Investment Advisors

For Investment Advisory firms, CEFEX registration is a demonstration of adherence to all fiduciary practices contained in the handbook: Prudent Practices for Investment Advisors. A CEFEX-certified Investment Advisory firm is an acknowledged fiduciary. In the United States, these firms may assume responsibilities as defined in ERISA §3(38). The scope of registration typically lists the types of clients (eg. DC Plans, DB Plans, 403(b), HNW etc.) served by the Investment Advisory firm.

Please click here to download Fiduciary Practices for Investment Advisors

Many Investment Advisory firms claim to be fiduciaries, however since the topic is often confusing to investors and trustees, these claims are difficult to prove.

Does the Investment Advisory firm:
• accept fiduciary responsibility in writing?
• have prudent investment processes in place and in use?
• use best in class Service Agreements?
• make complete disclosures regarding potential conflicts of interest?

In general, can the Investment Advisory firm demonstrate adherence to the highest standard of fiduciary care? CEFEX-certified Investment Advisory firms can.

Investment Advisory firms certified by CEFEX can seek a legal opinion issued by Drinker, Biddle & Reath, LLP. of Los Angeles, CA regarding their certification process. The opinion letter must be ordered separately from the CEFEX assessment, at any time after initial certification. The legal opinion is similar to the one issued to CEFEX and states, in substance, that a firm receiving an Investment Advisory certification will have demonstrated, as of the date of the certification, that it has practices and procedures in place that equal or exceed the investment fiduciary requirements of the Employment Retirement Income Security Act of 1974 (ERISA).

The Benefits of Certification include:

1. Increased Assets Under Advisement:
Certification increases market differentiation and investor (individual or institutional) confidence. With the recent increase in investor anxiety due to scandals, bankruptcies, and lawsuits and the increased press from the introduction of numerous financial industry regulatory initiatives, fiduciaries can differentiate themselves by assuring investors of their excellent practices.

2. Risk Management:
Most investment litigation involves the omission of certain fiduciary practices and/or prudent investment procedures, as opposed to the commission of certain acts. Certification helps your firm maintain evidence of relevant practices.

3. Reduced Costs:
CEFEX-certified Investment Advisory firms are eligible to receive discounts on professional liability insurance premiums of up to 25%. The certification acts as evidence that your firm is a lower risk for insurance carriers. See Program Summary

4. Competitive Advantage:
'Fiduciary responsibility' has become a watchword with trustees, investment committee members, and even retail investors. Investment Advisory firms who can clearly communicate how they manage investment decisions to a defined fiduciary standard, will enjoy a major advantage over competitors.

See quotes from CEFEX-certified firms.

Self Assessment

Investment Advisory firms can determine their readiness for a certification assessment by performing a “Self Assessment of Fiduciary Excellence: SAFE”. Please download the appropriate SAFE below, or perform an on-line SAFE by clicking here:http://safe.actifi.com

Self-Assessment of Fiduciary Excellence for Investment Advisors

Fiduciary Adviser (United States only):

In the U.S. a person or firm 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).

CEFEX registration, since it includes an annual audit, is a demonstration of compliance with the requirements of the Pension Protection Act, specifically final rule §2550.408g-1, pertaining to the furnishing of investment advice to participants and beneficiaries. This registration includes the audit of any applicable eligible investment advice arrangements, which would be listed in the scope if applicable.

The Department of Labor regulation requires that the auditor:

(1) be independent,

(2) have appropriate technical training or expertise and proficiency,

(3) make such representations in the written audit report, and

(4) present in the audit report specific findings regarding compliance with the regulation.

The DOL has stated that the selection of the auditor is a fiduciary act and therefore must be carried out in a manner consistent with the prudence requirements of ERISA section 404(a)(1), taking into account the nature and scope of the audit and the expertise and experience necessary to conduct such an audit. The audit itself does not cause an auditor to be a fiduciary under ERISA.

Quotes from CEFEX-certified firms.

“The Ingham Group uses our CEFEX certification to articulate our fundamental belief in total disclosure and best fiduciary practices. We go out of our way to educate our clients and prospects on the importance of sound fiduciary practices. We believe this certification should be a standard requirement in the selection of Investment Advisors, much like how SAS70 has become required in the recordkeeping industry. CEFEX certification has been instrumental to Ingham Group maintaining its client base and opening many new opportunities. Ingham group has experienced a 30% growth in AUM in the past year, thanks to our positioning, and proven track record.”
Ken Ingham, AIFA, President and CEO, Ingham Group, Miami, FL

“Slavic Mutual Funds Management Corporation has won many RFQ’s recently, and we can attribute our success to be due in part to our CEFEX certification. Since Slavic operates as a broker/dealer, an investment manager, a TPA and an advisor, we also believe the CEFEX process has helped improve the accountabilities within our organization. The better delineations between our disciplines has helped sustain improved corporate performance.”
John Slavic, President, Slavic Mutual Funds Management Corporation, Boca Raton, FL

“Unified Trust Company, NA became CEFEX registered in October 2006. Unified sought registration as an important independent assessment of our commitment to follow a prudent, consistent and standardized process based on Fiduciary Best Practices for Investment Advisors as promulgated by CEFEX. This independent verification means our clients, and those considering our services, can be confident that critical components of an investment strategy have been properly implemented. This can be especially important for retirement plan sponsors in today’s environment of increasing complaints and/or lawsuits alleging fiduciary misconduct. Being able to show adherence to this independent standard has given Unified a distinct advantage when competing with other investment advisors. Successful retirement outcome is the cornerstone of Unified’s philosophy. As a fully discretionary trustee, we believe a prudent best practices approach improves investment outcomes for our clients and increases their financial goal success probability. Progress towards success can and should be measured. We have done extensive research on success probabilities and have been able to show that implementing the prudent best practices necessary for CEFEX registration improves the probability of success. Unified believes registration is more than a differentiator in the sales process; rather it will make a true positive difference in the most important consideration, successful outcome. In the five months since Unified became CEFEX registered, assets under management have grown by 12.5%. In that same period, the S&P has added just over 5%. While the difference is likely due to many factors, we feel that our outcomes based approach based on prudent best practices is the overarching reason. The CEFEX registration is the distinctive sign to the marketplace that Unified Trust Co., N.A. unquestionably follows the highest fiduciary best practices standards.”
Dr. Gregory Kasten, MD, MBA, CFP, CPC, AIFA, CEO Unified Trust Company, NA.

“ The CEFEX Analyst’s assessment of our firm’s custodian function was thorough and produced many useful benefits to us. We have a much better appreciation of our clients’ perspectives of us. The CEFEX experience has caused us to alter the way we tell our firm’s service delivery message. Our CEFEX certification has won more business for us than we even hoped.”
Denys Pearce, Managing Director, Plan B Trustees Limited, Perth Australia.