For the Financial Advisor’s Fiduciary

[Pages:23]15 Essential Steps for the Financial Advisor's

Fiduciary

Standard of Care

In partnership with:

Roger L. Levy, LLM, AIFA?, of Cambridge Fiduciary Services, LLC

i

BLUELEAF'S ALL-IN-ONE CLIENT ENGAGEMENT

SOFTWARE

... BRINGS YOUR REPORTING & DATA WORLDS TOGETHER IN ONE, POWERFUL, INTEGRATED PACKAGE

ACCOUNT AGGREGATION

CLIENT PORTAL

ON-DEMAND PAPERLESS REPORTING BEAUTIFUL CLIENT PORTAL INTEGRATED ACCOUNT AGGREGATION ELIMINATES MANUAL DATA ENTRY

PERFORMANCE REPORTING

DOCUMENT SHARING

VIDEO DEMO

30 DAY FREE TRIAL

SIMPLE BILLING

CLIENT ANALYTICS

ii

Introduction

Your fiduciary duty, simplified.

Fiduciary responsibilities are integral to the work of a financial advisor. It's your job to not only act with a high fiduciary standard of care, but it's also your job to communicate this with your clients. Your clients, both current and prospective, have grown increasingly anxious about the state of their savings and investments. Most advisors feel overwhelmed by the complexity of the fiduciary standards and wonder how to maintain best practices as their business grows... This checklist will change that.

Here at Blueleaf, we help advisors simplify their business.

Blueleaf's simple account aggregation, client interaction and state of the art reporting software equips you with the information and communication tools that can be leveraged to maintain the highest level of fiduciary standard of care. This checklist will cover best practices and what you can do as a Blueleaf user.

If you're not a member of the Blueleaf community yet, no problem. This checklist still serves as a fundamental outline of 15 fiduciary best practices you need to know as a financial advisor, regardless of what's in your technology tool kit. Click here if you'd like to learn about Blueleaf Advisor ?

ii

Meet the pro.

Roger Levy, LLM, AIFA?

Roger is a friend of Blueleaf.

CEO of Cambridge Fiduciary Services, LLC, Roger has 25+ years experience guiding fiduciaries, including investment advisors, with their fiduciary obligations and building due diligence records of their investment process. As a CEFEX Analyst, he o ers fiduciary consulting and assessment services. Click here to email Roger ?

Today he shares a checklist of 15 fiduciary best practices. First, a quick preface:

"My trusted advisor..." That is how financial advisors like to be thought of by their clients. How an advisor earns that trust is another matter. Usually, it is not just a case of smarts or reputation. Most often, it is a question of time. Yet, the advisor is in a position of trust from the very moment that the advisor is engaged. From that moment, the advisor assumes fiduciary responsibilities towards the client and a position of trust is created.

Why not build that into the advisor marketing strategy? By establishing and explaining a "prudent" process that conforms to a fiduciary standard of care, the advisor acknowledges his fiduciary role and identifies a process designed to achieve appropriate outcomes. This can be a distinguishing feature of an advisor's model.

The following is a checklist to guide you in establishing a process to achieve a fiduciary standard of care.

iii

15 Essential Steps to achieve a Fiduciary Standard of Care

THE ULTIMATE CHECKLIST

Roger tells all.

Follow Roger as he walks through each essential element of this best practices checklist.

&

BlueBubbles

pop up with simple suggestions.

Let's get started...

1. Know the Fiduciary Framework

Governing Laws and Controlling Documents -

When you claim to conform to a fiduciary standard of care, you need to know the source of that standard. Generally speaking, that standard is derived from years of court decisions involving the law of trusts, where courts have found that when you are in a position of "trust" you take on certain responsibilities involving duties of care and loyalty. With the passage of time, statutes have been enacted to apply those fiduciary duties to particular relationships and circumstances.

For advisors, first among these statutes is the Investment Advisors Act of 1940 ("IA"). Under the IA, investment advisors, unless excluded or exempt, are required to be registered with either the SEC or their state authorities, depending on the advisor's activities and assets under management. Curiously, the IA has no specific language imposing a fiduciary duty on advisors, but Section 206, which has antifraud language prohibiting advisors from engaging in any practice that is fraudulent, manipulative or deceptive, has been interpreted as reflecting a congressional recognition "of the delicate fiduciary nature of an investment advisory relationship." So, it is now well settled that Registered Investment Advisors ("RIA's") owe a fiduciary standard of care to their clients.

The next most important statute from a fiduciary perspective is ERISA ? the Employee Retirement Income Security Act of 1974. This applies to qualified retirement plans but its fiduciary standard, the highest known to law, is well recognized as representing "fiduciary best practices." The statute is enforced by the Department of Labor ("DOL") which has issued extensive regulations regarding fiduciary duties and "prohibited transactions."

5

Three other uniform statutes also impact fiduciary responsibility ?

? UPIA ? The Uniform Prudent Investor Act, which applies to private trusts ? UPMIFA ? The Uniform Prudent Management of Institutional Funds Act, which applies to endowments,

foundations and nonprofit organizations ? UMPERSA ? The Uniform Management of Public Employee Retirement Systems Act, which applies to state,

county and municipal retirement plans These uniform statutes have been adopted by the majority of states, except UMPERSA, which is adopted in only a few states.

With an understanding of the regulatory framework, it is also important for an RIA to know what documents govern the client's circumstances. So when advising a trustee, one must know the provisions of the trust document and any amendment. For a retirement plan, the plan document must be reviewed together with any other document that impacts the investment process, such as board resolutions of the plan sponsor and investment policy statement. For other institutions, such as foundations and endowments, the charter must be reviewed as well as the terms of any restricted gift.

This is as simple as understanding the laws for (a) where you are and (b) the services you provide. Consider going through the laws with a business mentor or lawyer in your network. The jargon can be intimidating, but the practical application can be surprisingly easy to understand.

6

2. Know Fiduciary Duties

There are two principles which drive fiduciary responsibility. The first is that a fiduciary owes a duty of loyalty to each client, i.e. a duty to put the client's interests before his own. The second is a duty of care, which requires the fiduciary to fulfill his responsibilities with the care, prudence, skill and diligence of a "Prudent expert." All that follows in this Checklist has these two fiduciary principles in mind suggesting that, when advising a client or making a decision on a client's behalf, the advisor should apply three tests:

(i) Is this course of action in the client's best interests? (ii) Have I taken into account everything needed to arrive at this decision? and (iii) Is the decision prudent?

prudent (adj.) : acting with or showing care and thought for the future. This one's quite basic: Put the client first, consider their "whole picture" when making decisions, and always keep the future in mind.

7

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download