Business Management · Trusts and agency

Fiduciary Duty and Conflicts of Interest for Actuaries

Updated 11 October 2026 · Fact-checked

A fiduciary duty is a duty to act in another person's interest, with loyalty and good faith, and not to profit from the role or put your own interest first. A conflict of interest arises when that duty clashes with your own interest or another client's. You identify the relationship, the duty, the conflict and the proper response: avoid, disclose, get consent or decline.

Understand Fiduciary Duty and Conflicts of Interest for Actuaries

A fiduciary is someone placed in a position of trust, who must act for the benefit of another. The other person depends on the fiduciary's judgement and cannot easily check it. Trustees, agents, company directors and, in many situations, professional advisors are fiduciaries or owe duties of a similar kind.

In a trust, the trustee holds property for beneficiaries. The trustee's duty is the strictest: act in the beneficiaries' interest, act impartially between them, do not make a secret profit, and do not put yourself in a position where your interest conflicts with your duty. In agency, the agent acts for a principal and can create legal relations for the principal. The agent must follow lawful instructions, act in good faith, disclose material facts, avoid secret profits and account for money handled.

The key difference: a trustee holds and manages property for beneficiaries who may be many and may not give instructions. An agent acts on the principal's instructions and is usually closer to a contractual relationship. Both owe loyalty, but the trustee has wider discretion and tighter limits on profit.

An actuary is usually an advisor, not the trustee. For example, an actuary advises pension scheme trustees on funding. The trustees decide; the actuary gives advice. The actuary's duty comes from the contract, the duty of care in negligence, and the professional code. Where the actuary has real discretion over a client's affairs, or holds the client's confidence, fiduciary-type loyalty can apply. In exams, say that the exact duty depends on the facts and the terms of appointment.

A conflict of interest is a situation where your duty to one party competes with your own interest or with a duty to another party. Examples: advising both the employer and the trustees of the same scheme, holding shares in a company you are valuing, or being paid more if a particular result is reached. The usual responses are to avoid the conflict, disclose it, get informed consent, put in controls such as separate teams, or decline the work. Disclosure alone does not always cure a conflict.

Key rules to remember

Core fiduciary duties: Loyalty + good faith + no secret profit + no conflict between duty and interest; Use as a checklist. A breach of any one can make the fiduciary liable to account for profit or compensate loss.
Trustee vs agent contrast: Trustee: holds property for beneficiaries, wide discretion, impartiality. Agent: acts for principal on instructions, can bind principal.; Both owe loyalty and must not make secret profits. The source of the duty differs.
Conflict response ladder: Identify → avoid → disclose → consent → manage → decline; Work down it. If the conflict cannot be managed, decline or withdraw.
Actuary as advisor: Duty = contract terms + duty of care + professional code; Say that fiduciary-type duties may apply depending on the role and facts.

How to solve Fiduciary Duty and Conflicts of Interest for Actuaries questions

Use this method for scenario questions on fiduciary duty and conflicts. Tie each point to the facts given.

1Identify the parties: who is the client, trustee, principal, beneficiary or other stakeholder.
2Define the relationship: trust, agency or advisor. Say what the actuary's role is.
3State the relevant duty in plain words: loyalty, good faith, no secret profit, no conflict, disclosure.
4Find the conflict: what is the actuary's own interest or competing duty, and who could be harmed.
5Judge whether it is a breach or a risk of one. Consider the facts, not only labels.
6Give the response: avoid, disclose, seek informed consent, put controls in place, or decline.
7Note the consequences: account for profit, compensation, professional discipline, loss of trust.
8Conclude with a clear recommendation.

Quickest way: Party, duty, conflict, action

When to use it: Use for short written questions and MCQs when time is tight.

Write the parties and the relationship in one line.
Name the duty that applies in a few words.
Name the conflict in one line.
Give the action: avoid, disclose, consent, manage or decline.
Add one consequence if marks allow.

Common mistakes in Fiduciary Duty and Conflicts of Interest for Actuaries

Saying an actuary is always a trustee
Students mix up the advisor with the person who holds the trust property.
Fix: Say the actuary usually advises trustees. The trustees hold the duties of trusteeship. Add that fiduciary-type duties may arise from the facts.
Treating disclosure as a full cure for any conflict
Students remember disclosure as the standard answer.
Fix: Say disclosure may need informed consent too. If the conflict is serious or cannot be managed, the actuary should decline.
Confusing trustee and agent duties
Both are loyalty duties, so they look the same.
Fix: Contrast them: trustee holds property for beneficiaries with discretion and impartiality; agent acts on instructions for a principal and can bind them.
Ignoring the professional code
Students focus on trust and agency law only.
Fix: Add that the actuary also owes duties under the professional code, such as integrity and managing conflicts and confidentiality.
Giving general answers not tied to the case
Students recall definitions and stop.
Fix: Name the parties, the interest at stake and the person who could be harmed in each answer.
Forgetting the secret profit rule
Students think a profit is fine if the client suffers no loss.
Fix: State that a fiduciary should not keep an undisclosed profit from the role, even where the client lost nothing.

Worked examples

Example 1

An actuary advises the trustees of a pension scheme. The actuary also advises the sponsoring employer on the cost of benefit changes to the same scheme. Explain the conflict and what the actuary should do.

Show the solution

Parties: trustees (who act for the members) and the employer (who pays contributions). Actuary advises both.
Duty: the actuary must act with integrity and in the interest of each client. Trustees owe loyalty to members.
Conflict: the employer wants low cost. The trustees want secure benefits. The same advice may favour one side.
Harm: members could be disadvantaged if advice leans towards the employer.
Response: first consider whether the conflict can be avoided, for example by using separate actuaries.
If both appointments continue, disclose the conflict to both clients, get informed consent and keep information separate.
If the interests are directly opposed in a negotiation, the actuary should decline one role.

Answer: There is a conflict because the employer and the trustees have opposing interests in the same matter. The best answer is separate advisors. Otherwise disclose, get informed consent and manage it, and decline one role if it cannot be managed.

Example 2

An agent sells insurance for a principal insurer. He also accepts a commission from a competitor for steering the customer to it, without telling the principal. State the duties breached and the likely consequences.

Show the solution

Relationship: agency. The agent acts for the principal.
Duty of good faith and loyalty: the agent must act in the principal's interest.
No secret profit: the commission from the competitor was not disclosed.
Conflict: the agent's interest in the commission clashes with his duty to the principal.
Breach: the agent has made a secret profit and put himself in a position of conflict.
Consequences: the principal may require the agent to account for the commission, claim compensation for any loss, and may end the agency.

Answer: The agent breached his duties of loyalty, good faith and no secret profit. The principal can claim the commission, claim compensation for loss and end the agency.

Exam tips

Tie every answer to the facts. Name the parties and the interest at risk.
Learn a short contrast between trustee and agent. It is a common comparison question.
In conflict questions, give a response, not just a diagnosis. Show avoid, disclose, consent or decline.
Mention both legal duties and the professional code for an actuary.
In MCQs, watch for absolute words such as always and never. Disclosure does not always remove a conflict.

Practice questions from Trusts and agency

Fiduciary Duty and Conflicts of Interest for Actuaries: frequently asked questions

Is an actuary a fiduciary?

It depends on the role and the facts. An actuary who advises trustees is usually an advisor with duties from the contract, a duty of care and the professional code. Where the actuary has discretion or holds the client's trust, fiduciary-type duties can apply.

What is the difference between trustee and agent duties?

A trustee holds property for beneficiaries, has wider discretion and must act impartially between them. An agent acts for a principal on instructions and can bind the principal. Both must act in good faith and avoid secret profits.

What should an actuary do about a conflict of interest?

Identify it early. Avoid it if possible. Otherwise disclose it, get informed consent and put controls in place. If it cannot be managed, decline or withdraw from the work.

Is disclosure enough to cure a conflict?

Not always. Clients may need to give informed consent, and some conflicts are too serious to manage. In those cases the actuary should decline the work.