1. PRUDENT INVESTOR RULE ETHICS
8 FIDUCIARY QUESTIONS
TO ASK YOUR
FINANCIAL ADVISOR
NATIONAL COLLEGE OF PROBATE JUDGES SPRING CONFERENCE May 2 – 5, 2018
Darryl J. Lynch, AIF ®
Executive Director – Investments
th Avenue NE, Suite 2100
Bellevue, WA // P: (425)
Peter C. Palumbo, AIF ®
Director - Investments
One North Brentwood Blvd. Suite 600
St. Louis, MO // P: (314)

2. Working with Your Financial Advisor
History and Overview of the Prudent Person vs. Investor Rule
Ways to Apply the Principles of the Uniform Prudent Investor Act to Guardians, Conservators and Estates
Fiduciary Responsibilities vs. Liabilities:
Eight questions to drive the conversation with
your Financial Advisor
Ethical objective decision making vs. subjective opinions
Establishing and monitoring guardian investment accounts
Blocking or Restricting Accounts to Reducing Bonding Costs 2

3. Uniform Prudent Investors Act of 1994
43 States have adopted the Uniform Prudent Investor Act of 1994 3
Source: uniformlaws.org

4. Source: National Guardianship Association
NATIONAL GUARDIANSHIP ASSOCIATION DEFINES FIDUCIARY AS…
“Any person that has the responsibility to invest and manage the assets of another person is a fiduciary.”
Source: National Guardianship Association
This is not a legal definition nor an indication of the statue of Oppenheimer & Co. Inc. or any of its associates. This is provided for informational and education purposes only. 4

5. ORIGINS OF LEGAL LISTS Originated in the early 18th century
Started in the early 18th century
British Government formed “legal lists” due to an investment scheme that altered the development of trust law.*90
Only investments on “legal list” allowed for fiduciary's.
Government Debt and well-secured mortgage loans.
“Legal List” were too constraining. Focused on preservation of capital at expense of income and growth.*94
Jurisdictions began adopting “Prudent Man – later Prudent Person – Rule” for more flexibility
Harvard College v. Amory: “Such care and skill as a person of ordinary prudence would exercise in dealing with his own property,”*97
Negative to Prudent Person Rule was that it focused on individual investments without consideration of the broader investment strategy or portfolio and it stressed preservation of capital
Originated in the early 18th century
British Government Formed Legal Lists
Government Debt and well-secured mortgage loans
Source: Theories of Law 5

6. PROBLEMS WITH LEGAL LISTS
“Legal List” focused on preservation of capital which could be at the expense of income and growth.
They were too constraining because they didn’t take into account other factors
“Legal List” focused on preservation of capital at expense of income and growth.*94
They were too constraining : Government debt, Inflation, Term, excluded common stocks
Investment
Portfolio 6

7. Source: Harvard College v. Amory, 1830
PRUDENT MAN RULE
“Such care and skill as a person of ordinary prudence would exercise in dealing with his own property.”
Prudent Man Principle was founded on the idea that “….” So this is the idea that you would care and look over someone else’s to the same level of detail as you would your own.
Source: Harvard College v. Amory, 1830 7

8. LIMITATIONS OF PRUDENT MAN (LATER PRUDENT PERSON) RULE
Focused on individual investments without consideration of the broader investment strategy or portfolio
Allowed for hindsight evaluation of investment choices
Diversification is not a requirement
Stressed the preservation of capital without taking risk into account
A major change
was coming 8

9. DISTINCTION OF THE PRUDENT INVESTOR RULE
Total Portfolio Evaluation
Risk
Process
Diversification
Monitoring
Delegation
Documentation
Modern Portfolio Theory
Source: Uniform Prudent Investor Act of 1992
“The prudent investor rule is a test of conduct and not of resulting performance.”
(760 ILCS 5/5) (from Ch. 17, par. 1675) 9

10. THE START OF THE PRUDENT INVESTOR RULE
Modern Portfolio Theory (MPT)
Cash
CD’s
Bonds
Large Cap Stocks
Emerging Markets
RISK
RETURN
MPT is a discipline which seeks to maximize return and minimize risk by diversifying among different asset classes
MPT
Middle of the 20th century
Consider risk and the compensation received for taking the risk
But in doing so consider investments as a whole and not individually
Asset Allocations come into effect when analyzing a portfolio investment* 104
Ex: CD’s vs Small Caps
Diversification does not guarantee a profit or protect against a loss. 10

11. THE PRUDENT INVESTOR RULE
The Prudent Investor Rule of today is about a few key principles.
Assessing Risk – Determining suitability and risk for each client on a case by case basis.
Proper diversification among different assets
Proper Diversification*
TX Sec
VA Sec
NJ Sec 3B:
Delegation of Investment
Responsibilities
CO Sec
PA Sec. 7206
OH Sec
Assessing Risk
CO Sec TX Sec
OH Sec
* Diversification does not guarantee a profit or protect against a loss 11

12. THE PRUDENT INVESTOR RULE…continued
Documentation of the process is critical –
Ongoing monitoring, don’t see and leave
Minimizing investment costs
Relying on qualified professionals, like CPA’s and Attorneys to help in the process
Minimize Investment Costs
NJ Sec. 3B:
CO Sec CA
Relying on Qualified Professionals
Documentation
Monitoring
WA 409.8
NJ 3B: UT 12

13. Ethical Decision Making
Responsibility vs. Liability
Fiduciary responsibilities can be shared but not abdicated.
Fiduciary liability exposures exist where there are unfulfilled responsibilities.
Fiduciaries can reduce liability by identifying and filling gaps in their practices. 13

14. Fiduciary Code of Ethics
Employ and provide the client information on the Prudent Practices when serving as an investment fiduciary.
Act with honesty and integrity and avoid conflicts of interest, real or perceived.
Ensure the timely and understandable disclosure of relevant information that is accurate, complete and objective.
Be responsible when determining the value of services and form of compensation. 14

15. Fiduciary Code of Ethics…continued
Know your limits of expertise. Refer clients to colleagues and/or other professionals in connection with issues that go beyond your scope of knowledge and skill set.
Respect the confidentiality of information acquired in the course of work, and not disclose such information to others, except when authorized or otherwise legally obligated to do so. Do not use confidential information acquired in the course of work for personal advantage.
Not exploit any relationship or responsibility that has been entrusted. 15

16. As Guardian you are always responsible for the following:
Confirm investment goals and objectives
Approve appropriate asset allocation strategy
Establish or approve an explicit, written IPS/Investment Proposal
Prudently select service providers
Incur only reasonable expenses
Monitor the activities of the overall investment program, including service providers
Avoid conflicts of interest
Documentation 16

17. Eight Questions to ask your Financial Advisor
Will the Advisor act as a fiduciary in all scenarios when managing portfolio assets?
How long has the Financial Advisor been acting in this fiduciary capacity? Describe your experience acting as a fiduciary advisor.
What fiduciary training has the Financial Advisor received? Any designations focused on fiduciary best practices? 17

18. Questions to Ask…continued
Provide at least three references of clients who are using your services in your capacity as a fiduciary advisor.
Please disclose and describe any potential conflicts of interest.
What safeguards and procedures do you have in place for blocked or restricted accounts?
Describe your total compensation or fees received for your proposed services.
What services do you provide to help fiduciaries meet their obligations? 18

19. Questions to Ask & Ethical Decision Making…continued
Creating and maintaining a comprehensive plan, strategy or policy statement / Investment proposal that documents the processes and procedures that will be used to manage the portfolio.
IPS/Investment Proposal should have:
Sufficient detail for a competent third party to implement;
Not so detailed to require constant revisions and updates. 19

20. Questions to Ask & Ethical Decision Making…continued
Applying objective standards vs. subjective opinions for evaluation and recommending appropriate investment options.
Monitoring and reporting portfolio performance.
Understanding their important fiduciary roles, responsibilities and obligations. 20

21. How to Apply the Prudent Investor Rule for Guardians, Conservators and Trustees
Evaluation of
Client’s Needs
Investment Proposal
for Court Approval
&
Investment Policy Statement
Standardized Financial Decision-Making Process
Industry Standard Evaluation of Investment Portfolio
FINANCIAL MANAGEMENT PACKAGE
Simple Fee Model
Documentation of all Reviews and Ongoing Monitoring
Cost-Effective Investment Management
* Including Special Needs Trusts
Proper Diversification and Periodic Rebalancing of Assets 21
Diversification does not guarantee a profit nor protect against a loss.

22. The Hierarchy of Decisions
Most Important
Time Horizon-Investment Strategy
Appropriate level of risk/return
Asset Classes Considered
Mix among Asset Classes
Sub-Asset Classes
Time Horizon-Investment Strategy
Managers/Funds
Least Important 22

23. Evaluate the Clients Needs
Time Horizon
Age & Health Evaluation
Total Investable Assets
Income Sources
Annual Expenses
What is the short fall, if any?
Anticipated large withdrawals? i.e. education
Additional income from other sources?
Limitations or restrictions on Investments? 23

24. Investment Policy Statement/Investment Proposal
Should Include…
Statement of Fiduciary Relationship
Purpose of the Investment Policy Statement / Proposal
Rules and responsibilities of parties Involved
i.e. Oversight monitoring: performance, advisor, allocation, conflict of interest, documentation, and manager selection
Financial Advisor responsibilities
Investment objectives 24

25. Investment Policy Statement/Investment Proposal…cont.
Investment Allocation Model
Capital Preservation, Income, Balanced Income, Balanced Growth & Growth
Investment Time Horizon
Investment Selecting & Future Considerations
Rebalancing Frequency
Annual Costs
Court Blocking or Restriction Requirements
Adoption Agreements to be signed by Guardian & Financial Advisor 25

26. Investment Models MODEL FACTS: Low Cost Index Funds
Capital Preservation
Income
MODEL FACTS:
Low Cost Index Funds
No Load Actively Managed Mutual Funds
Proper Diversification Among Asset Classes
Optimize Number of Securities to Minimize Accounting Costs
Most Clients Fall Within A Few Models
30%
100%
70%
Balanced Income
Balanced Growth
40%
50%
50%
60%
Growth
25%
75%
Fixed Income
Equity
The above allocation examples are for illustrative use only and are not intended as investment advice. Please consult with your Oppenheimer Financial Advisor with any specific questions you may have regarding your own situation.
The suggestions here may help you choose an investment program appropriate for you. Keep in mind, though, these are only suggestions made for long-term, total-return-oriented investors without considering tax consequences. The use of an asset allocation suggestion does not guarantee a profit or protect against a loss in declining markets. You should discuss your individual situation with your investment professional to find the right balance between risk and potential reward.
For more complete information about any of the funds that may be used including investment objectives, risks, charges and expenses, please obtain a prospectus and read it carefully before investing. 26

27. Sample Special Needs Trust
Investment Proposal Summary
Sample Special Needs Trust
Account Name
Special Needs Trust
Total Investable Assets
$500,000
Type of Account
Trust
Monthly Withdrawal
N/A
Time Horizon
2 - 5 years
Risk Tolerance
Conservative - Moderate
Allocation Model
Income
Benchmark Model
70% Barclays Aggregate Bond Index / 30% S&P
Rebalancing Frequency
Semi-Annual
Blocked / Restrictions
n/a
Performance Reporting
Quarterly in Person Reviews
The cost benefits of a transfer to the Oppenheimer & Co. Inc. Guardianship and Trust program are:   
Oppenheimer’s Annual Management Fee is 0.90%
Provide opportunities for increased income for the client through proper asset allocation
Oppenheimer will hold in the portfolio approximately 9 – 12 securities, thus reducing the annual accounting costs
Maintain proper diversification & regular rebalancing
Provide standardized performance reports quarterly
Provide ongoing monitoring & risk evaluation to keep in compliance with the Uniform Prudent Investor Act (UPIA) 27
This proposal is for illustration purposes only and is not a representative of the performance of any specific investment, and there is no guarantee that the hypothetical rate of return can be achieved.

28. Investment Proposal Summary … continued
SHORT FIXED INCOME/CASH EQUIVALENT
20%
 $100,000
HIGH YIELD FIXED INCOME
15%
 $75,000
INTERMEDIATE FIXED INCOME
25%
 $125,000
LONG-TERM FIXED INCOME
10%
 $50,000
LARGE CAP VALUE
LARGE CAP GROWTH 9%
 $45,000
SMALL/MID CAP 6%
 $30,000
INTERNATIONAL/GLOBAL EQUITIES 5%
$25,000 
SPECIALTY 0%
TOTAL PORTFOLIO
100%
$500,000 28
This proposal is for illustration purposes only and is not a representative of the performance of any specific investment, and there is no guarantee that the hypothetical rate of return can be achieved.

29. Establishing a New Account
Account Title
Guardianship or Trust
Total Investable Assets
Age of Client
Guardian Information
Letters of Guardianship
Allocation Model
Beneficiary, Settlor & Trustee Information
Source of Funds
Bank Information
Risk Tolerance
Objectives
Blocking Receipt
Online Access
*Note: Guardian must notify Advisor of an existing client’s death and provide a Death Certificate in a timely manner. 29

30. Cost of Managing an Investment Portfolio
Stock-picking and market-timing can be dangerous and counterproductive.
Independent financial advisors (especially flat-fee or fee-for- service advisors) are valuable to the fiduciary (1% or less).
Mutual funds are often an easy way to satisfy multiple fiduciary obligations, including diversification, lower management cost and built-in management. Index funds are more efficient to fiduciaries.
Investment costs need to be considered.
What is the importance of class shares of Mutual Funds in a portfolio and their internal costs.
Actively managed funds charge higher administrative fees. 30

31. Cost and Fee Structure…continued
Do not forget to consider the tax effect. Generally speaking, mutual funds will have less capital gains tax consequences than actively managed accounts. Index funds will usually have less tax consequences then actively managed funds. But dwarfing all of that, will be the income tax effect of liquidation of all assets transferred to a fiduciary in order to permit the fiduciary to reinvest according to his, her or its investment strategy.
Optimize number of securities to minimize actual costs. 31

32. Source: National Guardianship Association
Final Points
“Delegation. For a fiduciary without substantial investment expertise, it is both a good plan and protective against liability, to select an investment advisor”
Source: National Guardianship Association
“The prudent investor rule is a test of conduct and not of resulting performance.”
(760 ILCS 5/5) (from Ch. 17, para. 1675) 32

33. Final Points
“The Prudent Investor Rule” (the Rule) is intended to give fiduciaries guidance on how to invest assets under their control and management.
Fiduciaries…
may use the Rule as a defense if challenged by the ward, families, courts and others.
Wards…
may use the Rule to protect from guardian mismanagement. 33
Source: National Guardianship Association

34. IMPORTANT INFORMATION
This Presentation is intended for informational purposes only and is subject to change without notice.
For further information about the products/programs available and their suitability for your portfolio, please contact your Oppenheimer Financial Advisor. Any discussion of securities, should not be construed as a recommendation or an offer or solicitation to buy or sell interest in any securities. Securities products offered or sold by Oppenheimer will not be endorsed or guaranteed by Oppenheimer and will be subject to investment risks, including the possible loss of principal invested.
Oppenheimer & Co. Inc. does not provide legal or tax advice.
© 2018 Oppenheimer & Co. Inc. Transacts Business on All Principal Exchanges and Member SIPC. All rights reserved. No part of this presentation may be reproduced in any manner without written permission of Oppenheimer. 34