Regardless of when a fiduciary standardis implemented and whichever group is assigned to monitor it, one thing is certain: You will need to build an investment management process that meets a higher standard of care. We've already shown you that amidst the chaos and confusion that is sure to follow any new legislation, a fiduciary standard can give you a more efficient and effective practice. Now we will explore the steps advisors can take to do just that-create an investment decision-making process that upholds a principles-based fiduciary standard.

Over the next several months, we will examine the steps of the investment management process, along with tools, technology and software that can help you get there. We will also reveal the leadership behaviors essential to successfully executing each step. In this column, we will delve into the first step of the process: Analyze.

To begin an analysis, advisors must have a thorough understanding of their client's current financial position, legal and regulatory constraints, current service providers and professional advisors, and investment risk/return profile. Advisors can gain such an in-depth understanding by looking at the facts and circumstances pertaining to the funds that the client's looking to invest in.

This has three dimensions:

1) State goals and objectives.

2) Define roles and responsibilities of decision-makers.

3) Brief decision-makers about objectives, standards, policies and regulations.

You may feel that some of these dimensions are too simple. Well, they are. In a complex and changing world, the ability to reduce complex tasks to their simplest forms is crucial.

Another key concept associated with any fiduciary standard is the requirement for the fiduciary to demonstrate the details of his or her decision-making process. By doing so in terms of simple dimensions, you dramatically increase the probability of ensuring that the right information is gathered, analyzed, formalized, implemented and monitored. In other words, simplicity helps ensure that you maintain the discipline to continually apply the process.

GOALS, OBJECTIVES

As with running any business, you must establish clear objectives. Here, you and the client play a key management role in defining objectives that are both realistic and consistent with the client's present and future resources, as well as with his or her values and priorities.

Begin by collecting, reviewing and analyzing all documents pertaining to the management of the client's portfolio. Among others, these can include:

* Investment policy statement, or IPS (some clients won't have an IPS yet; they will benefit most from this process);

* Applicable trust documents, including amendments;

* Custodial and brokerage statements (so current fees and expenses for investment management can be analyzed);

* Service agreements with investment management vendors: custodians, money managers, investment consultants, actuaries, accountants attorneys; and

* Information on retained money managers, such as in a prospectus or similar documents.

Advisors should pay particular attention to documents that identify trustees and name fiduciaries, restrict or prohibit certain asset classes or allow for investment decisions to be prudently delegated.

After analyzing these documents, advisors should be able to establish their client's strategic long-term goals and objectives. These objectives should align with the client's financial resources, be within the limits and constraints of any applicable regulations and statutes, and be periodically assessed in light of existing results and future trends.

The essential leadership behavior associated with this dimension is deliberative, or persuasive. This is the ability to build consensus and identify strategic needs of the organization/client; the ability to listen to different and opposing opinions in order to galvanize common goals and objectives.

ROLES, RESPONSIBILITIES

As the investment advisor, you play the most critical role in the decision-making process-you're the manager of the process. But what role will other professionals and trustees play? Are they aware of their responsibilities? Who is serving in a fiduciary capacity and who isn't?

Parties that could be involved in this process include:

* Trustees (usually deemed to be fiduciaries);

* Investment committee members (usually deemed to be fiduciaries, but check for the existence of bylaws that will normally specify whether the committee member is a fiduciary or not);

* Money managers (usually deemed to be fiduciaries, but confirm fiduciary acknowledgement in the manager's services agreement);

* Custodian (usually deemed to be a limited fiduciary); and

* Accountants and attorneys (typically not fiduciaries).

To ensure all parties involved in the decision-making process are in sync, each party's role and responsibilities should be communicated in writing, either by a services agreement or in the investment policy statement. Such alignment allows decision-makers to delegate with confidence, and empowers everyone to act without hesitation.