This case involves a bank that served as a trustee on behalf of a well-known university. The defending bank was accused of breaching its fiduciary duty to the university by allegedly failing to diversify the trust assets. The holdings of the trust were invested almost exclusively in 5 stocks. The fund was diversified and sold some of the stock, but the trust asset holders still lost about $2.5 million. An expert trust officer with experience in diversifying asset portfolios was sought to opine on whether the bank violated its fiduciary duty.
Question(s) For Expert Witness
- 1. Please describe your experience as a trust officer or as a bank trustee.
- 2. Do you have specific experience diversifying asset portfolios of a trust? Can you speak to the bank's fiduciary duty to do this?
Expert Witness Response E-004630
Cases involving a trustee not diversifying their own stock tend to be very embarrassing for the trustee. During my almost 40 years of handling trust accounts or supervising those who were handling the accounts, diversification was a high priority with any account. For accounts with a single asset, you should be able to show communication with the beneficiaries about your plan to diversify and the timeline to do so. Even that may not suffice with remaindermen of a trust.