In his August Fiduciary Corner column, Blaine writes about a fiduciary's duty to delegate responsibility to "prudent experts" when their level of training, experience and expertise is not adequate. Fiduciary duty requires that all aspects of managing investments for others are done so to a professional standard of care. When a fiduciary cannot do that his or herself, he or she must delegate that responsibility to a professional who can. And, the fiduciary must also demonstrate a prudent delegation process that resulted in the best professional for the job being selected. Blaine's article explains these duties and the key components for a proper search for investment professionals.
Practices 1.3, 3.1 and 3.4 in our Prudent Practices for Investment Advisors handbook also are about delegation, with 1.3 describing the "prudent expert" rule, 3.1 addressing the selection of investment managers (the handbook also includes suggested due diligence fields) and 3.4 addressing the selection of the custodian and other service providers. The three Practices together give a pretty full picture of the delegation duty. Reading the Legal Memoranda on those Practices gives the full substantiation to those Practices from ERISA, UPIA, UPMIFA, MPERS and other legal sources.
Make sure you read Blaine's full article at InvestmentNews.com and click the "Recommend" button at the top of the page if you like it. We've already received some feedback via email from those who disagree with and support this idea, and we'd like to hear more and respond to it in hope of advancing the conversation on how to provide an environment more conducive to success for retirement. Please leave those thoughts in the comments section below.
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