When you agree to work with a professional, whether it is an investment banker or a real estate agent, that professional has certain duties and obligations to you as their client. In other words, that professional occupies a position of trust, and they must perform their duties in a manner that reflects the trust inherent in their job title.
Fiduciary duty is the responsibility of a professional to put the needs of a client before their own benefit. When you engage a professional for services, you expect that they will help you make decisions that are right for you, not for them.
After all, mistakes in this arena could mean financial devastation for you, from the loss of a retirement account to buying a home that you can't reasonably resell. If you later discover that a professional breached his or her fiduciary duty, you may have grounds to take legal action against that professional.
Sometimes, professionals intentionally use their position to profit off of others
Those who work in financially sensitive fields, including banking, finances or real estate, may have the opportunity to profit off of the decisions of others. For example, a real estate agent could convince a buyer that a property is a good investment, when it is really a money pit.
If the seller has a business or friendly relationship with the real estate agent, that could be incentive enough to trick or manipulate a potential buyer. Other times, the seller may offer a financial incentive to an agent who helps bring buyers to the table, above and beyond the state authorized commission for such a transaction.
Another example would be a financial consultant who recommends that people invest in a new stock or IPO. Perhaps that business is owned or run by a loved one or family member. Perhaps they already have a financial interest in the company, so they will benefit from increased stock values. These situations are both examples of professionals intentionally breaching their fiduciary duty for personal gain.
A breach of fiduciary duty can also be negligent
Sometimes, professionals simply get themselves into a situation that is outside their area of expertise or ability. Rather than acknowledging that they cannot provide accurate information or reasonable advice, they may attempt to fake their way through the process. Other times, they may notice an issue, but fail to take action to protect their clients from the potential consequences.
Unfortunately, this kind of behavior can have a devastating impact on those who trust an incompetent or negligent professional. Making a decision based on the advice of someone who does not reasonably know their advice to be sound could end up damaging your financial future.
Whether a breach of fiduciary duty occurs due to an intent to profit or neglect of one's responsibilities, the people who suffer the financial consequences of that breach have legal rights. If a professional in a position of trust abused that position or misled you in some way, it may be grounds for pursuing civil action. Educating yourself about fiduciary duties and the responsibilities of someone in a position of trust can help you determine whether you have a solid legal case.