What investment rules must a trustee follow in Ontario?

In Ontario, trustees are required to follow the "prudent investor" standard set out in the Trustee Act. This means a trustee must invest trust assets as a careful, prudent person would — taking into account the interests of all beneficiaries, both those who receive income now and those who will eventually receive the capital.

The standard looks at the portfolio as a whole rather than judging each investment in isolation. A trustee is expected to diversify, consider risk and return, and avoid speculative investments unless the trust terms specifically permit them. The trustee must also factor in the purpose of the trust, the beneficiaries' needs, and the expected duration of the trust.

Trustees are not required to be investment experts, but they are expected to get professional advice when it is prudent to do so. Delegating investment decisions to a licensed portfolio manager is allowed under Ontario's Trustee Act, provided the trustee exercises reasonable care in selecting and monitoring the manager.

A trustee who makes poor investment decisions without following these standards can be held personally liable for losses. If you are a trustee, getting proper advice before making investment decisions is both a legal duty and practical protection for yourself.