Friday, May 25, 2012


Earlier this week we announced a new standard which The Spaulding Group and BrightScope are working on: the Universal Advisor Performance Standards or UAPS. At this week's North America Performance Measurement, Attribution & Risk (PMAR) conference in Philadelphia, a few folks inquired into how these standards related to GIPS(R).

I guess one might expect that this initiative would engender some confusion, since the Global Investment Performance Standards have been around for almost 13 years, and have gained a tremendous amount of well deserved support and attention. The distinction between GIPS and the UAPS is, I believe, fairly clear.

GIPS is for asset management who manage client money and who wish to present their past performance to prospective clients. We are dealing with legally discretionary assets (i.e., assets where the client has given the manager the right to trade on their behalf) that further meet the firm's "GIPS discretionary" rules (that is, where the client has not imposed a restriction or requirement that causes the resulting portfolio not to be representative of the manager's strategy).

UAPS is intended for the retail / high net worth / wealth management arenas, where we often find individual financial planners and advisors who may provide their non-discretionary clients with advice and recommendations or have independent responsibility to manage their discretionary clients' assets.

When a firm has thousands of financial planners, scattered throughout the country, each independently managing client assets, to attempt to bring that firm into compliance with GIPS is a virtual impossibility. And so, these investment professionals want some standard they can use to ensure their reporting is appropriate, and which they can claim compliance with.

Let me make my next point very clear: UAPS does not compete with GIPS. It does not intend to serve the same market. Using a Venn diagram, we have the following:

For several years I have witnessed the confusion that exists within, for example, the U.S. brokerage community, where registered reps, financial planners, and investment advisors frequently ask their firm "are we GIPS compliant?" or "are our reports GIPS compliant?" or "are our returns GIPS compliant?" Clearly, GIPS has a far reaching presence. Unfortunately, these are the wrong questions, because these firms cannot easily achieve GIPS compliance. But with only one standard to use, it is not surprising that this occurs.

Whenever I suggested that a new standard, designed specifically for this market, was needed, the response has been over-whelmingly positive. And although we have wanted to develop a standard for this market, for a variety of reasons we couldn't make progress. Until now.

Last Fall we learned about the fellows at BrightScope, and reached out to them to discuss our idea of a standard, and they were very enthusiastic and offered to help. And so, we began the journey to develop such a standard. We are pleased and enthused by the progress we've made in a fairly short time, and are now ready to move to the next step of vetting and enhancing the document with a group of investment and performance professionals.

If you have any questions about the standards, please reach out. Contact information is at our website, where you can also obtain a copy of our draft white paper.

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