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Not All Businesses Are Fiduciaries: What You Should Know
When engaging with different professionals—whether in real estate, finance, or lending—it’s important to understand that not all are held to the same standard. The concept of fiduciary responsibility is crucial, but not every business operates under this legal and ethical obligation. So, what is a fiduciary, and why does it matter?
What Is a Fiduciary?
A fiduciary is someone legally obligated to act in the best interest of another party, prioritizing that party’s interests above their own. Fiduciaries must adhere to principles of trust, care, and loyalty, making this a particularly important designation in professions where clients rely heavily on expert advice and ethical conduct. Fiduciary duties include:
- Loyalty: Acting solely in the best interest of the client.
- Confidentiality: Protecting sensitive information.
- Disclosure: Informing the client of relevant details.
- Obedience: Following the lawful instructions of the client.
- Care: Providing competent and professional advice.
- Accounting: Keeping accurate records of transactions and assets.
But not all businesses or professionals are required to operate with fiduciary responsibility.
Some merely need to meet minimum legal standards, which often leads to confusion for consumers.
Real Estate Agents: A Fiduciary Relationship
Real estate agents are among the professionals who do have fiduciary duties to their clients. This means that as a real estate professional, I am legally obligated to prioritize your interests above all else. Whether you’re buying or selling, this fiduciary relationship ensures that I act with your best financial and personal outcomes in mind.
The fiduciary duty of real estate agents has been a part of real estate law for decades. It’s also embedded in the National Association of Realtors (NAR) Code of Ethics, emphasizing loyalty, confidentiality, and full disclosure. When you work with a licensed agent like myself, you can rest assured that your interests will be protected throughout the entire transaction.
Lenders and Securities Professionals: Not Always Fiduciaries
Unlike real estate agents, mortgage lenders and brokers are typically not considered fiduciaries. They are primarily responsible to the lending institution they represent, not to the borrower. Their job is to facilitate the loan process, and although some states may impose fiduciary duties on mortgage brokers, it’s not a universal standard.
In the world of financial services, there’s also a distinction between different types of advisors:
- Stockbrokers: Generally follow a “suitability standard,” meaning they only need to recommend investments that are suitable for the client, not necessarily those that are in the client’s best interest. They are not bound by fiduciary duties.
- Investment Advisors: These professionals, on the other hand, do have fiduciary obligations. They must act in their clients’ best interests, avoid conflicts of interest, and provide unbiased advice.
Understanding the Evolution of Fiduciary Roles
The role of a fiduciary has evolved over time and varies by profession:
- Real Estate Agents: Real estate professionals like myself have long been recognized as fiduciaries, ensuring the best possible outcomes for clients. This has been a key element of our profession since real estate brokerage laws were developed in the early 20th century.
- Lenders: While lenders provide essential services, they don’t typically owe fiduciary duties to borrowers unless a specific state law imposes this responsibility.
- Securities Professionals: There has been a more recent push toward fiduciary duties for those managing retirement accounts or other investments, especially following regulations like the Dodd-Frank Act and the Department of Labor’s fiduciary rule for retirement advice.
Why This Matters to You
Understanding whether the professional you’re working with has a fiduciary duty is essential because it influences the quality and trustworthiness of the advice and services you receive. For instance, working with a real estate agent bound by fiduciary duty provides you with confidence that your agent is working for your best interests—not just to close a deal or collect a commission.
Call to Action: Trust My 21 Years of Fiduciary Expertise
When it comes to buying or selling real estate, you want someone who’s not only experienced but also legally obligated to put your interests first. With over 21 years of experience, I’ve helped countless clients navigate the complex world of real estate while upholding the highest ethical standards as a fiduciary.
As your dedicated real estate professional, I will:
- Protect your confidentiality.
- Offer you expert advice tailored to your unique situation.
- Ensure that your best interests are at the forefront of every decision.
If you’re ready to make a move or simply want to explore your options, let’s connect. Rely on my experience and fiduciary duty to guide you every step of the way.
Contact Jose Cervantes, CalDRE#0141005
Coldwell Banker Realty, Burlingame, California
(650) 200-0852 or (510) 485-3893
Whether you’re buying, selling, or investing, you can trust me to provide the care, dedication, and expertise needed to make the right decision for your future.
#GotRealEstate.us
