| Summary: | This chapter identifies the cutting back of fiduciary obligations by courts and legislatures as a possible contributory cause of the financial crisis that erupted in 2008. It argues that a restoration of classical fiduciary duties of loyalty and care to clients can help improve the health of the financial system and mitigate the next crises. During the "Great Moderation" asset managers used a permissive legal environment to take high fees but, by the time that the crisis had come, had moved their clients’ wealth into assets which crashed in value, whilst insulating themselves from liability for poor judgment and care in making such investments. The law needs to provide a satisfactory response to such behaviour, addressing the problems of uncertainty, asymmetric information and expertise, and conflicts of interest. These necessary additional duties would create something very similar to the fiduciary law we already have, but which we no longer use. This chapter describes the attenuation of modern fiduciary law over the past forty years, and suggests how the power of this body of law may freshly be deployed in the future.
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