Insights from the experts in investment fiduciary responsibility.

A Brief History of the Prudent Practices

Posted by Rich Lynch on May 22, 2013

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Today marks the official release of our latest update to the Prudent Practices and the associated handbooks for fiduciaries. You can read more about the changes in the News section of our website. As a companion to that release, we wanted to use today’s blog post to give a brief history of the Practices and their history as it relates to our company.

Everything we do at fi360 centers around fiduciary responsibility (hence the “fi” – fiduciary and “360” degrees – full circle) and, as the definitive guide to fiduciary responsibility, the Prudent Practices form the foundation from which we deliver our Training, Tools, and Resources.  Our first fiduciary handbook, “Prudent Investment Practices,” was published in 2003.  It was a result of more than three years work informed by:

  • numerous presentations nationwide
  • fiduciary courses taught at the University of Pittsburgh and elsewhere
  • input from practitioners, most of who had attended the training
  • face-to-face consultation with senior staff members at the SEC and DOL
  • receipt of more than 8,500 comments through our web-based survey soliciting feedback from industry stakeholders nationwide
  • legal review by a prominent law firm in the financial services field
  • technical review by the AICPA

The Practices have always been informed directly from requirements found in applicable legislation, including ERISA for corporate retirement plans, UPIA for trusts, UPMIFA for endowments and foundations, and UMPERSA for state, county, and municipal retirement plans, and the associated regulation and case law. In 2007, guidance from the Pension Protection Act was also incorporated and the new release also includes guidance from the Investment Advisers Act, state securities, recent ERISA-related rulemaking, and the Dodd-Frank Act. The legal review was originally handled by ERISA attorney Fred Reish and his law firm exclusively and has since evolved to include a team of law firms from a variety of practice areas.

Minor handbook updates occurred from 2003 to 2005.  Our first major update occurred in 2006 when we added more specific Criteria under each of the Practices and differentiated versions of the handbook for advisors and stewards.  This was done primarily so we could include more technical information in the advisor handbook while keeping the steward handbook more accessible to the lay fiduciary, such as trustees, plan sponsors, and investment committee members. 

We also published our first international edition, for New Zealand, in 2006. Handbooks for Canada and Australia were added in 2007 and 2008, respectively. Each of those present their own unique challenges as we need to engage local experts and attorneys to make any necessary changes to the Practices, criteria, handbook narrative, and, perhaps most significantly, legal substantiation. In each case, an attorney familiar with securities and advice law in that country needs to review the Practices to ensure they are, in fact, compliant with local requirements.   

2006 also marked the publishing of the “Prudent Practices for Investment Managers,” for those professionals who have discretion to select specific securities for separate accounts, mutual or exchange-traded funds, commingled trusts, and unit trusts. Those manager Practices were unique both because they are for a type of fiduciary entirely different from stewards and/or advisors and because they were derived from industry best practices vs. legislation, regulation and/or case law.

Again, minor, technical updates have been made since 2006 to all three U.S. handbooks. For about two years now, we have been working on the significant updates to the advisor and steward handbooks (U.S. Editions) that were released today (the managers handbook is largely unchanged, with the exception of an entirely new introduction to match new content in the stewards and advisors handbooks). Again, this has included an internal fi360 team, numerous external reviewers, including adjunct faculty members, an expanded, external legal review, and technical editing by the AICPA. 

While the handbooks are obviously a huge part of who we are as a company, we also believe there is no better source of fiduciary guidance that is at once comprehensive, highly practical, and accessible to readers. Whether or not you have a need of our educational or technology solutions, the Practices and handbooks stand on their own as a means of creating a more fiduciary culture in all of financial services.

You can learn more about the updates by visiting the update summary and the Practices section of our website. You can also download the new Periodic Tables here: Stewards, Advisors, and Managers. The full handbooks can be downloaded by active AIF and AIFA Designees via the Designee Portal. Hard copies can be purchased by anyone by visiting the Fiduciary Store

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