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Posted by Norman Boone, MBA, CFP® on January 27, 2015 inAn investment policy statement (IPS) is a reflection of the initial and on-going agreements between the client (what I want and don’t want, who I am, how much risk I’m willing to take, what decisions I expect to be involved in, etc.) and the advisor (discretion or no, the intended allocation and how much it can be strayed from and the process for rebalancing, the general investment process to be followed, the kinds of investments/securities to be used, etc.). It should outline each party’s responsibilities to each other and identify how and...
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...