Agency vs Fiduciary Duty?

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    Michael Ermann

    Does the architect have a fiduciary duty to the client: a legal obligation to act in the owner's best financial interest?

    No, architects do not serve as an owner's fiduciary.

    Fiduciary duty: The obligation a professional has to act in the best interests of their client

    Generally, the term is used for professions who protect the financial interest of the people they represent. Certified financial planners (CFPs) can't recommend a particular investment if they do so because the CFP gets a higher commission from the brokerage if that particular investment is purchased; lawyers or accountants can't advise their client to move forward with a deal because the lawyer or accountant owns the property to be sold; and a corporate director can't steer the company to sign a worse deal because the person on the other side of that deal is her brother-in-law. (Of course, if the brother-in-law really has the best corporate travel agency and charges the company the lowest fees, it is probably not a breach of fiduciary duty.)

    If you, as a fiduciary, breach your duty, you are liable in court, though as you would imagine, proving a breach is difficult in practice. The concept of fiduciary was set up because professions like attorneys, accountants and physicians are granted a monopoly to practice their craft, and hold power or knowledge asymmetries over their clients. While architects are granted a monopoly to practice by the state and do hold knowledge asymmetries, they are not fiduciaries.

    Clients often assume a professional is bound by fiduciary duty, when in fact she is not. For instance, a stockbroker is not a fiduciary. She can legally steer you to a particular stock only because she gets the largest commission for selling that stock--even if purchasing that stock is not in your financial best interest.

    Fiduciary duty is the highest standard of care level that can be imposed under law, and thus it far exceeds the "standard of care" threshold for architects' performance established in the AIA contracts. Owner-generated contracts sometimes sneak in a clause binding the architect to fiduciary duty, but because your professional liability insurance almost certainly won't cover that level of expectation, you will need to strike that fiduciary clause out of the contract. If the owner generates her own non-standard contract, you might even want to go out of your way to include a clause that establishes that the architect is not held to a fiduciary standard.

    Why isn't an architect held to a fiduciary standard? Perhaps because we protect the health, safety, and welfare of the public. Have a story where doing financially right by the owner conflicted with doing right by the public? Share it with me at ermann@amber-book.com and perhaps I'll add it to the course (anonymized). Or maybe architects aren't held to the higher standard because the AIA, with an obligation to protect the architects, is the entity writing the industry-standard contracts.

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    Giovanni Succi

    Well, thank you.

    What about the contradiction in  the two texts? Which source do you think "prevails"?

    What about the Architect being the Agent of the Owner? True or False?

    Regards

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    Michael Ermann

    You can be an agent (represent a client) without being a fiduciary (legally bound to act in the owners beat financial interest)

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    Giovanni Succi

    Thank you Michael, that was clear.

    regards

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