Fiduciary Standards

Critically Important; Often Overlooked
The middle market client has the burden of establishing and maintaining a rigorous and disciplined fiduciary structure, regardless of the size of the institution or the budget of the management team. This presents significant, and sometimes overwhelming challenges for the organization’s leadership.

Middle market institutional clients - those with assets under $500 million - face operational challenges in the efficient execution of their regulatory, legal, operational, and compliance best practices. This is most commonly due to the unbending laws of economics - smaller institutions have limited budgets for internal staff and/or outside counsel, requiring fewer people to do more with less; a scenario that may present opportunities for risk, fraud, or simple oversight given the volume of fiduciary responsibilities an investor must assume.

Most institutions understand the basic premise of a fiduciary, yet few comprehend the depth to which it applies to their organization, and how the fiduciary standards impact the actions of the organization, the policies and procedures taken, as well as the structure and strategy of the investment policy employed on behalf of the organization.

Fair or not, regulators do not discriminate or apply the fiduciary standards (or accounting or legal standards, for that matter) differently based upon the size of an entity. Accordingly, large institutions may have the resources to employ internal staff or outside counsel to ensure compliance with the myriad policies and standards to which all investors must comply.

But what about the $10 million Community Foundation? The regulators evaluate them with the same focus on policies, procedures, best practices, documentation, and sound fiduciary execution. The demands placed on middle market clients to not only remain in compliance with the continuously evolving policies and guidelines is challenging enough; asking a $10 million Community Foundation to embrace cutting edge fiduciary standards may simply be too much.

Unfortunately, that has been our experience. But we believe a much better solution exists.

At Grace Legacy Capital, we work extensively to educate our clients on the particulars of the fiduciary standards, what they are, to whom they apply, what the expectations are for an organization of any size, and how to best adopt policies and procedures to consistently meet the letter and the spirit of the standards. This is not a small task, especially for clients who have traditionally accomplished their investment goals “in-house”, manually, without policies or consistent procedures.

We take the fiduciary process several steps further, however. Most consulting firms acknowledge the role of the fiduciary in the establishment of the investment policy, and treat the standards as a “static” concept.

Grace Legacy Capital believes clients are better served by approaching fiduciary standards as a fluid continuum throughout the investment and operational process. This mindset adopts a “best practices” approach to working in the best interests of the institution and its ultimate beneficiaries.

We offer the solutions and fiduciary excellence of large institutional plans, consistently delivered to middle market clients in a way that makes sense for its management, its board, and its beneficiaries.

We employ this strategy from an investment perspective through the use of fiduciary implementation strategies. In establishing a client’s investment framework, we believe there is much to learn from the resources and expertise of investors with $1 billion or more. These clients employ overlay managers, ensuring full compliance with investment policies, social restrictions, asset allocation restrictions. These clients professionally transition assets from one manager to another, minimizing inefficient asset transfers. Large institutional clients have the benefit of working with custodial banks who will formally assume fiduciary responsibility for a portfolio’s assets.

Virtually all middle market clients have historically been unable to consistently employ these value added fiduciary services. Yet these services target essential needs from the perspective of fiduciary discipline and implementation.

Grace Legacy Capital recognizes the critical need in the market to address fiduciary concerns over implementation consistency. We see virtually no concerted effort in the middle market space for clients to access the resources and expertise available to larger organizations.

Accordingly we have partnered with Fiduciary Advisor Advocates and Callan Associates to bring cutting edge fiduciary implementation expertise to middle market institutional clients.

Learn more about our partnership with FAA and Callan Associates

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