What risk is associated with a fiduciary's duty of undivided loyalty?

The duty of undivided loyalty requires fiduciaries to act in the best interests of their clients, placing the clients' interests above their own. Engaging in self-dealing represents a clear violation of this duty because it involves a fiduciary taking actions that benefit themselves at the expense of their clients. Such actions can undermine trust and create conflicts of interest, which are fundamentally opposed to the principles of acting loyally and with integrity on behalf of clients.

By prioritizing personal gain over the interests of clients, a fiduciary would be directly failing to uphold their responsibility. This risk is critical in fiduciary relationships because it can lead to significant harm for clients, both financially and in terms of the relationship's integrity.

While the other options present various concerns in a fiduciary context—such as ignoring client instructions, failure to comply with regulations, and frequent alterations to policies—they do not inherently encapsulate the core issue of undivided loyalty as powerfully as self-dealing does. Each of those may be breaches in fiduciary duty, but engaging in self-dealing is particularly egregious because it explicitly demonstrates a fiduciary acting not solely for the benefit of the client, which is the essence of the loyalty requirement.