How to Write an Investment Policy Statement

Foreword by Don Trone 11SECTION ONE: Why Plan Sponsors and All Fiduciaries Need a Formal Process for Writing Their Investment Policy StatementChapter 1 ERISA AND THE CHALLENGE OF FIDUCIARY RESPONSIBILITY 17Writing an Investment Policy 17What Is a Fiduciary?18Fiduciary Liability19Chapter 2 YOUR FIDUCIARY RESPONSIBILITIES AND LIABILITIES UNDER ERISA 21Five Fiduciary Responsibilities 21Fiduciary's Personal Liability 22A Fiduciary's Primary Role Is to Manage the Process 23Chapter 3 WHAT IS AN INVESTMENT POLICY STATEMENT AND WHAT ARE THE BENEFITS? 25Risk Management 25Monitor Investments 26Summary 27Chapter 4 UTILIZE THE "SAFE HARBOR" PROVISIONS PROVIDED BY ERISA 29Prudent Experts 29Five Recognized "Safe Harbor" Rules 29Chapter 5 COMPLYING WITH ERISA SECTION 404(c) 31SECTION TWO: How to Get Started and Steps to Formalize the ProcessChapter 6 ASSEMBLING THE DOCUMENTATION 35Chapter 7 STEPS TO FORMALIZE THE PROCESS 37STEP 1: Decide on Plan Goals, Objectives, and Strategies 37STEP 2: Decide on Strategy for Managing Risk 37STEP 3: Determine the Risk Tolerance of the Plan 38STEP 4: Set Forth Guidelines for Asset Classes 39STEP 5: Implement an Asset-Allocation Policy 39STEP 6: Mutual Funds Recommendations 39STEP 7: Delegate Investment Management Responsibility 40STEP 8: Investment Monitoring and Reporting 40SECTION THREE: The Template IPSChapter 8 SAMPLE IPS TEMPLATES 43Two Distinct IPS Samples 43Organization of Templates 43Chapter 9 SAMPLE IPS TEMPLATE #1: For Participant-Directed 401(k) That Intends to Comply with ERISA Section 404(c) 458STEP 1 Executive Summary and Background 45STEP 2 Purpose of the Investment Policy Statement 46STEP 3 Duties and Responsibilities 48STEP 4 Asset Class Guidelines 50STEP 5 Investment Manager Selection 52STEP 6 Monitoring the Investment Managers 53STEP 7 Controlling and Accounting for Investment Expenses 55STEP 8 Investment Policy Review and Monitoring 56Chapter 10 SAMPLE IPS TEMPLATE #2: For High-Net-Worth Individual Setting Up a Family Trust 57Executive Summary 58PART I--Purpose 59PART II--Investment Management Objectives 59PART III-- Roles and Responsibilities 60PART IV-- Investment Manager Selection 61PART V-- Investment Monitoring and Review 63PART VI-- Manager Termination 65PART VII-- Additional Provisions (optional)65ConclusionMESSAGE TO PLAN SPONSORS 67Glossary 69Appendix: The Firm Profile 77About the Author 7