Finding Optimum Fiduciary Responsibility
Like most of you, in 2008, I was a CFO for a company that had some financial success and had some significant cash reserves.
Financial prudence had made us successful, but financial prudence gave us an ultraconservative, risk intolerant investment strategy.
We were busy, but making .1% on money market deposits at the bank kept me up at night. Was I advising Management and my Board in a prudent manner?
I knew enough to know I needed some outside help. I talked to my banker and several other bankers soliciting my business. Over several months, I had lunch after lunch with bankers in the investment department, but all I got was a full belly and a blank stare. The representatives from the big investment houses were not any better.
Every esoteric conversation ended with, “Send us your written investment policy statement, and we’ll get started.”
What I discovered is that these investment people are precluded from writing an investment policy statement by law. They aren’t really advisors, they are regulated securities dealers.
Writing an Investment Policy Statement (IPS) is a daunting task. The IPS involves as much planning, insight and analysis as your annual operating plan. It lays out the governance and the metrics for evaluating success and fulfilling your fiduciary duty. It protects the operatives from doing a poor job.
The IPS also becomes the basis on which to find the right investment advisor. Since we selected our investment adviser in 2010, we have together achieved the 5-7% total return profit called for in our plan.
What we do is help you develop a prudent and comprehensive Investment Policy Statement, find the right Investment adviser for you, set proper expectations with your Board of Directors and implement a successful investment strategy.