Fiduciary standards on notice
Managing director of Plan B Group Denys Pearce has warned that many Australian investment stewards may be vulnerable to litigation over fiduciary standards.
Following his appointment to the global policy board of the Investment Fiduciary Leadership Council (IFLC), Pearce said he had serious concerns over how many lay investors were ignorant of the rigorous processes required for due diligence of investment decisions.
“Naivety and best intentions are not an acceptable excuse for poor investment decision making and could leave these stewards open to criticism and litigation,” he said.
Lay investment stewards may include the trustees and members of investment committees of not-for-profit organisations, foundations, local government and self-managed super funds.
“Fiduciary standards and obligations are not a matter of personal opinion and preference. They are the result of well-established analysis and well-founded procedures — akin to a company director’s considerable legal responsibilities.
“They help determine acceptable risk levels, asset allocation, the selection of appropriate investment managers and monitoring of strategy on an ongoing basis,” Pearce said.
According to Pearce, the last few months have highlighted serious lapses in fiduciary responsibility and have had serious consequences for some investments.
“Trustees and investment stewards are entitled to make mistakes, as long as their processes are correct and written documentation proving that they have been followed processes exists,” he said.
“Even ‘bad’ outcomes that result from decisions based on correct processes can withstand attack and litigation.”
The IFLC is a US-based organisation that promotes fiduciary excellence in the financial services industry.
Recommended for you
A quarter of advisers who commenced on the FAR within the last two years have already switched licensees or practices, adding validity to practice owners’ professional year (PY) concerns.
Integrated wealth and financial services group Rethink has launched a financial planning arm called Rethink Wealth to expand beyond property investing and into holistic wealth management.
While adviser numbers continue to slowly creep back up, the latest Wealth Data analysis reveals they would actually be in the green for the calendar year if it weren’t for so many losses in the limited advice space.
Iress has appointed a chief AI officer to spearhead the fintech’s strategic focus on AI, with chief executive Marcus Price describing how the technology opens the doors to a “new frontier for wealth advice”.
