1. The Fiduciary Relationship
2. The Fiduciary Standard
3. Compliance with the Uniform Prudent Investor Act
4. A clear understanding and utilization of Modern Portfolio Theory
Fiduciaries are responsible for someone else's welfare. To meet this responsibility, it is essential that the fiduciary carefully and correctly assess the client's situation. They need to assess the client's capabilities, wants, desires, needs, abilities, limitations, etc. From this assessment the fiduciary must strategize, create and implement the best possible plan of support, while remaining diligent to the statutes that direct fiduciaries, while protecting and serving their clients.
The typical investor is answerable only to himself. If he speculates and loses, he's the only one hurt. By contrast, a fiduciary has accepted responsibility for someone else's welfare. If he speculates and loses, his client suffers the consequences of his imprudence. Thus, California law imposes the fiduciary standard upon all fiduciaries (public, private, or professional). That standard requires a fiduciary to act solely in the client's best interest.
(UPIA) - Was adopted in 1992. It reflects a "modern portfolio theory" and "total return" approach to the exercise of fiduciary investment discretion. Guardians and conservators are subject to laws of trust established in Probate Code Sec 2101, however, they are also limited in Probate Code Sec 2574 as to what investments can be made without Court approval. Trustees are subject to the laws of trust established in Probate Code Sec 2101, without the limitation of Sec 2574.
Uniform Prudent Investor Act (UPIA) admonishes fiduciaries to embrace the principals of Modern Portfolio Theory.