By Tim Hatton, CFP®, CIMA, AIF
Reviewed by Gary W. Silverman, CFP®
Bottom line: this is a book that every financial planner needs to read.
That said, I do have a couple of complaints about my review of the book. First, readers of The New Fiduciary Standard can earn ten hours of continuing education credit by taking the exam inside the book. This is a bonus and pretty much pays for the cost of the book. However, as of the writing of this review, Bloomberg had yet to decide (or at least tell me) whether or not they were going to register this CE with the new, automated CE system. I've held off for over a month waiting for them to make up their minds but so far, nothing. So, while the CE by itself would make the book worth its cost, you are gambling on whether or not it will be valid.
My other complaint is that I wanted to look at the book that this one is based on. Namely, I wanted a copy of Prudent Investment Practices so that I could confirm that The New Fiduciary Standard follows and expands on it. I was promised twice by the publisher that they would send me a copy to look at. So far (and this has been going on for about two months), nothing.
Okay—rants aside, there are many other reasons it is worth opening your wallet for this text.
No doubt you are acutely aware of the controversy surrounding the issue of being a fiduciary. Amazingly, I regularly run into RIAs who proudly announce that they are fiduciaries but can't tell me what one is. (An excellent article in the November 2005 Journal of Financial Planning looks into this issue.) Once you figure out what one is, you end up with another question: "What the heck is it that a fiduciary should do?"
The genesis of this book comes from the work Prudent Investment Practices: A Handbook for Investment Fiduciaries, which was published in 2003 by the AICPA and the Foundation for Fiduciary Studies. It tried to answer the question by outlining 27 practices that an investment fiduciary should follow to ensure compliance with ERISA, the DOL, and the SEC. In this book, Tim Hatton, CFP®, shows how to implement those practices. The New Fiduciary Standard uses practical applications and examples to make them very understandable.
Of particular interest to me was the introduction and historical background that led to modern portfolio theory and the current (and confused) sets of fiduciary requirements. This included an excellent synopsis of the background theory and studies of risk and return.
In going through the practices, Hatton spends many pages or just a few paragraphs expounding on each fiduciary practice. This variety of depth is due to the nature of the fiduciary practices themselves—some require little in the way of explanation.
Hatton uses examples from his own practice to show how the fiduciary practices can be applied. While you may not manage your practice the same way or use identical software, you do get the understanding of how to apply the prudent practices in your own firm.
Bottom line: read the book.
Gary W. Silverman, CFP®, owns a fee-only financial planning firm in Wichita Falls, Texas. He is the host of the television show Falls Informer, editor of the financial newsletter Personal Money Planning, and a frequent contributor to the print and broadcast media. He also teaches university courses in finance and management.
Bloomberg Press, 2005