Manager Audit
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…
Read MoreHow is a targeted return like UBER?
A trustee would not get into an Uber until they defined the destination for their ride. A trustee would not hire an employee without describing at some level the work the employee was being hired to do. So then, why do so few trustees communicate a targeted rate of return to the investment advisor to…
Read MoreA Transitive Property of Fiduciary Duties?
If A = B and B = C, then A = C. This is the “transitive property of equality” that we learned in our remedial algebra classes so long ago. Is there a transitive property of fiduciary duties? We know that the trustee owes duties of care to the trust beneficiaries. We also know that…
Read MoreA 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.
Read MoreInvestment Governance Overview: Is my investment advisor doing a good job?
It’s difficult to answer the question, “Is my investment advisor doing a good job?” Predictably, all investment advisors report…
Read MoreIs my investment advisor doing a good job?
It’s difficult to answer the question, “Is my investment advisor doing a good job?” Predictably, all investment advisors report that they are “doing great” and are “above average.” They all provide compelling charts, graphs and benchmarks…
Read MoreQuestions to Ask an Investment Advisor Before They are Hired aka ”The Interview”
At times it becomes necessary to end a relationship with one investment manager and begin a relationship with a new firm. When such a change has been decided upon, it is best practice to not rush to the next investment manager that promises good returns, low fees, and excellent client service. Instead, a thoughtful investor…
Read MoreBank v RIA as Investment Advisor: A Cost-Benefit Analysis
Many investors ask, “Is it better to have a big bank (Goldman Sachs, for example) as my investment advisor or a Registered Investment Advisor (Bel Air, for example) to manage my money?” Following is a summary of the costs and benefits of each. The best investment platform should be determined by each investor’s unique preferences and…
Read MoreWhy the “Passive vs. Active” Investment Debate is the Wrong Issue
The investment industry is embroiled in a “great debate” concerning which investment philosophy is best: active vs. passive management. The debate concerns how the building blocks (asset classes) that make up the portfolio are constructed. The raging question is whether investment advisors should use passive index funds and ETFs as the building blocks or whether…
Read MoreInvestment 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…
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