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Do I need to monitor all clients' investment accounts? How often?

The concept of fiduciary status requires the fiduciary to monitor the client’s investments. An advisor may be subject to monitoring requirements under securities laws, ERISA, or both. Though ERISA generally requires a fiduciary to monitor investments, the DOL fiduciary rule does permit certain non-discretionary fiduciary advisors (typically those advising commission-based accounts) to disclaim a monitoring obligation in their contracts.

Typically monitoring is done in two ways. Quarterly, the financial advisor should evaluate whether or not the investments made by the financial advisor (i) meet the objectives of the account, (ii) are performing appropriately, and (iii) remain prudent and suitable. The financial advisor should also conduct a thorough review of the issuer and its financial performance for each security held in the account.

Consider wealth management as a guide. The regulatory agencies that supervise wealth management institutions require an annual formal review that includes the Covered Individual Account (i.e. IRA). It is customary to do it more often. It is required annually.

Utilize this checklist to help you monitor client accounts.

 

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