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Financial Advisers Can't Overlook the Prudent Investor Rule

"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."

Fiduciary Financial Advisers and the Incoherence of a 'High-Quality Low-Fee' Safe Harbor

"Concerned about conflicts of interest among financial advisers who provide advice to retirement savers, the [DOL] has proposed imposing fiduciary status and a 'best interest' standard on such advisers. To ameliorate the resulting compliance costs, the DOL has also raised the possibility of a safe harbor for certain 'high-quality low-fee investments.' However, the notion of a 'high-quality' investment is in irreconcilable tension with the highly individualized assessment of risk and return that is required by modern portfolio theory, the well-accepted concept from financial economics that has been codified in the 'prudent investor rule' as the standard of care for fiduciary investment. This policy incoherence is worrisome because of the potential for the safe harbor to swallow the best interest standard."

Fiduciary Financial Advice to Retirement Savers: Don't Overlook the Prudent Investor Rule

"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."