The fund has held as much as 13% of private mortgage debt that was underwritten by the firm. It now holds only 4%. If the DoL finds that the fund indeed breached its fiduciary duty, advisors who recommended the fund could be held liable for failing to do adequate due diligence.
 
Part of fiduciary duty is to examine the holdings in a fund to determine if risks inherent in those investments are within the investors’ risk parameters or within fiduciary guidelines for the purpose of the investment.
 
Granted, sometimes only limited information is available but advisors and plan sponsors must make sure they dig deep enough to find information that is made available and document the reasons they invest in a fund or other investment structure.
 
Good record keeping, especially for recommendations to 401(k) and other retirement plans, is a prudent way to prove you’ve acted in a fiduciary manner and also to explain the reasons any decisions were made that may come into question.
 
It also helps you know when the investment chosen has served its stated investment purpose and helps you and your client judge when a different investment strategy may be appropriate.

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