Response to Arthur B. Laby’s, Advisors as Fiduciaries
Professor Arthur Laby’s Advisors as Fiduciaries makes a significant contribution to our understanding of fiduciaries. It should be required reading in this area of law. The dominant view of a fiduciary relationship is based on discretionary authority. But this view, Professor Laby argues, is incomplete because the law consistently recognizes fiduciaries who are mere advisors without discretionary authority. The insight here is as old as the scientific method: if a theory does not match confirmed observation, then the theory is either wrong or incomplete. Professor Laby seeks to complete our understanding of the theory of fiduciary relationships by arguing that “advisors are and should be considered fiduciaries based on the trust that advisors seek from their clients and the trust that clients repose in their advisors.” Relying on social science literature, he identifies the core elements of “advice.” The provision of advice begets a fiduciary relationship when it creates an expectation of trust, resulting in vulnerability.
This Response reformulates Professor Laby’s insights with a focus on some additional considerations that should be in the analytical mix. With the edification of Professor Laby’s analysis, this Response proposes that a person is a fiduciary when systemic power is exerted on a critical interest of another person. This concept accommodates both the discretionary authority view and Professor Laby’s insight of advisors as fiduciaries even when such discretionary authority is lacking. Common elements exist in all fiduciary relationships. They are systemic power and critical interest.