The what and why of the word ‘fiduciary’
The global fiduciary industry has its roots in SA with the first estate ever handled by a corporate body occurring here in 1834
Many people may have come across the word “fiduciary” and yet may not fully understand what it means.
The word comes from the Latin “fiducia”, meaning “confidence, trust, or reliance”. In its most literal sense, fiduciary means looking after something on someone else’s behalf. In fact, the mere act of entrusting someone with something to give to another involves a fiduciary relationship.
Most home-owners will have come across the concept of “fiduciary” when buying a house. The deposit on the property is paid into the trust account of the transferring attorney until the date of transfer. The transferring attorney in this instance is acting in a fiduciary capacity.
Put in a more technical way, a fiduciary is an individual or company holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of that party. The word fiduciary also denotes a legal duty of loyalty and faithfulness towards another.
In SA, the fiduciary industry has come to represent the activities of those involved in estate planning, drafting wills, setting up and managing trusts, estate administration, and so forth. Hence the name of the only body solely representing fiduciary practitioners is the Fiduciary Institute of Southern Africa (Fisa).
The fiduciary industry, as it is known in several jurisdictions around the world, in fact has its roots in SA, where the first estate in the world to be handled by a corporate body occurred in 1834. From there the concept of trust companies and boards of executors grew around the country, and the world.
Fiduciary touch points
There are potentially many stages in your life where you could be affected by or involved in a fiduciary relationship. These could include:
- A minor child becomes the beneficiary of a testamentary trust set up at the death of their parents; here the trustees of the trust will act in a fiduciary capacity on behalf of the child.
- When you have a will drafted, it is strongly advised to use someone skilled in fiduciary matters. Even the simplest of estates can lead to complexities of interpretation if not drafted by an expert. DIY and online wills are not advisable unless at least checked by a fiduciary practitioner.
- Your will should be reviewed regularly, especially following life-changing events such as marriage, divorce or the birth of a child. Again, fiduciary advice is best sought.
- Before receiving or accumulating assets, you may wish to set up a trust to hold such assets. A fiduciary practitioner can help set up a trust and act as independent trustee, again in a fiduciary capacity.
- Many people are nominated as an executor of an estate, especially of their spouse or other family members. As an executor, regardless of whether you appoint an agent to assist you or not, you will be acting in a fiduciary capacity.
- If you are a director of a company, you act in a fiduciary capacity.
- If you are the treasurer of your local sports club, you act in a fiduciary capacity on behalf of the sports club members.
These are just some of the many areas in which citizens can be affected by or involved in a fiduciary relationship, so, don’t be put off by the word — it will increasingly become known as a household concept in SA.
• Van Vuren is the CEO of the Fiduciary Institute of Southern Africa (Fisa).