Looking for objective, unbiased advice? Thanks to the Uniform Prudent Investor's Act, opinions and special interests count for little;  sound process rules. Five new principles define Prudence in regard to investing practices.

Your Advisor Must Diversify Your Assets

Sound diversification is fundamental to risk protection. If your portfolio is not well diversified (in a very technical sense) you had better have a very good reason for it. Without diversification, investment portfolios tend towards greater volatility than necessary while having similar long-term expected returns.

Risk and Return Must be Measured

Risk and return are so directly related that trustees have a duty to mathematically analyze and make conscious decisions concerning the levels of risk appropriate to the purposes, distribution requirements, and other circumstances of the trusts they administer. Prudence requires avoiding uncompensated or unsystematic risk whenever possible. An expert trustee will deliberately take on risk only when it is judged likely to contribute to desirable investment performance for the portfolio as a whole.

Fees Must Pay for a Beneficial Service

Trustees have a duty to avoid fees, transaction costs and other expenses that are not justified by needs and realistic objectives of the trust's investment program. Many amateurs, misled by journalists, get in trouble on this issue.

The public is often advised to pare costs to the absolute minimum. But no one gives guidance about what fees should be paid and to whom (See number 5, below). Experts minimize fees whenever possible in reasonable and appropriate ways. The investment strategy should guide this decision and fees should correspond to the quality of services required consistent with the investment strategy being implemented.

Risk and Return Must be Balanced.

The fiduciary duty of impartiality requires a balancing of the elements of return between production of income and the protection of purchasing power. Again, journalists often mislead the public on this issue. In the last five years, a number of investment instruments like variable annuities have been trashed by the press. While TV pundits may make valid points, a Prudent investor will evaluate each on a case by case basis.

Expertise Must be Delegated

Trustees have the authority as well as the duty to delegate. In the past, delegation of fiduciary responsibility was impossible. Now the law allows for and insists upon delegation of tasks which the investor, trustee or advisor is not qualified to perform or perform well enough to serve the purposes of the trust.

Although most retirees don’t hold their assets in a trust, so the language of the UPIA might confuse. Successful retirees consider their wealth a trust for themselves, spouse and family. When the law references a trustee, they read "advisor" and whenever the law refers to beneficiaries they think of their family.

Advisors Must Put Your Interests First

A stockbroker often has a fiduciary duty to his employer, not to you, when selling investments. On the other hand, the law requires registered investment advisors to put your interests first.  A trusted advisor's His loyalty must lie with the purposes of your trust (retirement funds) rather than with his own purposes.