Does your adviser have discretion over your assets?
If you don’t know whether you’ve granted discretionary authority to an adviser, you probably haven’t. In Fiduciary 360’s fiduciary handbook, Prudent Practices for Investment Stewards, five generally recognized provisions are cited that may reduce the liabilities associated with an investment steward’s management of portfolio assets. These are:
- Use prudent experts (registered investment adviser, bank, or insurance company) to make the investment decisions.
- Demonstrate that the prudent expert was selected by following a due diligence process.
- Give the prudent expert discretion over assets.
- Have prudent experts acknowledge their co-fiduciary status.
- Monitor the activities of the prudent expert to ensure that the expert is performing the agreed upon tasks.
Generally, RWM recommends that nonprofits with less-than-highly investment-sophisticated boards grant decision-making authority to advisors pursuant to a process that meets these five provisions.