What is a personal conflict of interest?

A personal conflict of interest arises when an individual has a personal stake in the client's assets, which can influence or compromise the impartiality and objectivity expected in a fiduciary relationship. In a fiduciary role, such as a trustee or agent, the individual is obligated to act in the best interests of the client or beneficiaries. If the fiduciary has direct or indirect financial interests or personal relationships that could sway their judgment regarding the client's assets, this situation constitutes a personal conflict of interest.

Recognizing and managing these conflicts is essential to ensure ethical behavior and maintain trust in the fiduciary relationship. A fiduciary must fully disclose any potential conflicts of interest to the clients and take steps to mitigate their impact to uphold their duty of loyalty and care. This understanding is integral to the overall framework of fiduciary responsibilities in California and contributes to the integrity of professional practices.