Most investment professionals spend countless hours in sales and technical training, but little time is devoted to developing their expertise related to the investment fiduciary standards of care. Two designations offered by the Center for Fiduciary Studies offer financial advisors the opportunity to enhance their fiduciary knowledge and demonstrate that they are serious about their fiduciary responsibilities. The Center for Fiduciary Studies offers the designations of Accredited Investment Fiduciary (AIF) and Accredited Investment Fiduciary Analyst (AIFA).

The Standards

According to the Foundation for Fiduciary Studies. more than five million people have the legal responsibility of prudently managing someone else’s money. Simply put, there are a lot of fiduciaries out there. Considering the multitude of people involved in the investment management process and the trillions of dollars at stake, one would expect that the profession would require investment fiduciaries to be informed of, and abide by, the same standards of practice as professionals in other fields such as doctors, lawyers and accountants.

While such standards have not been the norm in the past, recent cases of fiduciary negligence and resulting legislation has placed the focus on fiduciary responsibility and the need to be trained in it. As with most other professional designations, obtaining the AIF and AIFA requires some study time and successfully completing an exam.

While graduates of the two programs can acquire an appreciation for and knowledge of prudent investment practices, they also gain credibility with their achievement. The investment advisory business is highly competitive and prospects often evaluate multiple advisors before making a choice. By spending the time and money on further education, advisors demonstrate their desire to obtain the expertise necessary to fulfill their fiduciary responsibilities to their clients.

Public Perception

As the public’s awareness of fiduciary responsibilities has grown, so too have opportunities for consulting on fiduciary matters. The AIFA is well positioned to take advantage of these opportunities. For organizations that wish to ensure their investment processes meet a fiduciary standard of care, AIFAs can perform consulting engagements to identify areas of non-conformance and opportunities for improvement.

For example, if you have ever had the opportunity to witness the workings of an investment committee of a small charitable organization or small businesses retirement plan. you probably observed the lack of a structured process with defined steps for decision making. The AIFA assessment approach offers a unique method to help bring structure and organization to a process that may otherwise be vulnerable to a rogue committee member or an overzealous investment service provider.

For organizations that are confident in their conformity with a fiduciary standard of care, those with an AIFA designation can provide an assessment that results in a Certification of Fiduciary Excellence. This certification can be used by the organization to demonstrate a high level of stewardship, which requires the interests of those participants be placed above the organization’s own, to potential donors, retirement plan participants or other interested parties.

The Rewards for Continuing Education

With more money than ever being entrusted to fiduciaries of charitable endowments, retirement plans and investment advisors, the public wants to know that its money is being prudently managed. The growing awareness of fiduciary duties accelerates each time a highly publicized case of fiduciary misconduct is unveiled, such as the case involving the Enron retirement plans.

In the case of Enron. fiduciaries — including the company’s top executives and board of directors — failed to comply with their fiduciary obligations to put plan participants’ interests above their own. Among many fiduciary failures documented by a lawsuit filed by the U.S. Department of Labor, they imprudently invested matching contributions in company stock, misled employees about the health of the company and encouraged them to invest in more Enron stock, even as they knew the company was in decline. By these actions and others they devastated their employees’ retirement funds.

The Bottom Line

In response to growing awareness of fiduciary duties, lawmakers passed the Pension Protection Act of 2006. which shines the spotlight on fiduciary advisors with provisions that require annual audits by a prudent expert for eligible investment advice arrangements offered to retirement plan participants. AIFAs are qualified to perform these audit services.

Growing public awareness, increased regulation and the massive amount of money entrusted to fiduciaries have created the perfect storm for advisors who, through the AIF and AIFA designations, can establish themselves as fiduciary experts.