ERISA §1104(a)(1)(C) re Diversification

Diversification

US Code §1104(a)(1)(C) states, “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries… by diversifying the investments of the plan so as to minimize the risk of large losses…” The court in Marshall v. Glass/Metal (D. Haw. 1980) noted, “Ordinarily the fiduciary should not…

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The Trustee’s Compliance Library

Trustees and beneficiaries don’t always see eye-to-eye on issues of trust administration and governance.  For the most part, the reasons for these disagreements are divergent beliefs about responsibility, duty, fairness, and transparency. Then the attorneys are called and nobody wins. At the heart of all of these conflicts is a single issue–did the trustee act…

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Case Study – Modifying Trust Distribution Rates

Last month the Anodos team worked on an interesting investment governance project that we thought you might find elucidating. Facts:  A grantor setup a “Net Income” trust in 1987 for the benefit of their grandchild.  The historic distribution rate from this trust, after all administrative expenses, has been 3.2%. (We know this by reviewing the last…

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UPIA §7 – A Trustee’s Duty to Incur Only Reasonable Costs

“Wasting beneficiaries’ money is imprudent. In devising and implementing strategies for the investment and management of trust assets, trustees are obliged to minimize costs” (National Conference of Commissioners on Uniform State Laws).Duty to Pay Only Fair Fees: Section 7 of the Uniform Prudent Investor Act states, “In investing and managing trust assets, a trustee may only…

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A Trustee’s Duty to Independently Monitor Investment Advisors

Many trustees implicitly trust the investment advisor to whom investment duties have been delegated. They trust that the advisor’s strategy is reasonable. They trust that the return the advisor produced was reasonable given the level of risk that was taken. They trust that the benchmark the advisor is comparing himself against is fairly established. They trust that the advisor’s fees are fair. They trust that the advisor’s representation of being “above average” is supported by facts.

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When to Fire an Investment Advisor

Question: When, if ever, should a business manager recommend that their client fire their investment advisor? Answer: It will be time for your client to part ways with their investment advisor when, over a protracted period of time, the investment advisor has been unable to accomplish the job they were hired to do. The problem…

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Duty to Monitor the Total Return of a Trust Portfolio

Statutory Considerations: Section 2(c)(5) of the Uniform Prudent Investor Acts directs that “Among that a trustee shall consider in investing and managing trust assets are… the expected total return from income and the appreciation of capital;” In response to this duty, a prudent trustee will adopt a policy in which the total investment return for…

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ERISA §1104(a)(1)(C) re Diversification

Diversification

US Code §1104(a)(1)(C) states, “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries… by diversifying the investments of the plan so as to minimize the risk of large losses…” The court in Marshall v. Glass/Metal (D. Haw. 1980) noted, “Ordinarily the fiduciary should not…

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ERISA §404(a)(1)(B) re Duty to Balance Risk and Return

trustee duty to balance risk and return

Trustees are required to make hard investment decisions. They are to take into consideration the risk of loss and the opportunity for gain associated with each particular investment or investment course of action. ERISA trustees are required to balance the risk and return of each investment decision under conditions of uncertainty. Because ERISA trustees do…

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