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Fiduciary Risk

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Fiduciary Risk
A type of Risk that accounts for the possibility of a trustee/Agent who is not optimally performing in the beneficiary's best interests.
    
This does not mean that the trustee is using the beneficiary's resources for his/her own benefit; this could be the Risk that the trustee is not achieving the best value for the beneficiary.
    
For example, a situation where a fund manager (Agent) is making more trades than necessary for a client's Portfolio is a source of fiduciary Risk, because the fund manager is slowly eroding the client's gains by incurring higher transaction costs than are needed. This would be a situation where the Agent is clearly not optimally creating value for his or her client.
Posted by  Financial Research Associates, LLC
 
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