Advisor Insights

Ground Zero for Prudent Fiduciaries

W. Scott Simon

The Prefatory Note to the 1994 Uniform Prudent Investor Act states, in part: "The tradeoff in all investing between risk and return is identified as the fiduciary's central consideration." Think of this as the ground zero directive as to how a prudent fiduciary should begin to think and act when investing and managing other people's money.

This directive is incorporated into all the subsequent model acts that were promulgated as a result of publication of the UPIA which is, of course, a codification of the 1992 Restatement (Third) of Trusts (Restatement). These acts include the 1997 Uniform Principal and Income Act (which, in coordination with the UPIA, helps promote prudent investment practices in the making of principal and income allocations), the 1997 Uniform Management of Public Employee Retirement Systems Act (which governs state public employee retirement plans), the 2000 Uniform Trust Code (which draws upon the common law of trusts, the Restatement and the 1959 Restatement (Second) of Trusts, as well as incorporating fully the UPIA) and the 2006 Uniform Prudent Management of Institutional Funds Act (which governs the investment and management of endowment funds of charitable institutions.