As a fee-only financial planner, it is widely understood that we have a fiduciary duty to our clients. But did you know that this duty extends far beyond the client relationship into other areas of our professional lives? Take for instance your role if you are a member of a Board of Directors. Did you ever consider that this role includes a fiduciary duty that encompasses all aspects of the company’s operation, including but not limited to investments?
Even if a company has hired a fiduciary on a subcontracted basis to assist in the administration of their fiduciary duty with respect to investments, the subcontractor is not alleviated of fiduciary obligation for the investments. If an organization chooses NOT use a fiduciary and instead goes for a standard “buyer beware” brokerage arrangement or the “it may not be the best we can do, but it is the most convenient for us” approach to selecting proper investments for the company, the Board is clearly exposed to liability for doing or not doing some things they should have done.
This is all the more reason to ensure that there are members on staff to properly discharge fiduciary duty for investments or that an organization subcontracts with a REAL fiduciary to handle the day-to-day aspects of discharging these important responsibilities.