Fiduciary is a funny word
The F-word above has its roots in Latin with the basic meaning of trust. The word faith has a similar root from the Latin fides, which means trust. But you didn’t come here for an etymological lesson.
A fiduciary is a person or organization that acts on behalf of and in the best interest of an individual or individuals. The word itself is very broad and doesn’t necessarily relate to finances. However, within finances, fiduciaries are common, and you’ve interacted with many if you’ve walked into a credit union branch. Any member service rep, accountant, or financial advisor likely falls under the category of fiduciary.
Fiduciaries are bound both legally and ethically in their duties to another person or persons. You may have heard of the “prudent-person rule.” In short, the fiduciary cannot and will not allocate or use assets belonging to the principal in a way the principal themselves would not use.
This is interesting in the case of board members. Board members are honor-bound to make decisions that are best suited for the the credit union and its members, regardless of whatever information might be yielded from an examination into a particular matter. Obviously, this doesn’t require or condone board members breaking the law, but you understand the point. Board members have a fiduciary responsibility to the credit union and its members.
Consider the relationship between a lawyer and their client, and that will give you a strong idea of how strong the fiduciary responsibility can be.
There is something called a fiduciary risk. This doesn’t necessarily mean that the fiduciary is being shady or underhanded with assets entrusted to him or her. This could just mean that they kind of suck at their job. They make honest mistakes. The flip side to that is someone who is using a principal’s assets for their own personal gains. That’s called fiduciary abuse.
The next time you walk up to a credit union teller or you have a meeting with your attorney, understand they have a fiduciary responsibility to you. This means they are to work or fight for you and on your behalf, making the best possible decisions in your best interests. Remember that last part. These decisions are to be made in YOUR best interest, not theirs.
