Prudent Expert Act

AAA

DEFINITION of 'Prudent Expert Act'

A measure contained in section 404(a)(1)(B) of the Employee Retirement Income Security Act (ERISA) that requires the fiduciary of a defined contribution retirement plan to use "care, skill, prudence and diligence", and to act in the same way that someone "familiar with such matters" would act. The "familiar with such matters" language has been interpreted to mean "expert". This language creates an important distinction from the earlier prudent person guideline, in that it holds fiduciaries to a stricter standard.


Also called the "prudent expert rule" or "prudent expert standard".

INVESTOPEDIA EXPLAINS 'Prudent Expert Act'

A fiduciary is someone who is legally responsible for someone else's money, and who is legally required to manage that money in the best interests of its owner. Fiduciary best practices include identifying the client's time horizon, desired return and risk tolerance, choosing asset classes consistent with these guidelines, periodically reviewing investment performance and periodically reevaluating whether fiduciary standards are being met.

RELATED TERMS
  1. Named Fiduciary

    The fiduciary that holds responsibility over a given financial ...
  2. Code Of Ethics

    A guide of principles designed to help professionals conduct ...
  3. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  4. Fiduciary

    1. A person legally appointed and authorized to hold assets in ...
  5. Pension Benefit Guaranty Corporation ...

    A non-profit corporation that functions under the jurisdiction ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
Related Articles
  1. Professionals

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  2. Budgeting

    Find The Right Financial Advisor

    Learn how to weed out those who are just out to make a quick buck.
  3. Professionals

    Fiduciary Designations For Financial Advisors

    Attaining the AIF or AIFA could help both you and your clients enjoy a comfortable retirement.
  4. Professionals

    Meeting Your Fiduciary Responsibility

    Being a fiduciary comes with a certain level of responsibility. These four steps will reduce your liability when managing other people's money.
  5. Professionals

    Ethical Issues For Financial Advisors

    Learn what to do when that devil on your shoulder begins to whisper.
  6. Professionals

    How To Deal With (Seriously) Dysfunctional Clients

    Difficult, unreasonable and eccentric people seek financial planners too. Find out how to cope.
  7. Professionals

    An Introduction To Fiduciary Advisors

    Offering personalized solutions in a world of cookie-cutter advice may be your ticket to career perfection.
  8. Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
    Professionals

    Tips For Managing A Cash Windfall

    Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
  9. Retirement

    Planning Ahead for 2015's Tax Law Changes

    Increased 401(k) limits can help savers put away more money for retirement in 2015—but some new restrictions are coming for IRAs.
  10. Even though inflation currently seems tame, it's still the worst enemy of retirees. Here are some tips to reduce its impact.
    Professionals

    Tips For Managing Inflation In Retirement

    Even though inflation currently seems tame, it's still the worst enemy of retirees. Here are some tips to reduce its impact.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center