How to Write an Investment Policy Statement

"The preparation and maintenance of the Investment Policy Statement is the most critical function a fiduciary performs . . . this compact strategy guide provides advisors and their fiduciary clients with a useful tool that will help them comply with their ERISA-directed requirement." —Donald B. Trone, CEO (Chief Ethos Officer), 3ethos ERISA and other guidelines have long required fiduciaries to implement a uniform process for drafting an Investment Policy Statement (IPS). But historically, enforcement has been lax, leaving companies little motivation to develop a formal practice. Now, times have changed. Corporate scandals, coupled with volatility in the markets, have generated an increase in complaints, lawsuits and even the possibility of government legislation requiring an official IPS. This compact guide will help financial advisors, plan sponsors, money managers and all professional fiduciaries protect themselves, stay in compliance—and stay one step ahead of the government mandate—by putting a simple IPS process in place. Industry pro Rocco DiBruno provides an easy-to-follow framework for producing a well-written IPS based on practices recognized by the Foundation for Fiduciary Studies. In clear terms, he outlines how to . . . Define the duties and responsibilities of all parties involved Clarify diversification guidelines and keep costs in check Identify due diligence criteria for selecting investment options PLUS: Two Sample Policy Statements are included which can be downloaded directly from the website at: www.thornburg.com/IPS. Both templates make implementing a proper IPS easier and more accurate. With this thorough guidebook, you can prepare documents that meet all industry standards of compliance and federal regulations with relative ease—every time—while protecting yourself and your firm from liability.

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 Chapter 2 YOUR FIDUCIARY RESPONSIBILITIES AND LIABILITIES UNDER ERISA 21 Chapter 3 WHAT IS AN INVESTMENT POLICY STATEMENT AND WHAT ARE THE BENEFITS? 25 Chapter 4 UTILIZE THE “SAFE HARBOR” PROVISIONS PROVIDED BY ERISA 29 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 SECTION THREE: The Template IPS Chapter 8 SAMPLE IPS TEMPLATES 43 Chapter 9 SAMPLE IPS TEMPLATE #1: For Participant–Directed 401(k) That Intends to Comply with ERISA Section 404(c) 45 Chapter 10 SAMPLE IPS TEMPLATE #2: For High–Net–Worth Individual Setting Up a Family Trust 57 Conclusion MESSAGE TO PLAN SPONSORS 67 Glossary 69 Appendix: The Firm Profile 77 About the Author 79