Fiduciary Prologue to a Cross-Examination
By Neal Shikes, CRPC®
The litmus test for suitable behaviors and the products that result is woven from fiduciary responsibility. Breaches are born from a lack of methodology which materializes in behaviors and product selection. Perhaps these behaviors are best characterized in trust law which describes the prudence, commitment, and loyalty that the trustee has for the beneficiary of the asset.
According to Black's Law Dictionary, a trustee is:
"The person appointed, or required by law, to execute a trust; one in whom an estate, interest, or power is vested, under an express or implied agreement to administer or exercise it for the benefit or to the use of another."
In addition, fiduciary duty is:
"a duty to act for someone else's benefit, while subordinating one's personal interests to that of the other person. it is the highest standard of duty implied by law (e.g. trustee, guardian)."
The fulfillment of fiduciary duties becomes apparent where there is evidence of behaviors and methodology, in "content and oversight," that improve the likelihood that the beneficiary of the asset(s) achieve their goals.
When one is compelled to discover evidence of fiduciary behaviors, clues materialize in the products that were purchased, the timing of the purchases, how such products meshed and correlated with other assets, the level of compensation, and any compensation relationships if applicable. If these facts were not transparent to the inquirer then, chances are, they weren't to the beneficiary of the assets. Thus, the path of behavior and methodology discovery will extend and fork to include oversight.
Expert Witnesses and Subject Matter Experts
Even though there are many attorneys disciplined in ERISA and class actions, few have any experience in money management, financial technology, and applying the law to fiduciary matters. That is why attorneys need assistance from expert witnesses and subject matter experts before the case is filed.
Choosing the right experts can be a daunting task especially when the correct questions to ask are not known. Career consultants and business advisors are very good at methodology, modeling, and quantifying evidence. Many, however, have only "kept score from the stands" and have never "stepped into the batter's box." There is a clear difference between those who have applied their skill sets in different environments and those who quantify the opinions of people that do. In addition, it is probably best to seek assistance from someone who has been a fiduciary as opposed to someone who hasn't. This is also critical in the cross-examination.
A person with portfolio management skills will immediately recognize what they are up against after reviewing briefs, statement of claims, and pleadings as it provides clues to how the cross-examination strategy should be formulated:
Fiduciary and ERISA law is trust law. it is not based on contracts and outcomes but the relationship between the investment advisor/employer sponsor of the retirement plan and the client/beneficiary of the asset dominated by the former's fiduciary duties to the latter. It is not evidenced by product benefits but by transparent behaviors and methodologies that can only be recognized by an experienced subject matter expert which is paramount in a cross-examination.
Neal Shikes has been a Registered Financial Services Industry professional for over 20 years and a Chartered Retirement Planning Counselor, CRPC®. He is also the "Willing Fiduciary" (http://willingfiduciary.com/) associated with Counsel Fiduciary LLC (http://counselfiduciary.com/) and a principal associate for Thornapple Associates a provider of Expert Witness Services (http://thornapple.net/).
Additional article by Neal Shikes, "Fiduciary Law Is Trust Law."
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