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102 Matching News Items

1.  A Fiduciary Blueprint: The Restatement of Trusts, the Prudent Investor Rule, and the DOL's New Fiduciary Rule
The Prudent Investment Adviser Rules Link to more items from this source
Sept. 14, 2016
"In adapting their practices to the DOL's new fiduciary rule, financial advisers need to focus on the fact that fiduciary liability is generally based on a fiduciary's imprudent conduct in developing their investment recommendations, not the actual performance of the actual investments and strategies. It is reasonable to assume that the courts will continue to rely on the Restatement of Trusts and the Prudent Investor Rule in interpreting imprudent conduct under the DOL's new fiduciary rule."
2.  Modern Portfolio Theory, the Prudent Investor Rule and Fiduciary Investing
The Prudent Investment Fiduciary Rules Link to more items from this source
Oct. 12, 2021
"While most financial advisers are aware of the 'total portfolio' approach of MPT and the Rule, they are often unfamiliar with other key tenets of MPT and the Rule. Consequently, many financial advisers are unaware that their practices may be totally inconsistent with MPT and the Rule, leaving them exposed to liability for financial losses sustained by their clients."
3.  Whoomp, There It Is! The New Prudent Fee Fiduciary Standard
The Prudent Investment Adviser Rules Link to more items from this source
Dec. 18, 2014
"[The] United States District Court for Southern District of New York provided the long-anticipated introduction, or more specifically the judicial verification, of Vanguard's funds' fees as a comparative basis for assessing excessive of fund fees was established. While the case is not binding on other courts, the rationale used by the court is persuasive and will undoubtedly be referenced by plaintiffs' attorneys in both 401(k) and other cases where breach of fiduciary issues involving fee issues are involved.... More importantly, the court's decision provides further support for the relevance of intrinsic costs and returns in analyzing both investment recommendations made by financial advisors and investment options offered by 401(k) plans and other retirement plans." [Leber v. The Citigroup 401(k) Plan Investment Committee, No. 07-CV-9329 (S.D.N.Y. Sept. 30, 2014)]
4.  The Key Factor in Adviser Liability Risk Management
The Prudent Investment Adviser Rules Link to more items from this source
Mar. 6, 2014
"Investment advisers and other financial advisers who create asset allocation recommendations based solely upon the belief that a client's time horizon is the most important investment factor should go ahead and call their E&O carriers and put them on notice. The argument commonly advanced in favor of time horizon being the most important factor in asset allocation claim [is] that time reduces risk. Various studies have shown that that simply is not true.... Attempting to designate one factor as the most important factor in evaluating a client simply makes no sense."
5.  Financial Advisers Can't Overlook the Prudent Investor Rule
Max M. Schanzenbach and Robert H. Sitkoff, via SSRN Link to more items from this source
Aug. 9, 2016
"This article calls attention to the [DOL's] imposition of the 'prudent investor rule' on financial advisers to retirement savers. This article also canvasses the customary role of an investment policy statement in promoting compliance with the prudent investor rule by professional fiduciaries."
6.  Quantifying Fiduciary Prudence and the Quality of Investment Advice
The Prudent Investment Adviser Rules Link to more items from this source
Feb. 12, 2024
"A simple cost/benefit analysis would seem to be a part of a prudent process for plan sponsors to use evaluating the fiduciary prudence of investment products in defined contribution plans (DCPs). However, based on the evidence, very few plans seem to use cost/benefit analyses as part of their fiduciary prudence process. Furthermore, even when plans do use cost/benefit analysis, there are often legitimate questions as to whether such analyses were properly conducted."
7.  Fiduciary Standard vs. Suitability Standard: The 'Gotcha' That Won't Go Away
The Prudent Investment Adviser Rules Link to more items from this source
Jan. 9, 2017
"While there are those that try to confuse the issues with regard to fiduciary prudence and/or suitability, ... two simple questions help to clarify the issues for both financial/investment advisers and securities attorneys. [1] Is an investment that has consistently failed to produce a positive incremental return for an investor a prudent investment and/or suitable for any investor, given the opportunity costs it produces relative to comparable investment options? [2] Is an investment whose incremental costs have consistently exceeded the investment's incremental returns a prudent investment and/or suitable for any investor, given the financial losses it produces relative to comparable investment options?"
8.  Robo-Advisers: Best Deck Chairs on the Titanic?
The Prudent Investment Adviser Rules Link to more items from this source
Sept. 15, 2015
"Many of the current robo-advisers offer automatic rebalancing services, which automatically [adjust] an investor's portfolio allocations to their original percentages once certain thresholds are breached. The rebalancing takes place without regard to factors such as overall economic and/or stock market conditions. And therein lies the potential threat to an investor's financial well-being, and the opportunity for traditional investment advisers to establish their value proposition to investors."
9.  What Mr. Schlichter Understands ... and Plan Sponsors and Investment Fiduciaries Need to Understand as Well
The Prudent Investment Adviser Rules Link to more items from this source
Aug. 21, 2016
"[T]he prudent fiduciary will normally choose a period of five or more years so that at least one down period is included to get a better idea of how the fund performed in both up and down markets.... [T]oo many investment fiduciaries look at a fund's nominal returns and the fund's standard deviation and believe that they have met their fiduciary duties.... What too many fiduciaries fail to consider is that a fund's nominal return may not reflect the fact that a fund achieved a respectable return while assuming far less risk than a fund with slightly higher nominal returns."
10.  Factoring Investment Costs Into the Prudence/Suitability Equation
The Prudent Investment Adviser Rules Link to more items from this source
May 10, 2017
"Investors cannot control the performance of the markets. Investment fiduciaries are not held liable for the eventual performance of the markets. However, investors and investment fiduciaries can control certain elements of investing that play a significant role in determining an investor's and/or pension plan participant's success."
11.  Incredible Marketing Opportunity for RIAs
The Prudent Investment Adviser Rules Link to more items from this source
May 22, 2014
"The [DOL's] pending fiduciary revisions and the SEC's stall tactics provide an incredible opportunity for investment advisers, who are already subject to a fiduciary standard. Prudent investment advisers will focus their marketing on the inequitable dual standard that currently exists and the dangers that result from same."
12.  No Bonus Points for Complexity: Simplifying Fiduciary Risk Management
The Prudent Investment Adviser Rules Link to more items from this source
Jan. 9, 2024
"Prudent plan sponsors keep it simple. They comply with ERISA without exposing themsleves to unnecessary risks or potential fiduciary liability exposure.... The only thing that really matters from a risk management and legal liability standpoint, and that is truly in the plan participants best interest, is that the plan sponsor provide them with prudent investment options that are both cost-efficient, and that allow them to properly diversify their plan investments to hopefully reduce the risk of large investment losses."
13.  Quantifying 'Best Interest,' Reasonable Compensation and Suitability for Investment Professionals
The Prudent Investment Adviser Rules Link to more items from this source
May 29, 2016
"Given the abundance of evidence establishing the poor historical performance of actively managed mutual funds and the inequitable nature of the 'inverse pricing' method used by many variable annuity issuers in computing a variable annuity annual M&E fee, a strong argument can be made that the fees and other costs charged by many investment professionals are not reasonable at all[.]"
14.  Fiduciary Financial Advice to Retirement Savers: Don't Overlook the Prudent Investor Rule
Max M. Schanzenbach, Northwestern University School of Law, and Robert H. Sitkoff, Harvard Law School, Via SSRN Link to more items from this source
June 16, 2016
"This essay calls attention to the regulatory imposition of the prudent investor rule on financial advisers to retirement savers. The essay also canvasses the basic tenets of the prudent investor rule, highlighting its nature as principles-based rather than prescriptive, and the customary role of an investment policy statement in compliance by professional fiduciaries."
15.  Costs, Correlations and Prudent Fiduciary Investing
The Prudent Investment Fiduciary Rules Link to more items from this source
Sept. 1, 2021
"Financial advisers and actively managed mutual funds do not like to talk about the costs associates with their funds. Research has consistently shown that the overwhelming majority of actively managed are not cost efficient.... Financial advisers and actively managed funds also do not like to discuss the relationship between a fund's implicit expense ratio and its correlation of returns with comparable index funds."
16.  Using Creative Chaos to Demonstrate the Value of the Fiduciary Standard
The Prudent Investment Adviser Rules Link to more items from this source
Nov. 7, 2013
"Independent investment advisers can, and should, take advantage of their independence to stress the fiduciary issues inherent in the broker/non-fiduciary standard and the investment adviser/fiduciary and the implications of both for investors. In order to drive the difference home, [the author suggests concentrating] on a simple question -- 'what is so objectionable and onerous about requiring that anyone providing investment advice and investment recommendation be required to put their client's interests ahead of their own?'"
17.  Why the SEC Will Not and Cannot Adopt a Fiduciary Standard
The Prudent Investment Adviser Rules Link to more items from this source
July 18, 2017
"[M]any of the investment products currently on the market would not pass a meaningful fiduciary standard ... [by which] I mean a fiduciary standard that is consistent with the standards set out in the Restatement (Third) Trusts, especially Section 90, more commonly known as the Prudent Investor Rule.... The current pricing platforms used by actively managed mutual funds and variable annuities raise legitimate questions as to whether such products would pass the Restatement's prudence requirements.... [Is the SEC] willing to risk the wrath of Wall Street and the investment industry by honoring its stated vision and mission statements and enact a meaningful fiduciary standard to protect the public and ensure fair and equitable treatment for all investors?"
18.  The Two Minute ERISA Fiduciary Liability Risk Management Challenge
The Prudent Investment Adviser Rules Link to more items from this source
July 21, 2016
"After considerable frustration with both the genuine and the bogus complaints, [the author] decided to create a metric to help clarify the concepts of the prudence and 'best interests' required of fiduciaries under the Prudent Person Rule.... The strength of the [Active Management Value Ratio™ 2.0 (AMVR)] is its simplicity, both in terms of calculation and interpretation.... The AMVR calculates the cost efficiency of an actively managed mutual funds relative to a comparable passively managed, or index, fund based on the incremental cost incurred and incremental return, if any, produced by an actively managed mutual fund."
19.  The Art of Fiduciary Investing: Controlling the Controllable
The Prudent Investment Adviser Rules Link to more items from this source
July 9, 2014
"While excessive costs have been the focus of recent ERISA actions ... the next wave of ERISA litigation will focus on the failure of plan sponsors to provide the 'broad range' of investment options required under ERISA Section 404(c) in order to allow plan participants to effectively diversify their pension accounts so as to minimize the risk of significant investment losses.... [T]he investment options offered by most defined contribution plans consist of mainly of unnecessarily expensive and highly correlated equity-based mutual funds."
20.  Beware the 'We're Number One' Trap
The Prudent Investment Adviser Rules Link to more items from this source
Aug. 14, 2013
"All advisers want favorable publicity, but these so-called 'best of the best' lists raise a number of potential problems.... 'Barron's' disclosure that only those advisors who pay a fee are eligible for inclusion on their lists raises a number of issues for advisors named to such lists.... The [Investment Advisers] Act and the rules created thereunder all stress one point -- full disclosure of all material facts to clients. An advisor simply cannot say that they are a 'Barron's Advisor' of that they are a 'Top 100 Advisor' without making the disclosures required by the [SEC's 1998] DALBAR no-action letter."
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