Introducing fiduciaryLINK - fi360 Australasia

By: Fi360 Australasia  06-Dec-2011
Keywords: Investment, Risk Management, Due Diligence

fiduciaryLINK™, is a specific support program for Charities and other Board Governed entities, Investment Committees and Professional Firms (accountants and lawyers) who have fiduciary roles.

Fred Reish, a US Attorney specialising in fiduciary services and litigation provides a valuable outline ... 

“The common denominator for almost all fiduciary governance is the concept of the “prudent” fiduciary.  Procedural prudence may seem, at first blush, like an amorphic concept…attractive sounding, but difficult to apply.  Or, procedural prudence may sound like a grand idea in the realm of academics, but of little real application in the real world.  However, neither of those conclusions is correct.  Instead, prudent process is, at a fundamental level, both specific and implementable. But it does require a commitment to engaging in a process to make decisions” 

The conduct or good governance required of any prudent trustee, as made clear by the law and court judgements, is clearly one of "process" yet this term can be as daunting as it is appealing, hence lip service is often the end result. Fortunately, there are now materials and guidance available, ensuring fiduciary processes are defined in sufficient detail to be practically implemented.

In 2005 a study was undertaken in New Zealand by The Crummer School of Business, Rollins College, (home of Florida’s most Prestigious MBA program). It investigated what beneficiaries and clients wanted from Trustee Boards or their accountants and lawyers, who may also act as trustees. It highlighted the following opportunities:

  • Gain knowledge and independent certification (trustworthiness)
  • Focus on good governance by managing investment process, not providing investment advice
  • Form robust alliances for key components (of the investment governance process) in order to provide integrity and transparency and to ensure a focus on what really matters.

The objectives of the "fiduciaryLINK" program is to :

  • Install and document quality fiduciary governance
  • Improve evaluation and decision-making by those in governance roles
  • Enhance board or committee dynamics, ensuring genuine purposefulness by all participants
  • Reduce costs by unbundling service provider fees and expenses and ensuring fair, transparent costs for only essential services.
  • Improve diversification and risk management
  • Provide robust provider selection with thorough due diligence
  • Improve performance and quantify which providers add genuine value

The program provides two stages;

Stage 1 - Assessment

An initial fiduciary review, which is an assessment of current investment process against a defined fiduciary standard, and an analysis of portfolio implementation and monitoring issues to establish alignment with good governance objectives.

Stage 2 - Enrolment

A board governed entity or family trust can enrol in a tailored program of ongoing investment governance support. This stage is all about getting the right things done well.

In the investment world nothing stays the same for long. Supplier's offerings, costs, performance achievement and new, alternative opportunities mean continuous and detailed supervision of investments is arguably the most critical function for any fiduciary. Most do not have the expertise or time to collate the necessary detail in a form that can be easily evaluated, enabling sound and justifiable decision making. Relying on providers for this information is fraught with shortfalls.

Beneficiaries and investor clients assume trustees and professional firm partners are "up to date" with the knowledge and ability to scrutinise providers and to ensure good governance practices are installed. This bar is of course always rising and no more quickly than at present with the tidal wave of scrutiny and disclosure being demanded by the public and the raft of new legislation being brought in after the debacle of the last few years, where too many industry conflicts have been exposed.

The impact of new regulations

For those in governance roles, the bar is rising. Better disclosure and more information being made mandatorily available by service providers leaves trustees and those acting in fiduciary roles with nowhere to hide if it is not prudently weighed up.

Proper evaluation of this information, challenging the impact of disclosed relationships and fee sharing relationships and making the right decisions based on this information must be effective. fiduciaryLINK facilitates this.

Keywords: Due Diligence, Fiduciary Governance, Investment, Risk Management,

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The conduct or good governance required of any prudent trustee, professional or financial adviser, as made clear by the law and judgements, is clearly one of process yet this term can be as daunting as it is appealing, hence lip service is often the end result. Fortunately, there are now materials and support services available, ensuring fiduciary processes are defined in detail and can be practically implemented.