Duty To Delegate To Experts
A prudent fiduciary is required to delegate certain decisions to experts if he does not possess the expertise to make a decision.  He can only delegate investment decisions to people with the requisite credentials, skills and experience. If there is a disagreement with a client, he will be required to show how they employed appropriate prudent experts. A fiduciary advisor has the duty to seek expert opinions in the same way a general medical practitioner relies on specialists for patient care.

The Duty To Monitor
A fiduciary should provide clear account management guidelines to each asset class manager and establish an appropriate benchmark for performance measurement. These guidelines will be used to control the risk that managers can take and to evaluate their performance.

The fiduciary should create an investment policy statement that lays out the risk and return parameters for the total client portfolio and provides information on the client's time horizon, tax situation, liquidity needs and any unique circumstances.  This document describes the advisor's strategy to the client and evaluates the performance of the strategy over time.  It should be viewed as a living document that changes as client needs and circumstances change. It should be updated at least annually.

Questions Raised By Recent Events
The current economic turmoil provides some insight into the value of fiduciary investing. Sound diversification, for example, is fundamental to risk management and is therefore ordinarily required of trustees. Yet diversification was notably absent in some of the key events that have led to the current market crisis.

Among the questions in the aftermath of the Bernie Madoff scandal is, to what degree were funds of hedge funds diversified? Tremont reportedly had 27% of its capital allocated to Madoff. Ezra Merkin's Ascot Partners LP reportedly had all of its capital under Madoff's management. Concentrated positions such as these were in contrast to the principles of diversification.

Why did some firms discourage investors from working with Madoff?  What due diligence process did fund of fund investors use to evaluate this fund?  Were the people doing the due diligence truly qualified to makes these judgments and what were their credentials? Did they understand the strategies being employed, the risks associated with them, and did they understand how to monitor the managers?

Prior to the recent decline in the market, did advisors have clients in large-, mid- and small-cap and international investments?  If alternatives were used, how was private equity accounted for and what was the asset class's correlation with the equity markets?  Did advisors understand clients well enough to get risk levels right?  How did they account for hedge fund gates and potential extensions of the time to repayment from private equity investments in their cash flow models and asset allocation models?

Conclusion
The recent turmoil in the financial markets has caused investors a great deal of concern and forced them to rethink where they will get advice in the future and how they will manage their advisors.  In fact, a recent survey by Prince & Associates showed that over 70% of high-net-worth clients want to fire their current financial advisors. This is not surprising given the losses investors have suffered and the low quality of the advice they have received.  Many were put into hedge funds and private equity investments at the peak of the cycle, when it was clear that the return opportunities were diminishing.  Is it surprising that the same "strategists" and "advisors" who encouraged investors to invest in tech stocks during the Internet bubble are the same people who were behind the recent push into alternatives and private equity?

Many investors took advice from commission sales people who were conflicted and in many cases unqualified to give advice to high-net-worth individuals. Also, many advisors lost sight of the fact that the primary goal of most wealthy investors is to protect and preserve their capital.

Today's wealthy investors are using sophisticated strategies that, just a few years ago, were only used by institutional investors. To carry out these strategies, investors need advisors who are not only educated and experienced, but who are without conflicts of interest and who adhere to a high fiduciary standard.