Insights from the experts in investment fiduciary responsibility.

The Prudent Practices Update: Revisiting the Spotlight on the Practices Series

Posted by Anna Hancq on September 25, 2013

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Beginning in 2009, we started a series here on the blog called Spotlight on the Practices, in which we went through each of the Prudent Practices, dived a little deeper into the purpose of the Practices, how it can be applied, and additional resources that might help you implement them. You can find those blog posts by clicking the Spotlight on Practices category in the right-hand column. Now that the Practices have been updated, we want to revisit these posts. Our goal will be to both highlight the changes and continue to strengthen the understanding of the Practices, the Criteria, as well as the underlying legislation, regulation, and case law upon which they are based.

As a primer for this series, we’ll start with an overview of the Practices themselves. The Prudent Practices were introduced as a guide for investment fiduciaries. They broke down the fiduciary requirements found in the major investment management laws into a cohesive process that ensured all obligations are being met. The Practices were originally based on ERISA, UPIA, UMIFA (now UPMIFA), and MPERS (now UMPERSA). Since then, we have also incorporated the Investment Advisers Act of 1940, the Pension Protection Act, and the Dodd-Frank Act. While the Practices are intended to be universal for all types of investment portfolios and therefore general enough that the process itself can be considered timeless, they are also living Practices that must be updated to reflect changes in laws, regulations, and industry best practices. The goal of these changes, or updates, is always the same: to produce a prudent practice road map for fiduciaries to follow as they navigate their numerous responsibilities.  [See also the original introduction to the Spotlight on Practices series for an overview of how we formed the Practices.]

For ease of reference, we have listed the old Practices and Criteria side-by-side the new ones so you can see how the Practices have evolved since the previous iteration. As you’ll see, the process itself hasn’t fundamentally changed.  The changes we have made are either to reflect changes in law and regulation, to reflect input of practitioners, or for clarification purposes. There is also a net increase of 13 Criteria, which reflects the extra detail we have provided with this update. Those documents can be found at the links below:

You can review the new Practices via the updated Periodic Tables, which provide a handy visual representation of the Practices for reference or for providing to clients (Stewards version hereAdvisors version hereManagers version here). 

The Practices are the core of fi360 – they are the foundation of all we provide with respect to training, tools, resources and the designations we award. As we grow and expand our services, we will continue to revise them as needed, and use them to build even better and more innovative products and services for our clients.

In the next post of our revisit of the Practices, we’ll be looking at Practice 1.1: The Advisor demonstrates an awareness of fiduciary duties and responsibilities.

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