Fiduciary Deposit Account

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 08, 2023

A fiduciary deposit account is a type of bank account or brokerage account that has two separate and distinct purposes.

  • The first purpose is to act as the comprehensive record for all your assets, but instead of just tracking if you have enough money it also tracks how much you're owed by others (liabilities).
  • The second purpose is to lend money to third parties when appropriate and in your best interest.

    This is the only type of account that can legally receive interest payments, dividends, and other distributions from third-party investments like Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs), and Individual Stocks.

The fiduciary deposit account is owned by one or more individuals and serves as a repository for all their assets.

Also, the account is managed by another person or company, called a "fiduciary", who is legally bound to act in the best interest of the account owners at all times.

Who Can Use This Account?

If you're an individual who has a lot of assets but also a lot of debts, it's highly recommended that you use this type of account.

Not only can it help manage your interest payments and dividends more efficiently, but it provides complete accountability for income and expense items by tracking them on the same system that tracks all your assets.

If you're an individual who is planning for retirement, this type of account can potentially help grow your assets faster by lending them out.

How Does It Work?

A Fiduciary Deposit Account works like any other bank or brokerage account, but it has added features that allow the account owners to track their loans and interest income from third parties online.

In general, the account is used to store all your assets and liabilities on a single system run by a fiduciary who agrees to manage your interest payments and dividends for you.

When an expense or income item occurs that involves a transaction with a third party, it's added to the account in real-time.

That way, the account owner can see exactly how much interest they're receiving from third parties at any time.

How to Open a Fiduciary Deposit Account?

There are multiple ways to open a fiduciary deposit account.

The most common method is for you to go into any bank or brokerage firm and tell them that you'd like an FDI account opened with your funds on the spot.

Because of this, it's highly recommended that you first shop around for banks or brokerages that offer this service since there may be commission or other fees attached.

Another option is to open an account with your desired bank or brokerage and then ask them about the fiduciary deposit feature afterward, which may get you a lower opening cost because it's bundled with another account.

Once you've found a bank or brokerage that offers the Fiduciary Deposit Account feature, the process of opening an account with them is pretty standard.

You'll be required to fill out a form with your personal information and preferred investments, they may require you to open up another type of account if you don't already have one, then transfer money into the bank or brokerage.

Advantages of Opening a Fiduciary Deposit Account


One of the biggest advantages of opening a fiduciary deposit account is that you can start earning interest immediately on money that's already within your brokerage or bank.

For example, if there are funds in your current account with another firm, you can transfer those funds into the new one and start earning interest on them immediately.

Another advantage of using this type of account is that you can potentially generate even more savings from your interest payments and dividends by lending your assets out to third parties.

For example, if you have a huge amount of assets in a deposit account, but not enough to generate enough interest payments and dividends to sustain yourself on a monthly basis, you can use your assets as collateral for loans from other companies or individuals.

And lastly, you don't have to manage the account at all.

Because of this, you can simply deposit your money into it and not worry about the day-to-day management of your assets.

Disadvantages of Opening a Fiduciary Deposit Account


The biggest disadvantage of opening a fiduciary deposit account is that there may be an upfront cost for setting one up.

For example, you may be required to pay a small fee for any transfer or setup fees that are charged by the bank or brokerage firm.

Another downside of using this type of account is that they only provide deposit accounts.

So, if you've already taken out loans with third parties and need to make payments on them, you'll have to transfer money from your deposit account into a separate account specifically for those purposes.

In addition, you don't have complete control over which loans or parties you lend money out to with this type of account.

Because of this, you may want to first open a trust fund and then use that as collateral for any loans until all of your fiduciary deposit account funds have been used up.

Final Thoughts

A fiduciary deposit account can be an excellent way of earning interest on any amount of money that you already have in your bank or brokerage.

Although there are some potential downsides to using it, such as an upfront fee for opening the account and not having complete control over where the funds go, this type of account can be a very convenient and efficient way of generating more interest income.

This type of account is mainly used by wealthier individuals because it's best suited for those who already have a lot of money in their accounts, but don't want to deal with the day-to-day management of that money.

Fiduciary Deposit Account FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

Find Advisor Near You