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.
Investment Stewards have different
• Steward of a qualified or public retirement plan
• Steward of a foundation, endowment
• Steward of government funds
The Standard of Practice used to assess Investment
Stewards is based on the Handbook: “Prudent Practices for Investment Stewards”,
published by fi360. Each practice has been substantiated by legislation, case
law, and/or regulatory opinion letters from ERISA, UPIA, UPMIFA, and
click here to download Fiduciary Practices for Investment Stewards
Benefits of fiduciary assessments for
1. Helps to establish evidence that the Steward is following a prudent
2. Potentially helps increase long-term investment
performance by identifying appropriate procedures for:
- Diversifying the portfolio across multiple asset classes and peer groups
- Evaluating investment management fees and expenses
- Selecting Investment Managers
- Terminating Investment Managers that no longer are appropriate
3. Helps uncover investment
and/or procedural risks not previously identified, which may assist in
prioritizing investment management projects.
4. Encourages Stewards to compare
their practices and procedures with those of their peers.
5. Assists in
establishing benchmarks to measure the progress of the Steward.
Consulting Assessments vs. Certification Assessments
CEFEX offers 2 forms of fiduciary assessments for Investment Stewards. Both types are based on the Global Fiduciary Standard of Excellence, and use the methodology described in the “Consultants Assessment of Fiduciary Excellence (CAFÉ)".
Consulting Assessments are typically performed when the Steward requires advice on its fiduciary practices, and may want the Analyst to assist in the development of documentation, processes, or investment practices. The Analyst is supported by the CEFEX system, whether it be technical assistance with Analytics tools, fiduciary practice interpretation from the CEFEX expert panel, or having the most recent assessment methodology. The Analyst’s work is registered with CEFEX and reviewed for completeness. Upon completion, the Steward receives an Opinion Letter from CEFEX, thereby assuring the assessment process was completed according to CEFEX standards. The Steward contracts directly with the CEFEX Analyst for these types of assessments. A formal agreement with CEFEX is NOT required.
Certification Assessments are performed by an independent Analyst who has an impartial perspective on the Steward’s practices. When successfully completed, this assessment results in a public certification as described on this site. This type of an assessment is beneficial to Stewards who wish to publicly demonstrate their adherence to the Global Fiduciary Standard of Excellence, specifically to staff, plan participants, boards of directors, or donors. These assessments may follow a Consulting Assessment, however a formal agreement with CEFEX is required. When performed within 6 months of a Consulting Assessment, the fee is significantly reduced because the CAFÉ has already been completed.
Investment Stewards can determine their readiness for a certification assessment
by performing a “Self Assessment of Fiduciary Excellence: SAFE”. Please download
the SAFE below, or perform an on-line SAFE by clicking here: http://safe.actifi.com
Qualified or Public Retirement Plans
The Employee Retirement and
Income Security Act (ERISA) imposes on the Retirement Plan Sponsor, an
obligation to act solely in the interests of participants and on those involved
in managing the investment of plan assets an obligation to follow a prudent
investment process. What does this mean?
A prudent investment process involves a
number of practices including the following:
- Identifying who are the plan
fiduciaries and obtaining their written acknowledgments
quantitative and qualitative criteria for the selection and evaluation of
- Establishing a written investment policy statement to govern
the prudent practices to be followed, i.e. the business plan
- Conducting due
diligence and documenting the process with respect to the selection of
investment options and service providers
- Following applicable “safe harbor”
- Conducting periodic and scheduled monitoring of investment
performance, evaluating whether to change an investment option that falls short
of selected criteria and documenting the process to provide a critical written
- Conducting periodic and scheduled monitoring of investment expenses and
service provider fees and disclosing the results to plan participants
best execution, appropriate use of “soft dollars” and proper voting of
- Avoiding conflicts of interest and self-dealing.
require that Stewards act as “prudent experts”, a standard demanding
professional investment expertise. The CEFEX assessment provides a disciplined
approach to ensuring all responsibilities are addressed.
Flexible Fiduciary Assessments for Plan Sponsors
CEFEX offers a range of assessments for plan sponsors, addressing relevant fiduciary matters. Please
click here for an overview of our services.
Service Provider Disclosure Review
The Department of Labor now requires 401(k) and defined benefit retirement plan sponsors review all service provider
disclosures and confirm that their arrangements with these providers are necessary and reasonable.
Plan sponsors and their officers who make 401(k) decisions, face lawsuits and penalties if they do not take steps to comply
with the new regulatory requirements. Please click here for an expert commentary on this matter.
Please click here for a description of how CEFEX can help plan sponsors, including the issuance of a legal opinion
letter to help reduce risk.
Participant Disclosure Review
The Department of Labor requires 401(k) plan sponsors to ensure plan participants receive comprehensive disclosures of all expenses
charged directly to their accounts or indirectly through investment management fees. Please click
here for a description of how CEFEX
can help plan sponsors with this responsibility.
Mandating certification of Service Providers
Investment Stewards should
mandate CEFEX certification of their service providers in order to ensure
fiduciary diligence is prevalent throughout the investment environment. For
retirement plans, the ERISA contains many sections which specify Investment
Steward responsibilities for qualified plans. In each case, CEFEX certification
delivers an effective means for providers to help Stewards meet these
• Investment Stewards should have a due diligence process for
selecting investment options, and the process is consistently applied. (Per
§402(c)(3); §403(a)(1) and (2); §404(a)(1)(B))
CEFEX-certification of an
Investment Manager or Advisor verifies the existence of due diligence in
selecting investment options, thereby forming an excellent basis for the
oversight by a Steward. Through the certification process, the Investment
Steward delegates this highly specialized task to a CEFEX Analyst, who is an
• Investment Stewards must apply a documented due diligence
process in selecting service providers. (Per §402(a)(1); §402(b)(2);
When a Steward selects a CEFEX-certified firm, the Steward has
intrinsically applied a due diligence process since the CEFEX firm has been
rigorously assessed to documented diligence parameters. Fundamental due
diligence screens for governance, and fiduciary practice, allow the Steward to
focus on specific investment strategies and retirement plan features.
Stewards periodically review qualitative and/or organizational changes of
investment decision-makers. (Per §3(38); §402(c)(3))
A CEFEX-certified firm is
assessed on an annual basis, when both qualitative and/or organizational changes
are reviewed to determine whether or not fiduciary practices are affected. The
CEFEX-certified firm is obligated to report changes to its clients, and this is
verified in the assessment process.
• Investment Stewards must verify that fees
for investment management are consistent with agreements and with all applicable
laws, and that fees are periodically compared to industry benchmarks. (Per
§3(14)(B); §404(a)(1)(A),(B) and (D); §406(a))
Investment portfolios of CEFEX
Investment Advisors are annually benchmarked against peer groups using the fi360
Analyzer. The CEFEX Analyst uses this tool to identify watch-listed
investment options, including a screen for fees. Thresholds for watch-lists are
established and the Advisor must explain significant deviations.
Stewards must periodically review agreements and contracts to ensure consistency
with needs of the managed assets. (Per §3(14)(B); §3(38)(C); §402(c)(2);
§403(a)(2); §404(a)(1); §408(b)(2))
The CEFEX assessment includes a detailed
review of the Advisor’s Service Agreement to ensure compliance with regulation,
specifically § 408(b)(2) and to ensure it is used for all clients. Since the
certification is renewed annually, this periodic review helps the Investment
Steward fulfill this obligation.
By hiring CEFEX-certified firms, the
Investment Steward is greatly increasing the prudence by which it manages plan
assets. This is a significant task. Investment Stewards must use this program,
at a minimal cost to their plan, to increase the fiduciary excellence in
overseeing the management of investors’ assets. The result is an increase in
trust throughout the retirement system.
Stewards of Foundations and Endowments
Foundations compete with other philanthropies for donor dollars. In an
environment of increasing investment anxiety and questionable trust, such
competition can be particularly fierce. CEFEX certification can help to overcome
donor anxiety and mistrust by publicly demonstrating a foundation’s outstanding
commitment to accountability, diligence and fiduciary process. Certification
also enables a foundation to maximize investment performance and thereby
maximize support of its donors.
Please click here for a description of how CEFEX can help foundations and endowments.
CEFEX-certified foundations meet a standard of
excellence established for Investment Stewards. The standard is represented by
The Investment Steward Practices which are substantiated by legislation,
including the Uniform Prudent Management of Institutional Funds Act (UPMIFA),
case law and, where appropriate, regulatory opinion letters.
Investment Steward standard are practices requiring sound oversight and
transparency of investment and spending policies. Oversight in the form of due
diligence in the selection of asset managers and in monitoring their investment
performance on an ongoing basis is an important fiduciary function. For most
foundations with numerous endowed and non-endowed funds to oversee, this can
involve dozens of managers.
The fiduciary burden is increased for community
foundations that will engage a donor’s financial adviser to manage the donated
assets. Institutionalizing the practice multiplies the burden. To mitigate
fiduciary exposure, foundations should ensure that they have policies and
resources adequate to meet the challenge of multiple managers. Further, they may
require a donor’s adviser to submit to independent assessment in the form of
CEFEX certification to verify that the adviser, as a manager of the foundation’s
assets, conforms to a comprehensive standard of fiduciary practice. Indeed,
foundations can require such certification of all of their asset
Foundations serve important philanthropic needs in the
communities they serve. Access to continued donor support is crucial to their
success. Being able to demonstrate their trustworthiness as stewards of donor
assets is an integral part of maintaining that access. CEFEX Certification
serves that purpose by verifying the foundation’s conformity with best practices
and, where implemented, by verifying the conformity of its asset managers.
Stewards of Government Funds
Governments have a responsibility to
oversee the mission, strategic direction, finances and operations of their
respective organizations. They have an especially high commitment to fulfill
these responsibilities honestly and with integrity. With respect to the treasury function, they must establish clear and
understandable policies and ensure that they are followed.
Managers of governmental or public funds administer, direct, control, account
for, report on, and monitor hundreds of billions of public dollars through
governmental investment programs. This institutional environment is markedly
different than for-profit sectors in that they must invest as well as borrow;
maintaining long-term funds for social purposes such as housing programs, or
maintaining short-term funds for governmental daily expenditures. An
understanding of the dynamics of cash flow is vital for successful investments,
as well as recognition of their fiduciary duties and responsibilities to the
Fiduciary duties and responsibilities such as setting investment
objectives, developing and implementing an investment policy and investment
committee, developing cash flows, performing broker/dealer and custodian due
diligence, implementing internal controls, selecting, diversifying, and
purchasing investment securities, recording and properly accounting for
investments, monitoring the portfolio and evaluating and reporting the results
are just a few of the fiduciary duties and responsibilities public investment
managers have. A CEFEX-certified public fund demonstrates to the public that
fiduciary procedures are in place and that investments are prudently managed.