Advisory Only Assets – Understanding New GIPS® Terminology

The roll-out of 2020 GIPS® is underway and currently open for comment.  One of the more confusing provisions in the exposure draft is the proposed requirement to report Advisory Only Assets separate from GIPS Firm assets.

This 2020 GIPS provision is not a big departure from prior guidance.  It is important, however, to understand if you and your colleagues—and regulators—use the term “advisory only” assets differently than it is used in the 2020 GIPS Glossary.  This article will define the terminology and help you assess the impact of the new terminology for your firm, if any.  We’ll also line up the GIPS terminology with regulatory assets under management and provide clarifying examples.

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GIPS® Compliance, Marathons & Significant Events

A GIPS Disclosure Analogy

I’ve been helping firms become GIPS compliant and have been running marathons for over 20 years, and last month, I just ran my fastest half marathon ever.  The marathon was an inaugural Mt. Hood Revel run, and my husband was getting texts during the event tracking my bib number:

“One quarter done with a pace of 8:05 min/mile. Projected finish time of 3:33:26.41 at 9:05AM.”

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2020 GIPS® Implementation Countdown

The specifics of what you need to know if you follow the Global Investment Performance Standards (GIPS) are merely weeks away. Registration for the conference covering it all is likely days away. Be assured there’s an expected 90-day global comment period, a 2019 annual conference to address the final version of the Standards after the comment period, and plenty of professionals to help make sure you are ready to comply by January 1, 2020.

If GIPS isn’t your day job, what you need to know about the 2020 standards in fifty words or less: the revised version will have three distinct Standards for firms/staff with discretion managing 1) separate accounts, 2) commingled funds, and 3) internal assets – aka the “three pillars.” New terminology, disclosure additions/edits and a handful of clarifying interpretations will need to be incorporated into your GIPS compliance program by 2020.

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Ten Steps to GIPS® Compliance

Is your firm considering GIPS Compliance?

Cascade Compliance can help asset managers achieve and maintain independently verified GIPS compliance.  Compliance with the GIPS standards is a firm-wide process, often required by consultants and institutional investors. Third-party verification brings additional credibility to that process and supports the overall guiding principles of full disclosure and fair representation.

Cascade Compliance was established with a 100% dedication to consultation and verification services for the investment industry.  With that focus comes thought leadership and a commitment to keeping clients informed about operational and compliance developments and upcoming changes from the CFA Institute.

Here are 10 helpful tips for becoming GIPS compliant:

Step 1 – Gain Management Support: Management must commit time and resources to bring the firm into compliance. Create a GIPS committee that includes leaders from different departments at the firm.

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Benefits of GIPS® Compliance

The primary objectives of the Global Investment Performance Standards (GIPS) are full disclosure and fair representation in marketing presentations. The benefits of GIPS compliance go beyond the compliant presentation, though.   Claiming compliance with the GIPS standards shows a firm is committed to ethical best practices and that the firm employs strong internal control processes.

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