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Nuts and Bolts of Fulfilling Fiduciary Duties

Fiduciary duty, who is responsible for fulfilling it, and the rules that will — or won’t — guide and regulate it have been generating great attention for years. And for good reason.

In “A Cascading Behavioral Roadmap for Fulfilling Fiduciary Duties” a recent blog entry by Neal Shikes, Managing Partner of The Trusted Fiduciary, Shikes argues that “fulfilling fiduciary duties is an outcome of successfully integrating processes and methodologies that require different skill-sets,” and offers some practical tips and ideas for performing this function.

“All outcomes and breaches of fiduciary duty /fiduciary responsibility fulfillment cascade from” performing these four tasks, Shikes says:

1. Identify skills needed fulfill fiduciary duties. Shikes suggests that these include:

  • portfolio construction;
  • investment selection;
  • analytics;
  • use of financial technology;
  • ability to apply laws and regulations;
  • recordkeeping;
  • administration; and
  • ability to communicate with employees.

2. Identify those with the necessary skills and assign them accordingly.
3. Develop a viable and executable Investment Policy Statement (IPS).
4. Identify financial technology that will facilitate compliance and fulfillment of fiduciary duty.
Shikes argues that one also must create methodologies “that are consistent with the IPS and free of conflicts of interest,” and they be applied to the following:

  • selecting and reviewing investment options, record keepers, administrators and advisors;
  • communications with plan participants; and
  • a continuing education program concerning fiduciary duties.

“Breaches of fiduciary duty and their poor outcomes tend to originate from poor behaviors and decisions that create a negative cascading effect on a retirement plan,” writes Shikes, adding that “a simple impact analysis” can show whether one’s behaviors and methodologies are helping or hindering meeting fiduciary duties.