Fiduciary Practices

We define an Investment Fiduciary as a person or organization who is managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility.

CEFEX uses the following terms:

Investment Steward
A person or organization which has the legal responsibility for managing investment decisions (trustees and investment committee members).

Investment Advisor
A professional who is responsible for providing comprehensive and continuous investment advice (including wealth managers, financial advisors, trust officers, financial consultants, investment consultants, and financial planners).

Fiduciary Adviser
A person that renders investment advice for a fee or other compensation, direct or indirect, to IRA accounts or ERISA retirement plan participants (per the Pension Protection Act of 2006).

Investment Manager
A professional who makes investment decisions: selects the securities (eg. stocks and bonds) to implement a specific investment mandate (eg. large cap growth).

Investment Support Services Provider
An organization providing support services to Investment Stewards or Advisors. The definition includes organizations providing services to ERISA plans (“parties in interest”) as well as those providing consulting, custodial, investment advisory, investment management, investment brokerage, or other similar services to investment fiduciaries.

Fiduciary Practices and Prudent Practices describe the requirements for a firm to maintain an investor's trust. The Practices are the basis for a CEFEX Assessment which may lead to registration

Investment Steward and Advisor Practices

Investment Stewards, generally with the assistance of Investment Advisors, have primary responsibility for effective management of the investment process:, including faithful adherence to investment fiduciary Practices. The Investment Steward is responsible for managing the overall investment strategy: deciding on the asset allocation, defining the details of the strategy, implementing the strategy with appropriate Investment Managers, and monitoring the strategy on an ongoing basis. An Investment Advisor may be called upon by the Steward to assist in this process, or to assume direct responsibility for certain fiduciary duties delegated to, and accepted by, the Advisor.

Please click here to download Fiduciary Practices for Investment Stewards

Please click here to download Fiduciary Practices for Investment Advisors

Investment Manager Practices
Currently, 24 Fiduciary Practices have been identified, which can decrease fiduciary risk for Investment Managers. We define fiduciary risk as the risk of breaching the investor's trust that an asset manager will meet an expected return on investment. The CEFEX Fiduciary Practices are based on guidelines proposed by industry organizations such as the CFA Institute, the European Fund Asset Management Association (EFAMA) and the World Risk Standards Working Group. CEFEX believes that fiduciary excellence contributes to improving performance by stabilising investment returns and securing capital. While past performance cannot predict future returns, CEFEX believes an asset management firm's adherence to fiduciary practices, correlated with its track record, can anticipate future risk.

Each fiduciary practice has criteria to determine conformity to the practice. Since asset managers will have varying implementations of fiduciary practices, the criteria span a broad range. Each criteria is assessed using 'fiducials', or quantitative measures of adherence to a practice. For example, Practices 3.5 and 4.2, best execution in trading and trade monitoring, contain criteria from the broker selection and trading process, to the monitoring and allocation policies. 'Fiducials' for these criteria will include a query on failed trades over a set time period. Another example is in Practice 1.5 where business continuity through reliable IT systems and risk management is addressed. 'Fiducials' will query whether back-up facilities and recovery programs are coordinated with the firm's reporting obligations.

Please click here to download Fiduciary Practices for Investment Managers

Prudent Practices for Investment Support Services
The Prudent Practices for Investment Support Services align directly with the fiduciary responsibilities detailed in Prudent Practices for Investment Advisors and Prudent Practices for Investment Stewards.

Please click here to download Prudent Practices for Investment Support Services