A fiduciary has a legal duty to act solely in the best interests of the beneficiary. While an accountant normally is not considered to be a fiduciary to his or her clients, the AICPA Professional Code of Conduct embodies standards of conduct which are closely analogous to a fiduciary relationship—objectivity, integrity, free of conflicts of interest and truthfulness. Accountants who provide audit services cannot be held to a fiduciary standard given their duty to the public.
Courts have found that an accountant can be a fiduciary to his or her client when providing certain professional services including tax services, asset management and general business consulting. Generally, if the following three elements are present in a client relationship, an accountant may be deemed to be a fiduciary to their client: (i) the accountant holds himself or herself out as an expert in an aspect of business, (ii) the client places a high degree of trust and confidence in the accountant and (iii) the client is heavily dependent upon the accountant’s advice. An accountant who provides investment advisory services as a registered investment adviser is a fiduciary to his or her advisory clients.
Prudent Practices for Investment Advisors, authored by the Foundation for Fiduciary Studies with in-depth technical review by the AICPA PFP Executive Committee, sets forth industry best practices for fiduciaries who provide comprehensive and continuous investment advice, including financial advisors, broker-consultants, investment consultants, wealth managers, financial consultants, trust officers and financial planners.
Prudent Practices for Investment Stewards, also authored by the Foundation for Fiduciary Studies with an in depth technical review by the AICPA PFP Executive Committee, was developed specifically for investment stewards such as trustees, investment committee members, attorneys, accountants, institutional investors and others involved in managing investment decision-making.
Legal Memorandums for Prudent Investment Practices was published as a companion to the handbooks. This collection of memoranda highlights the legal bases underlying the practices set out in the handbooks. The memoranda were prepared by the law firm of Reish, Luftman, McDaniel & Reicher and are helpful in understanding the rationale for each of the practices.