Performance Perspectives Blog

Who benefits from quarterly verifications?

by | Jan 10, 2012

The Spaulding Group is sometimes asked if we do quarterly GIPS(R) (Global Investment Performance Standards) verifications. We would be happy to, but strongly recommend against it. And why is this?

Well, we firmly believe that the only one who benefits from quarterly is the verifier; and this is for two reasons:

  1. They can charge more, because they increase the frequency of visits
  2. It keeps their staff busy all year round!

We oppose it because:

  1. It’s disruptive to the client
  2. It costs more
  3. There are no added benefits from more frequent verifications

What benefit does it provide? Does the client really think that they are going to fall out of compliance within a quarter, or a few quarters? Recall that verification does two things; it “assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.” Even though the Standards encourage firms to reflect quarterly and/or monthly returns on their presentations (see ¶ I.5.B.2.c), we don’t feel this means they need to immediately get those quarters verified.

As verifiers, we focus on the firm’s policies and procedures, and its composite construction. Chances are the P&P won’t change very much during the year, so that leaves the composite construction. Why must we monitor clients monthly? If we give interim reports rather than an annual, will it really help them?

During the year we often engage with our clients. Our clients frequently contact us with questions or seek advice. Our clients are invited to participate in our monthly webinars at no cost. And, we share information with them in other ways. And so, why bother them with quarterly visits?

Interestingly, of the numerous firms who have switched to The Spaulding Group from verifiers who required quarterly, none have continued at this frequency: all have been happy to move to annual.

Disagree? Think quarterly is a good idea? Let me know why! I’d love to hear your reasons. And the competing verifiers who read this blog are invited to chime in, too, but not anonymously, otherwise they won’t be posted.

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