Question

One of your customer accounts is a trust account. The trustee of the trust is inexperienced in investing.

As his broker, you should explain to the trustee that under the Uniform Prudent Investor Act he has a duty to invest the trust assets "prudently" which includes:

A. The duty to diversify the trust portfolio to reduce risk
B. The duty to monitor the performance of the portfolio
C. The duty to minimize costs
D. All of the above

Answer 1

A) The duty to diversify the trust portfolio to reduce risk

Step-by-step explanation:

The Uniform Prudent Investor Act (UPIA) requires trustees to make investments following the Prudent Person Rule. This means that trustees should invest the trust funds as if the trustee was a prudent person investing his/her own assets.

The best way to comply with the prudent person rule is to invest in a diversified portfolio that reduces risk.