- We are not fulfilling our fiduciary duty by continuing with a zero risk tolerance investment strategy.
- We lack the expertise internally to make investment decisions in a complex and volatile market.
- We lack the time and focus necessary to perform the due diligence and to gain the investment intelligence needed for sound decision making.
- We need to remove emotion and procrastination from investment decision making.
- We need assistance in successfully managing risk.
- As a fiduciary, we need a mechanism for limiting our liability for losses.
- We need assistance in developing a prudent and comprehensive investment strategy and policies to successfully implement our strategy.
- The Prudent Man Rule:
As stated in the Prudent Man Rule, found in ERISA Section 404(a)(1)(B), fiduciaries must act:
…with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
- The Prudent Process
- The duty to investigate;
- The duty to maintain records; and
- The duty to obtain expert assistance where necessary.
These three steps lead to the required outcome: An informed and reasoned decision.