they will perform to their best abilities to put their clients’ interests first. They cannot guarantee that an investment plan, for instance, will always perform up to a certain level.

In these cases, the client may not be happy with the results, but they are unlikely to have any legitimate legal claims against the fiduciary if they upheld their word and did their best on behalf of the client.

About Fahim Imam-Sadeque

Fahim Imam-Sadeque is a business development professional with proven experience in the asset management industry. He has a Bachelor of Science in Actuarial Science from the City University of London and is a Fellow of the Institute of Actuaries. Fahim’s top skills include asset management, hedge funds, investment management, sales, and consultant & client relationship management.