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The New Fiduciary Standard: The 27 Prudent Investment Practices for Financial Advisers, Trustees, and Plan Sponsors

Tim Hatton, Donald B. Trone (Foreword by)
ISBN: 978-1-57660-183-9
192 pages
May 2005
The New Fiduciary Standard: The 27 Prudent Investment Practices for Financial Advisers, Trustees, and Plan Sponsors (1576601838) cover image
Financial advisers, trustees, and plan sponsors—in fact, anyone who provides investment advice—may be held to a fiduciary standard of care for the financial well-being of their clients, beneficiaries, or employees.

Accountants, attorneys, and wealth managers all need to know about these responsibilities. But what, exactly, is meant by the term fiduciary standard? What must advisers do to be sure their procedures meet legal and ethical standards?

This book identifies the 27 Prudent Practices, organized under the Five Steps, that were developed by the Foundation for Fiduciary Studies—measures that professionals can take to demonstrate that they accept, understand, and are fulfilling the role of a fiduciary.

  • Financial advisers and others offering investment advice will add meaningful value to their practice and show tangible evidence of what sets them apart from the pack.
  • Attorneys, CPAs, and others serving as trustees will possess the knowledge to determine whether or not their clients’ investment portfolios are being managed appropriately.
  • Plan sponsors will know what to look for in selecting investment consultants and in giving employees the disclosures and information they need.

The most far-reaching trend in the financial-advisory business today is the move toward a fiduciary standard of care. This book establishes for the industry a credible investment-decision process that will meet the growing expectations of investors and regulators for integrity, transparency, and disclosure of fees and conflicts that affect their returns.

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Foreword (Donald B. Trone).

A Summary of the Five Steps and Twenty-Seven Practices.

Preface.

Acknowledgments.

Introduction.

PART ONE: MODERN PORTFOLIO THEORY.

Chapter One: Early Years.

Chapter Two: Practical Applications.

PART TWO: THE FIVE STEPS AND TWENTY-SEVEN PRACTICES.

STEP ONE: Analyze Current Position: Practices 1.1-1.6.

STEP TWO: Diversify—Allocate Portfolio: Practices 2.1-2.5.

STEP THREE: Formalize Investment Policy: Practices 3.1-3.7.

STEP FOUR: Implement Policy: Practices 4.1-4.4.

STEP FIVE: Monitor and Supervise: Practices 5.1-5.5.

APPENDIX I: Sample Investment Policy Statements.

APPENDIX II: Subsequent Performance of Mutual Funds: Past Winners' Uncertain Future.

NOTES.

Continuing-Education Exam for CFP Continuing-Education Credit and PACE Recertification Credit.

INDEX.

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Tim Hatton, a Certified Financial Planner practitioner and Certified Investment Management Analyst, earned the designation of Accredited Investment Fiduciary at the Center for Fiduciary Studies, the nationally recognized training organization affiliated with the Foundation for Fiduciary Studies. He is founder and president of Hatton Consulting Inc., a registered investment adviser, in Phoenix. Prior to starting that firm, he served thirteen years with Morgan Stanley, most recently as senior vice president of investments. He holds a BS in Business Administration from the University of Arizona.
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"Tim Hatton tells fiduciaries exactly what they need to know and does so with clarity and care."
Burton G. Malkiel
Author, A Random Walk Down Wall Street

"Every financial professional should have Tim Hatton's The New Fiduciary Standard on the desk. It will assure clients that their adviser has a commitment to the highest professional standards."
L. William Seidman
Chief commentator, CNBC
Former Chairman, Federal Deposit Insurance Corporation (FDIC)

"At last! A book that actually helps fiduciaries apply prudent fiduciary investment standards in a practical way. I strongly recommend that all those who have an interest in modern prudent fiduciary investing—trustees of 401(k) plans, charitable nonprofits, private family trusts, and public employee retirement plans—pick up a copy of Tim Hatton's excellent book, The New Fiduciary Standard, and employ its teachings."
W. Scott Simon, J.D., CFP, AIFA
Author, The Prudent Investor Act: A Guide to Understanding

"If you could recommend only one book to a financial adviser, it would be Tim Hatton's The New Fiduciary Standard. It will change them forever. Pandora's box has been opened, never to be closed again."
Stephen C. Winks
Founder, The Society of Fiduciary Advisors
Founder, Senior Consultant (www.SrConsultant.com)

"Tim Hatton has captured the essential essence of the fundamental requirements of fiduciary responsibility. His practical case-study approach to the application of the 27 Practices identified by the Foundation for Fiduciary Studies, in an easy-to-understand style, is a must-read for anyone having responsibility for 'other people's money.' His explanation of the history and evolution of the current body of knowledge applicable to what has become the ‘Fiduciary Standard’ is useful for both the novice and experienced professional at every level of advice giving."
Clark M. Blackman II, CPA/PFS, CFA, CIMA, CFP/AAMS
Partner and Chief Investment Officer, Investec Advisory Group, L.P. (Houston)

"For those of us who are beneficiaries or trustees, or who advise them, Tim Hatton's The New Fiduciary Standard offers us a way to exercise our fiduciary investment responsibilities, or to advise on them, with excellence. We have long needed such a repository of investment practices to help us make the promises of the Prudent Investor Rule come true. Now we have it with Hatton as our guide!"
James E. Hughes Jr., Esq.
Author, Family WealthKeeping It in the Family

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