Investment Fiduciary – Someone who is managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility.

The vast majority of the nation’s liquid investable wealth is in the hands of investment fiduciaries, and the success or failure of investment fiduciaries can have a material impact on the fiscal health of this country. As critical as their role is, more needs to be done to define the details of a fiduciary’s prudent investment process. The purpose of the Foundation is to step into this role and promote a culture of fiduciary responsibility and improve the decision-making process of investment fiduciaries.

All investment fiduciaries should demonstrate prudence in their investment decisions. By following a structured process based on the practices defined by the Foundation, the fiduciary can be confident that critical components of an investment strategy are being properly implemented.

The term, “fiduciary,” can be divided further into three groups:

Investment Stewards – A person who has the legal responsibility for managing investment decisions (trustees and investment committee members).

Investment Stewards, along with their Investment Advisor if the Steward has retained one, have the most important, yet most misunderstood, role in the investment process: to manage the investment process. The Investment Steward is responsible for managing the overall investment strategy: deciding on the asset allocation, defining the details of the strategy, implementing the strategy with appropriate Investment Managers, and monitoring the strategy on an ongoing basis.

This applies to more than 5 million men and women who serve as:

• Members of investment committees of retirement plans, foundations, and endowments
• Trustees of private trusts

Combined, they manage more than 80% of the nation’s liquid investable wealth. As critical as their function is to the fiscal health of this nation, we do not have a single federal or state agency that provides education and training to the 5 million.

If you are an Investment Steward and wish to test your conformance to the Practices and create a self-assessment report of the areas of your investment process that have been met, have deficiencies, or require further investigation, try our free online SAFE.

Investment Advisors – A professional who is responsible for managing comprehensive and continuous investment decisions (including wealth managers, financial advisors, trust officers, financial consultants, investment consultants, and financial planners).

The vast majority of Investment Stewards rely upon Investment Advisors for help and assistance in managing the Steward’s fiduciary responsibilities. The Advisor, like the Steward, has a critical impact on the nation’s fiscal health.

As critical as the Advisor’s role is, the Advisory industry is still lacking the attributes and chiseled profile of a true profession:

• There is no oversight by one regulatory body.
• There are no specific regulations designed for the investment consultant’s unique role.
• There are no defined practice standards.
• There are no advanced education and training requirements.

Oftentimes a fiduciary will confuse responsibility with liability. An Investment Advisor can never delegate away responsibility – it can be shared with other “co-fiduciaries,” such as Investment Managers, but can never be given away.

If you are an Investment Advisor and wish to test your conformance to the Practices and create a self-assessment report of the areas of your investment process that have been met, have deficiencies, or require further investigation, try our free online SAFE.

Investment Managers – A professional who makes investment decisions and selects the individual securities (stocks and bonds) to implement a specific investment mandate (such as large cap growth).

Investment Managers are distinguished from Investment Stewards and Investment Advisors in that Managers make investment decisions—selecting the individual securities (stocks and bonds) to implement a specific investment mandate (large cap growth).

There are an estimated 7,000 Investment Managers worldwide. Examples would include money managers who are responsible for separate accounts, mutual funds, commingled trusts, and unit trusts.

The Steward and Advisor have a fiduciary duty to demonstrate that Investment Managers have been prudently selected and monitored.