Fiduciaries, Like Spotters, Have a Duty to Investigate

“You had better be right or don’t bother coming in.” Those were about half the words Chuck Will, the long time producer of CBS golf telecasts, screamed in my headset as I stood on the side of the 18th green at Sahalee Country Club. It was near the end of the second round of the 1998 PGA Championship and I had just radioed the production trailer that Kevin Sutherland’s putt was for a bogey, not par, as the announcer had just said. Chuck had come back with his expletive-loaded statement to inform me that whatever score Sutherland got was going to be the cut line for the tournament. “Was I sure?”, because they were going with my call. It was actually a really big deal since getting it wrong would expose the network to the ridicule of their rivals in the print media. With conviction in my voice and doubt in my mind I said, “I’m sure.”  

I had been hired, along with some of my buddies, as spotters for the Thursday and Friday rounds. Spotters are the eyes and ears of the production crew. We were out on the course helping the people in the trailers make sense of the limited information available on their monitors, by providing information on yardages, club selection, hitting order, and shots played. We were the B Team working the weekdays that would be replaced by the A Team on the weekend. The A Team usually consisted of caddies whose players didn’t make the cut, so they were free on Saturdays and Sundays. Caddies make great spotters because they are very good at accurately gathering the information needed by the producer and directors to put together a good telecast.  

However, they decided to keep me and my buddies for the weekend because of the good work we had done and because I got the big call right. I got it right because I took the time to investigate Kevin Sutherland’s situation. When you are spotting, the producer will call and ask for information on players who are in the hunt. Since John Cook was the only one in my group having a good day, all my calls had been requests for information on “Cookie.” On eighteen, Sutherland drove his ball into the woods on the right, while Cook was in the fairway. I wanted to get Cook’s yardage because I was sure I would get a call on him, but I also had a duty to investigate what was going on with Sutherland. So I headed into the woods and watched as he “wasted” a shot in the soft pine needles. Not having seen the missed shot, the on-course announcer relayed erroneous information that could have caused real embarrassment if I hadn’t corrected it.  

Just like a spotter, a fiduciary has a “duty to investigate.” According to the Uniform Prudent Investor Act, “…a [fiduciary] shall make a reasonable effort to verify facts relevant to the investment and management of [portfolio] assets.” The Act explains that a fiduciary investor has a responsibility “to examine information likely to bear importantly on the value or the security of an investment.” That means a fiduciary needs to investigate records of title, have land appraised, reject unaudited financial statements, and perform a thorough analysis of any data that would relate to the stability or authenticity of an investment. In performing this due diligence, a fiduciary not only needs to examine potential investments but also determine if they match the time-horizon, risk tolerance, and needs of the client, beneficiary, charity or other entity.  

A fiduciary who performed an appropriate investigation would have protected his or her beneficiary from the fraud of Bernie Madoff, the deceit of the Stanford Group, the concentration of Bill Miller’s mutual fund, the lack of transparency of hedge funds, or the high costs of many annuities. It took effort to check out Kevin Sutherland’s situation and it takes effort to check out investment choices. As it turned out, though I didn’t know it at the time, Sutherland’s wasted shot in the woods was the most important stroke of the day. Just because you never know, both a spotter and a fiduciary have a duty to investigate.