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Posted by Bennett Aikin on January 15, 2015 in Fiduciary BasicsFiduciary duty is determined by facts and circumstances and it is not uncommon for fiduciaries to be unaware of their status. One of the first issues that will arise in breach of fiduciary duty litigation is determination of whether the defendent, in fact, owed a fiduciary duty. For the protection of the fiduciaries and investors alike, it is better to address this issue up front, by properly identifying the fiduciaries, documenting their status and role in the investment policy statement, and requiring the fiduciaries to acknowledge their status in writing. Not only will this help prevent misunderstandings, it ensures every...
Posted by Bennett Aikin on January 07, 2015 inIrrespective of whether a firm must meet a suitability or fiduciary standard, FINRA believes that firms best serve their customers—and reduce their regulatory risk—by putting customers’ interests first. This requires the firm to align its interests with those of its customers. This statement was part of FINRA’s annual Regulatory and Examination Priorities letter that came out yesterday. It’s a notable position to take for the self-regulator that is thus far under no obligation to expect anything more of its members than the traditional suitability standard. But if you’ve been...
As outflows continue to soar, how can investors, stewards, and advisors decide what to do with Pimco funds in their portfolios? What lessons can Pimco teach us about the qualitative side of due diligence?
Posted by Norman M. Boone, CFP® on October 16, 2014 inOne of the best characteristics of an investment policy statement is that it is collaborative. It documents the agreements and understandings both the advisor and the investor have agreed to in order to avoid surprises (e.g., “we’ll invest 60% of your portfolio in stocks and the rest in bonds” or “we’ll make every reasonable effort to avoid holding banking stocks in your portfolio, since you work for a bank”). Without documentation, it becomes easy for a client to forget what the advisor said about rebalancing procedures, or that the client specifically...
Posted by Norm Boone on September 29, 2014 inYou already understand that having an investment policy statement is good for you and your clients and, generally speaking, know what the IPS is supposed to do. But do you sometimes struggle deciding what, exactly, you should be putting into your client IPSs? At its core, an IPS is a document that reflects what a client and advisor have agreed to regarding how the money is to be managed. To consider what should go into an IPS, imagine what you and your client need to know about what the other is doing. Those are the topics...