What is a fiduciary's obligation regarding the management of conflict of interest situations?

A fiduciary has a fundamental responsibility to act in the best interests of their clients. When it comes to managing conflicts of interest, the obligation extends to ensuring transparency and obtaining proper permissions. Seeking authorization before acting when a conflict arises is crucial because it acknowledges the potential for bias or divided loyalties and ensures that all parties involved are informed and provided with the opportunity to make decisions accordingly.

By doing so, a fiduciary not only upholds their duty of care but also builds trust with clients, reinforcing the integrity of the advisory relationship. This process ensures that clients can weigh the implications of the conflict and make informed choices about how to proceed, thereby safeguarding their interests.

It is also important for a fiduciary to maintain a high standard of ethical conduct; therefore, simply ignoring minor conflicts or disclosing them only to relevant parties fails to address the principle of full transparency essential for maintaining client confidence. While avoiding conflicts entirely is ideal, the reality is that they may arise, and the focus should be on managing and disclosing them appropriately rather than attempting to eliminate them at all costs.