I had a recent conversation about the UAPS (Universal Advisor Performance Standards), which provides the ability for a compliant firm to show a representative (“rep”) portfolio’s performance. I mentioned that the white paper is a draft and subject to change. However, we recognize that it’s possible some firms may want to show such information, and therefore feel we need to address it; at least at present.
Reference was then made to the Global Investment Performance Standards (GIPS(R)):
- Question: Can a GIPS-compliant firm show a rep account’s performance?
- Answer: Yes! Nowhere in the Standards is this prohibited.
Why would a compliant firm choose to show a rep portfolio’s information?
- To provide performance attribution results
- To show actual holdings and trading
- To provide additional insights they may feel would prove helpful to the prospect
I am also aware that investment consultants sometimes ask to see a rep account.
Such information should be considered “supplemental.” In addition, it should include appropriate disclosures, to ensure the recipient understands what they’re getting.
But rep portfolios not allowed? Of course they are!
While they aren’t specifically PERMITTED (see below, they actually ARE addressed!), the fact that they are not explicitly PROHIBITED means that they can be employed. Clearly (a) best practice is ALWAYS the composite presentation, and (b) compliant firms are obligated to make every reasonable effort to provide the appropriate compliant composite presentation to the prospect. If they can give them a rep account’s details, they shouldn’t have any difficulty giving them the composite presentation, too! And (c), we would expect appropriate disclosures to be included with any rep portfolio details, to alert the reader of the possiblity that it was cherry-picked.
The Supplemental Information Guidance Statement actually makes reference to representative portfolio information being permitted: