Fiduciary Governance Blog
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UPIA §7 re Duty to Pay Only Fair Fees
“Wasting beneficiaries’ money is imprudent. In devising and implementing strategies for the investment and management of trust assets, trustees are obligated 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…
The trustee’s duty to diversify or “Too much of a good thing?”
There is no simple rule for identifying how much diversification is enough. A prudent trustee will develop a record that demonstrates they have reviewed the liquid assets held within the portfolio to confirm that there is a reasonable level of diversification at the (1) security level, (2) sector level, and (3) asset class level.
How much is too much for a trustee to be paid? (Part 3 of 3)
This article is the last in a three-part series addressing the factors to consider when establishing trustee compensation. In this article we consider the reporting requirement AFTER the trustee has determined what they are going to pay themselves. Following are several policies, procedures and practices we suggest the trustee adopt related to the ongoing administration of their…
How much is too much for a trustee to be paid? (Part 2 of 3)
Duty: Section 7 of the Uniform Prudent Investor Act directs that “… a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee.” This duty to only incur reasonable costs includes the trustee’s duty to pay themselves only reasonable fees. Unfortunately, few…
UPIA §9 re Prudent Delegation of Investment Duties
Many trustees implicitly trust the investment manager to whom investment duties have been delegated. They trust that the manager’s strategy is reasonable. They trust that the return the manager produced was appropriate given the level of risk that was taken. They trust that the manager’s representation of being “above average” is supported by facts. This…
Investment Governance Best Practices for Business Managers (How to Watch the Hen House)
The Problem: You are a business manager(1), and it is either explicitly or implicitly the case that you are responsible for monitoring the activities of the investment managers that have been entrusted with your clients’ capital. (If you are not a business manager or disagree with this statement, stop reading. This paper does not apply…
A Trustee’s Duty to Independently Monitor Delegates UPIA §9(a)(3)
The Uniform Prudent Investor Act at Section 9(a)(3) directs, “A trustee shall exercise reasonable care, skill and caution by periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.” Many trustees implicitly trust the investment advisor to whom they (or their predecessor) delegated investment duties. They…
Duty to Prudently Administer or “Check, check, double check, recheck” (1 of 12)
Duty of Prudence: Section 2(a) of the Uniform Prudent Investor Act directs, “A trustee shall administer the trust as a prudent person would…” But how is one to know how a prudent trustee would act?
Investment Advisor Annual Review (Duty to Monitor)
A trustee has a duty to act prudently when they delegate investment responsibilities to third parties.