Certified Trust and Fiduciary Advisor (CTFA) Practice Exam

A fiduciary can mitigate conflicts of interest primarily by maintaining transparency and adhering to ethical guidelines. This approach ensures that all decisions and actions taken on behalf of clients are open to scrutiny and align with established standards of conduct. Transparency involves communicating potential conflicts, disclosing the rationale behind decisions, and involving clients in the decision-making process when appropriate. Adhering to ethical guidelines reinforces a fiduciary's commitment to act in the best interests of their clients, which is fundamental to their role.

By contrast, attempting to eliminate all personal interests is often impractical, as fiduciaries are also human and can have personal connections or interests. Maintaining secrecy in decision-making would likely lead to distrust and exacerbate any existing conflicts of interest rather than mitigate them. Prioritizing personal relationships over rules undermines the fiduciary's obligation to act in the best interests of their clients and could lead to decisions that are biased or self-serving. Thus, fostering transparency and following ethical guidelines remains the most effective strategy for mitigating conflicts of interest.