Wednesday, January 26, 2011

And the reason you're having quarterly verifications done is why exactly?

One of our GIPS(R) (Global Investment Performance Standards) verification clients recently mentioned that they may be under pressure to move to quarterly verifications. I found this of great interest, because we, and most other verification firms, recommend annual verifications. What possible benefit is there to have quarterly, other than:
  • you get to see your verifier's smiling face more often (if they show up, that is, as opposed to doing "remote verifications")
  • you get to keep your verifier's employees active throughout the year
  • you get to pay more money for the service?
We have heard from a number of firms who undergo quarterly verifications that they are still waiting for their 2nd quarter 2010 (or earlier!) verification report!!! So, what's the point? We have already conducted 2010 annual verifications  for some of our clients. To recommend quarterly suggests that the client might suddenly somehow stop doing what they know they're supposed to be doing procedure-wise. Firms should not confuse quarterly verifications with the recommendation to update presentations quarterly; in fact, we believe that most firms don't (update their reports quarterly), adding even further justification to ask why not just do them annually? We will be happy to do quarterly if a client wants us to, but none of ours do; and this includes our clients who were previously undergoing quarterly verifications with their prior verifier.

Annual is sufficient. But what is also important is that the verifier keeps in touch throughout the year and is willing to respond to questions as they arise. We, of course, do this. We have been extremely proactive with the standards, by:
  • sending letters to clients detailing upcoming changes
  • hosting webinars on the standards (which are complimentary to our verification clients)
  • commenting in detail in both this blog and our newsletter about the standards.
We consider our verification clients, make that all of our clients, to be friends, and we enjoy their company. However, we don't believe in wasting their time or money: visiting quarterly means that quarterly they need to prepare for our visits: heck, annual is tough enough! Why disrupt their operation?

If someone has a good reason for quarterly, please share it, 'cause I surely don't know of any.


  1. Dave, the only thing I can think of is larger firms can use quarterly verifications to raise the “market norm” thus discouraging smaller firms from playing. What’s the cost/benefit of more verification costs weighed against less competition?

  2. Brant, you may be onto something! Thanks for commenting.

  3. Running the verification on a quarterly schedule can help catch any possible errors sooner, rather than later, potentially minimizing the impact of that error and preventing it from compounding as the firm awaits for the annual verification review.

  4. Michelle, thanks for your comment. By "error" I don't know if you mean error in the returns or errors in the process; I guess both could apply. I will do an entire post today in response to this, as I think it requires more thought. Thanks!


Note: Only a member of this blog may post a comment.