"This is one of these things where when people stop to think about it, they slap their heads and say, 'Why didn't I think of that?'" says Donald B. Trone, a financial advisor in Pittsburgh. "This is something we need to address, and address rather quickly."

 To that end, Trone and a colleague, Roger C. Gibson, have founded the Center for Fiduciary Studies, which has codified audit and practice standards it expects to become the industry norm. The standards call for formalized processes to guide the investment of other people's money and to set standards for due diligence, such as the minimum competence of money managers. They would apply to professionals, such as financial advisors, and lay people, such as church trustees.

 Trone and Gibson estimate 8 million to 10 million Americans fit this bill ? and have, at present, no firm rules to guide their actions. The duo expects their rules to be adopted by state and federal regulatory agencies, or at least to inspire the creation of similar standards that are eventually embraced by regulators and the fiduciary world.

 According to Gibson, the idea of establishing the center originated in the fall of 1998, when Trone was working at Morningstar using its database to conduct money-manager due diligence. "Don called me and asked if we could collaborate on some projects," Gibson explains. "That's when the idea arose. Don already had some experience in training fiduciaries."

 The center is associated with the University of Pittsburgh's Katz Graduate School of Business, which provides offices and shares in the center's revenue, which comes from educational programs built around the fiduciary standards. "It was Don's idea to associate it with a graduate business school," Gibson says. "And it so happens that the University of Pittsburgh has a gorgeous executive-training center after they spent millions rehabilitating the largest Masonic temple [which was given to the university] in the Western world. It was perfect."

 Both Trone and Gibson own firms that are headquartered in Pittsburgh. Gibson Capital Management caters to high-net-worth individuals and institutions. Gibson is also author of Asset Allocation: Balancing Financial Risk and is generally viewed as a pioneer within the advisory community in the development of asset-management strategies.

 Trone, co-author of two books, The Management of Investment Decisions and Procedural Prudence, is president of the Investment Management Council, which caters to advisors, providing them with asset-allocation software, templates for investment-policy statements and research on mutual funds and money managers.

 Trone notes his research stresses managers and funds "that meet fiduciary due-diligence criteria." The remarkable fact that no comprehensive standards existed to set these criteria helped inspire the creation of the Center for Fiduciary Studies, which opened its doors in October 1999. Since then, the center has held about six courses.

 The center's standards are straightforward and, on the surface, not controversial. They direct fiduciaries to:

    They also flesh out each of these areas. For example, a suitable money manager must have had the same portfolio-management team in place for at least two years and manage at least $75 million.

 The center defines fiduciaries as:

    The center's standards are designed to allow fiduciaries to be audited by independent third parties to assure that their practices are fair, reasonable and professional. At the same time, financial advisors who adhere to them would implicitly qualify to work for corporate investment committees, foundations, trusts and other fiduciaries.

 Trone believes the financial-services industry has been slow to confront the issue of uniform rules, partly because a lengthy bull market has papered over the inadequacies of trustees, advisors and money managers. "This will become critical when the market begins to slide sideways or declines, and the investment committee goes looking for an independent third party who can verify that the negative performance results are a result of the market and not oversights or shortcomings of the investment committee," he says.

 That is likely to happen sooner rather than later, Trone suspects. "I think we're going to be seeing market returns begin the painful migration to their historical norms," he says. Securities that are particularly overvalued, such as technology stocks, could contribute outright losses. "When client expectations are not beginning to get met or fulfilled, that's when the subject of investment fiduciary responsibility is going to become more important," Trone explains.

 Also contributing to the urgency of establishing standards, he says, is the movement of professionals from outside to inside the investment arena. "CPAs are now looking to expand their traditional tax and audit services by offering investment advice," he says, "and there's a lot of confusion within the CPA community on the appropriate way to deliver investment services to clients. An alarming number of CPAs are signing up with brokerage firms to provide these investment services, and we could see somebody like the AICPA, on behalf of its membership, adopting these standards to send a clear signal to their members as to what's going to be expected of them if they are going to hold themselves out as a person who's offering investment advice."

 Another catalyst Trone expects to contribute to demand for the center's rules would be the federal Department of Labor augmenting its 5500 audit with an audit of fiduciary responsibility. But the need for such rules is already at hand, he says. "Even in the current environment, while we're still getting rather robust returns, you have turnover on investment committees," he notes. "You have a new head of the committee who says, 'I'm assuming responsibility for this critical role, and I'd like a third party to evaluate what's been done in the past and give me a heads-up as to what's working and what's not.' "

 Practice standards for financial advisors are the flip side of this audit coin, Trone continues. "If the audit says the investment committee should do something, intuitively that now becomes a practice standard for the investment advisor," he says. Currently, standards vary according to which regulatory body, the National Association of Securities Dealers or the Securities and Exchange Commission, oversees the advisors in question.

 "In either case, neither body has given specific guidance on the minimum practice standards that are expected of investment advisors," Trone says. "This is a critical shortcoming in our industry. Investment advice is the only business that permits its practitioners to choose which regulatory body oversees their activities. In many respects, beauticians are more highly regulated than investment advisors."

 Practice standards enunciated by professional organizations such as the Financial Planning Association and the National Association of Personal Financial Advisors "are too general," Trone says. "They say things like, 'You must work in the best interest of the client,' and 'Engage the client in discussion before executing investment strategies.' But none of these organizations has said, 'If you're going to do an asset-allocation study, here are the minimum practice standards to be followed.' " He also concedes that the promulgation of fiduciary practice standards could intensify the simmering strife between the advisory and broker-dealer communities.

 Developing and promulgating these standards is the center's first mission; the second is to provide educational courses based on them. Currently, there are four such programs:

    Some advisors might well ask what makes Trone and Gibson qualified to develop these standards. That's a fair question, Trone acknowledges. "It is not that we are saying our standards should be the standards," he says. "But the industry needs standards, and we'll go to all the major stakeholders and take responsibility for assembling their comments."

 Still, the fact that no regulatory body or professional regulatory group such as the AICPA or the American Bar Association has taken the development of such standards upon itself speaks volumes about their own foggy conceptions of fiduciary responsibility. "In defense of the SEC, it's their job to regulate and enforce, not promulgate and educate," Trone says. "We don't want to further 'committicize' the process, and we don't want standards watered down by politics and the self-serving interests of different associations. Banks and brokerage firms are not anxious to put a report card out there."

 Several financial advisors think Gibson and Trone are filling a gaping void. "Roger and Don are well-qualified to develop and lead the debate, and they are clearly capable of creating and proposing standards," says Glenn Kautt, president of The Monitor Group in Fairfax, Va. "It can only assist people who are fiduciaries in fulfilling their responsibilities."

 In Kautt's experience, many trust companies fail to fully disclose all fees and costs or opt to bury them in tiny type on a back page of a document. "Nation's Bank, now Bank of America, has taken some of our clients out of stocks into proprietary mutual funds," Kautt says. "They disclosed it, yet it's still an inherent conflict of interest. But who are you going to call, Ghostbusters?"

 Many advisors have witnessed fiduciaries blithely circumventing similar conflicts. Kautt hopes that clearly defined practice standards would make big institutions think twice when confronting such situations.

 Trone says that in addition to providing audit and practice standards, the Center for Fiduciary Studies' certification program would enable financial advisors to qualify as expert witnesses in litigation. He predicts lawsuits will become increasingly common as pension-plan participants and trust beneficiaries find fault with those overseeing their money. More commonly, however, he says, advisors will benefit from the center's programs "to elevate their practice standards inside their own offices."

 Trone says virtually every organization that regulates or represents fiduciaries will benefit from the center's standards. These "stakeholders," as he calls them, range from the SEC and the Department of Labor to the American Bar Association, FPA and NAPFA.

 For his part, Gibson believes that in the near future, investment professionals will once again opt for process-oriented methods to make policy decisions that will improve investment results so that "you don't have to rely on remarkable investment skills." Indeed, so often the performance of the managers with the hottest hands turns out to be transitory.

 Currently, the center is a for-profit enterprise, but its founders expect it to convert to a not-for-profit corporation "in the not-too-distant future," Trone says. That's because he expects its standards to be adopted as public policy, and therefore for the center to become a public-policy institute.

 The Center for Fiduciary Studies has set the table for the profession to sit down together and agree on standards. The menu does not include fava beans and a nice Chianti. It's the meat-and-potatoes of managing other people's money. That is so commonplace, the only surprise is that nobody has written the recipe down before.