A trustee has a duty to prudently invest the plan assets on behalf of the beneficiaries. However, few trustees actually take on this complex responsibility alone. In most cases the trustee will hire a third party and delegate these investment duties.
When investment advisory functions are delegated a trustee is responsible for: 1) prudently selecting the vendor; and 2) periodically reviewing the “particular investment or investment course of action” that has been suggested by the vendor. Merely delegating investment duties does not absolve the trustee of responsibility if the vendor invests the trust assets imprudently.
Reliance upon an investment professional’s opinion in making trust investment decisions may be justified if the trustee has taken steps to confirm several factors including: 1) the expert’s reputation and experience; 2) the extensiveness and thoroughness of the expert’s investment process; 3) whether the expert’s opinion is supported by relevant material; and 4) whether the expert’s methods and assumptions are appropriate to the decision at hand (Bussian v. RJR Nabisco Inc., F. 3d 286 – Court of Appeals, 5th Circuit 2000).
Few trustees take the modest amount of time needed to DOCUMENT that they have established a procedure to consider these four factors at the time the delegation occurs and periodically throughout the relationship. The plan’s named trustee and the investment or fiduciary committee that supports them are encouraged to create a short, simple record that demonstrates they have recognized this duty to prudently delegate and have taken steps to periodically monitor their agent’s compliance with this delegation.
Following is a link to a series of questions that can be used by the plan’s investment committee to create this record.
Anodos helps trustees (ERISA, individual, and endowment) save time, reduce their personal risk, and fulfill their fiduciary duties. We do this by helping the trustee conduct audits of the money managers to whom investment duties have been delegated. Fiduciaries have an affirmative duty to provide ongoing and independent oversight of the money managers. What makes us unique is that we do not manage money or sell insurance. Doing fiduciary audits, benchmarking studies, and performance attribution is all we do.
Onward,
Josh Yager, Esq., CFP®, ChFC®
805-899-1245
jyager@anodosadvisors.com
Anodos helps individual trustees save time, reduce their personal risk, and fulfill their fiduciary duties. We do this by helping trustees develop and maintain a series of governance documents which demonstrates they have fulfilled each of their duties of care. We also will act as an expert witness to defend our clients’ findings in court. What makes us unique is that trustee governance support is all we do. We do not manage money, sell insurance, or accept referral fees. We don't have a horse in the race.
We help trustees save time, reduce risk, and fulfill their fiduciary duties. What makes us unique is that trustee governance support is all we do.