Generally speaking, those individuals entrusted with the responsibility of handling an organization’s investments have certain responsibilities. Unfortunately, these responsibilities are often overlooked because of career demands or simply because of a lack of available resources. These responsibilities are:
1. To manage the impact of inflation and avoid a consistent loss of purchasing power.

2. To maximize the total rate of return of the investment portfolio while keeping within an acceptable level of risk.

3. To control investment expenses as efficiently as possible.

4. To monitor investment performance and philosophy.

The procedural standards that fiduciaries must follow are outlined in conceptual form under the Employee Retirement Income Security Act (ERISA) as originally passed in 1974. While these standards primarily apply to qualified retirement plans, we often suggest organizations apply the same procedures.
The prudent procedures outlined by ERISA are:
  1. An investment policy must be established and should be in writing.
  2. Plan assets must be diversified.
  3. Investment decisions must be made with the skill and care of a prudent expert.
  1. Investment performance must be monitored.
  2. Investment expenses must be controlled.
  3. Prohibited transactions must be avoided.
1 ERISA Sec. 402(a)(1), 402(b)(1) – (2), 404(A)(1)(D)
2 ERISA Sec. 404(a)(1)(C)
3 ERISA Sec. 404(a)(1)(B)
4 ERISA Sec. 405(a)
5 ERISA Sec. 404(a)
6 ERISA Sec. 406(a) – (b)
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