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An indispensable resource for every financial service professionals developing an IPS
The Investment Policy Statement (IPS) is one of the most critical documents fiduciaries must draft. For years, ERISA and other industry regulations have governed the guidelines all fiduciaries must comply with when drafting one. But the current climate of corporate scandal and the 2008 global banking crisis have led to increased scrutiny by regulators, prompting firms to take a closer look at the quality and integrity of their IPSs and to take steps to have a rigorous formal process in place for drafting them. Endorsed by the Foundation of Fiduciary Studies, this concise guide provides a rigorous framework and the expert insight, information and guidance you need to guarantee that your IPS is in complete compliance with all ERISA-directed requirements.
* Provides a step-by-step plan for creating a uniform IPS that every advisor in the office can follow
* Defines the duties and responsibilities of all parties involved, while clarifying diversification guidelines and providing methods for keeping costs under control
* Packed with ready-to-use templates, sample forms, letters and other documents, diagrams and other valuable tools, including sample Policy Statement downloadable at the companion website
* Designed to get you quickly up to speed on what you need to know to confidently serve your clients with the highest standards of care and protection
List of contents
Foreword by Don Trone 11
SECTION ONE: Why Plan Sponsors and All Fiduciaries Need a Formal Process for Writing Their Investment Policy Statement
Chapter 1 ERISA AND THE CHALLENGE OF FIDUCIARY RESPONSIBILITY 17
Writing an Investment Policy 17
What Is a Fiduciary?18
Fiduciary Liability19
Chapter 2 YOUR FIDUCIARY RESPONSIBILITIES AND LIABILITIES UNDER ERISA 21
Five Fiduciary Responsibilities 21
Fiduciary's Personal Liability 22
A Fiduciary's Primary Role Is to Manage the Process 23
Chapter 3 WHAT IS AN INVESTMENT POLICY STATEMENT AND WHAT ARE THE BENEFITS? 25
Risk Management 25
Monitor Investments 26
Summary 27
Chapter 4 UTILIZE THE "SAFE HARBOR" PROVISIONS PROVIDED BY ERISA 29
Prudent Experts 29
Five Recognized "Safe Harbor" Rules 29
Chapter 5 COMPLYING WITH ERISA SECTION 404(c) 31
SECTION TWO: How to Get Started and Steps to Formalize the Process
Chapter 6 ASSEMBLING THE DOCUMENTATION 35
Chapter 7 STEPS TO FORMALIZE THE PROCESS 37
STEP 1: Decide on Plan Goals, Objectives, and Strategies 37
STEP 2: Decide on Strategy for Managing Risk 37
STEP 3: Determine the Risk Tolerance of the Plan 38
STEP 4: Set Forth Guidelines for Asset Classes 39
STEP 5: Implement an Asset-Allocation Policy 39
STEP 6: Mutual Funds Recommendations 39
STEP 7: Delegate Investment Management Responsibility 40
STEP 8: Investment Monitoring and Reporting 40
SECTION THREE: The Template IPS
Chapter 8 SAMPLE IPS TEMPLATES 43
Two Distinct IPS Samples 43
Organization of Templates 43
Chapter 9 SAMPLE IPS TEMPLATE #1: For Participant-Directed 401(k) That Intends to Comply with ERISA Section 404(c) 458
STEP 1 Executive Summary and Background 45
STEP 2 Purpose of the Investment Policy Statement 46
STEP 3 Duties and Responsibilities 48
STEP 4 Asset Class Guidelines 50
STEP 5 Investment Manager Selection 52
STEP 6 Monitoring the Investment Managers 53
STEP 7 Controlling and Accounting for Investment Expenses 55
STEP 8 Investment Policy Review and Monitoring 56
Chapter 10 SAMPLE IPS TEMPLATE #2: For High-Net-Worth Individual Setting Up a Family Trust 57
Executive Summary 58
PART I--Purpose 59
PART II--Investment Management Objectives 59
PART III-- Roles and Responsibilities 60
PART IV-- Investment Manager Selection 61
PART V-- Investment Monitoring and Review 63
PART VI-- Manager Termination 65
PART VII-- Additional Provisions (optional)65
Conclusion
MESSAGE TO PLAN SPONSORS 67
Glossary 69
Appendix: The Firm Profile 77
About the Author 7
About the author
Rocco DiBruno is the author of How to Write an Investment Policy Statement, 2nd Edition, published by Wiley.
Summary
An indispensable resource for every financial service professionals developing an IPS The Investment Policy Statement (IPS) is one of the most critical documents fiduciaries must draft. For years, ERISA and other industry regulations have governed the guidelines all fiduciaries must comply with when drafting one.
