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Fiduciary duty is bigger than a phrase it is a set of continual legal rules that all lawyers, stock or investment consultants, real estate agents and mortgage brokers and agents, among many occupations, are bound by. They can and do face court action with strong penalties for violation of these rules and principles. The Supreme Court of Canada defines the major elements of fiduciary duty as, trust, confidence and a reliance on skills and knowledge. If those elements exist in a functioning relationship, then fiduciary duty exists and is legally enforceable. Put in simple words fiduciary responsibility is; the putting of a client’s interest before yours and providing the very best standard of care to that customer in the advertising of those interests.

In the case of a commercial or retail outlet, such as a store, auto dealership, furniture store, or a bank, staff are considered “at arm’s length” from the transaction. This includes the “mobile mortgage specialists” being heavily promoted by the banks.

When you go to one such outlet it is implied the store clerk, salesman, or worker is representing their employer. In this case, the worker is tasked with first making certain the employer’s best interests, (profits), are being met. It is accepted that in any exchange the salesman is interested in raising their own compensation with commissions from a sale. The same is true in a bank. Shares, bonuses, raises and promotions are all based on the sales of products, heavily publicized promoted and dictated by head office for the sake of the bank’s profit.

On the Wikepedia web site, out of the 22 examples listed as jobs, which customarily by law, attract fiduciary relationships, banks aren’t on the list, with the single exception of mutual savings banks. (a mutual savings bank is one where the entirety of profits belong to the depositors and isn’t owned by stockholders)

Legally, according to the Supreme Court, a commercial or retail establishment isn’t bound by fiduciary duty. In a decision in the case of Hodgkins v Simms, 1994 (3SCR 377), it stated “in a professional advisor context however a person receiving advice should not need to protect him/herself from the abuse of authority by their independent adviser, when the very basis of the advisory contract is that the adviser will use their special skill for the advisee. In sharp contrast to arm’s length commercial relationships which are indicated by self interest, the essential nature of a professional advisory relationship is exactly trust, confidence and independence.”

Further enquiry into agent and fiduciary responsibility reveals that such a relationship imposes certain duties and responsibilities. Some are, but aren’t restricted to;

Fidelity to clients.

The proper use of abilities and knowledge to promote the client’s's best interest.

Putting the clients’ interest put before the agent or agency.

Not ever compromising a client’s best interests.

Provision of full notification and consent.

Complete confidentiality and truthfulness.

For the many thousands of unknowing individuals who go into a bank expecting that a fiduciary relationship will exist and is enforceable by law, this must come as a shock. They believe wrongly their trust, confidence, and dependence on skills and knowledge of the bank worker will be in their best interest. They are expecting their interests are being promoted, but oddly the banks are exempt legally from fiduciary duty. In spite of all the evidence and appearances that exist in a bank to give the impression of these responsibilities existing, there is not legal priority or an obligation on behalf of the bank to supply them. Try obtaining full disclosure next time you make an application for a mortgage at a bank, it won’t occur.

For the many thousands of mortgage agents, agents and independent executives who are bound by both agency law and fiduciary duty this only serves to reinforce our commitment to serve our customers faithfully. It’s a vindication of our unique and determined place within the mortgage industry. It also serves to market the broker network as the best logical choice when seeking a mortgage. When we promise that, we are working for our clients and not the lender, you know that as our client, there’s very serious and definite Supreme Court precedence to make sure we do.

Steve Clark is a mortgage agent with Northwood Mortgages. He keeps his clients fresh with the latest mortgage reports by posting on his site georgianmortgages.com