How to Write an Investment Policy Statement Book

Foreword by Don Trone 13

SECTION ONE: Why Plan Sponsors and All Fiduciaries Need a Formal Process for Writing Their Investment Policy Statement

Chapter 1 ERISA AND THE CHALLENGE OF FIDUCIARY RESPONSIBILITY 19

Writing an Investment Policy 19

What Is a Fiduciary? 20

Fiduciary Liability 21

Chapter 2 YOUR FIDUCIARY RESPONSIBILITIES AND LIABILITIES UNDER ERISA 23

Five Fiduciary Responsibilities 23

Fiduciary's Personal Liability 24

A Fiduciary's Primary Role Is to Manage the Process 25

Chapter 3 WHAT IS AN INVESTMENT POLICY STATEMENT AND WHAT ARE THE BENEFITS? 27

Risk Management 27

Monitor Investments 28

Summary 29

Chapter 4 UTILIZE THE “SAFE HARBOR” PROVISIONS PROVIDED BY ERISA 31

Prudent Experts 31

Five Recognized "Safe Harbor" Rules 31

Chapter 5 COMPLYING WITH ERISA SECTION 404(c) 33

SECTION TWO: How to Get Started and Steps to Formalize the Process

Chapter 6. ASSEMBLING THE DOCUMENTATION 37

Chapter 7 STEPS TO FORMALIZE THE PROCESS 39

STEP 1: Decide on Plan Goals, Objectives, and Strategies 39

STEP 2: Decide on Strategy for Managing Risk 39

STEP 3: Determine the Risk Tolerance of the Plan 40

STEP 4: Set Forth Guidelines for Asset Classes 41

STEP 5: Implement an Asset-Allocation Policy 41

STEP 6: Mutual Funds Recommendations 41

STEP 7: Delegate Investment Management Responsibility 42

STEP 8: Investment Monitoring and Reporting 42

SECTION THREE: The Template IPS

Chapter 8 SAMPLE IPS TEMPLATES 45

Two Distinct IPS Samples 45

Organization of Templates 45

Chapter 9 SAMPLE IPS TEMPLATE #1: For Participant-Directed 401(k) That Intends to Comply with ERISA Section 404(c) 47

STEP 1. Executive Summary and Background 47

STEP 2. Purpose of the Investment Policy Statement 48

STEP 3. Duties and Responsibilities 50

STEP 4. Asset Class Guidelines 52

STEP 5. Investment Manager Selection 54

STEP 6. Monitoring the Investment Managers 55

STEP 7. Controlling and Accounting for Investment . Expenses 57

STEP 8. Investment Policy Review and Monitoring 58

Chapter 10 SAMPLE IPS TEMPLATE #2: For High-Net-Worth Individual Setting Up a Family Trust 59

Executive Summary 60

PART I—Purpose 61

PART II—Investment Management Objectives 61

PART III—Roles and Responsibilities 62

PART IV—Investment Manager Selection 63

PART V—Investment Monitoring and Review 65

PART VI—Manager Termination 67

PART VII—Additional Provisions (optional) 67

Conclusion

MESSAGE TO PLAN SPONSORS 69

Glossary 71

The Firm Profile 79

About the Author 87