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Foundations, Endowments, Not-for-Profits

Fiduciary Duty - Investment Committee Members of Not-for-Profits, Foundations, and Endowments

Fiduciaries are persons who have the legal responsibility for managing someone else’s money, including trustees and investment committee members.

It's About Law

If you are member of an investment committee, you are a fiduciary, and are probably governed by a law known as the Uniform Prudent Management of Institutional Funds Act. As of 1972, 47 states and the District of Columbia had adopted the predecessor to the Act. Other activities, such as acting as the trustee of a private trust, or being an owner of a business with a retirement plan also create a fiduciary requirement for individuals, but these are governed under other laws. All these fiduciaries are Investment Stewards.

There are seven practices common to these laws. They are:

1. Know standards, laws, and trust provisions.

2. Diversify assets to a specific risk/return profile.

3. Prepare an investment policy statement.

4. Use “prudent experts” (for example, an Investment Manager) and document due diligence.

5. Control and account for investment expenses.

6. Monitor the activities of “prudent experts.”

7. Avoid conflicts of interest and prohibited transactions.

It's About the "Tone at the Top"

Investment Stewards, Investment Advisors and Investment Managers who do not foster and promote a culture of fiduciary responsibility are going to lack the sensitivity and awareness to identify the fiduciary breaches of others. When a fiduciary has its own conflicts of interests, then that fiduciary will be marginalized at best; corrupted at worst. 

“Society depends upon professionals to provide reliable, fixed standards in situations where the facts are murky or the temptations too strong. Their principal contribution is an ability to bring sound judgment to bear on these situations. 

They represent the best a particular community is able to muster in response to new challenges.”

Dr. Robert Kennedy, University of St. Thomas

It's About the Benefits of Having a Defined Standard

A defined standard is useful to:

• Help to establish evidence that the Steward is following a prudent investment process.

• Serve as a practicum for all parties involved with investment decisions (Investment Advisors, Investment Managers, accountants, and attorneys), and provide an excellent educational outline of the duties and responsibilities of Investment Stewards.

• Potentially help to increase long-term investment performance by identifying more appropriate procedures for:

• Diversifying the portfolio across multiple asset classes and peer group

• Evaluating investment management fees and expenses

• Selecting Investment Managers

• Terminating Investment Managers that no longer are appropriate

• Help uncover investment and/or procedural risks not previously identified, which may assist in prioritizing investment management projects.

• Encourage Stewards to compare their practices and procedures with those of their peers.

• Assist in establishing benchmarks to measure the progress of the Investment Steward.

It's a Four Step Process

Our Services

Our Fiduciary Consulting Services are offered “a la carte” and may include but are not limited to:
  • Complete Fiduciary Review
  • Helping you create an Investment Policy Statement that contains the details to define, implement, and manage a specific investment strategy, including appropriately structured, socially responsible investment (SRI) strategies, where applicable.
  • Assist in implementing an investment strategy which is in compliance with the required level of prudence.
  • Identify and implement applicable Safe Harbor provisions.
  • Investment review including asset class, investment vehicle, regulatory oversight, track record, stability of organization, expenses, and more.
  • Ongoing portfolio monitoring.
  • Act as liaison between parties at interest.
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