Angry RIAs?
According to Investment News:
"Advisers are agitated by the SEC’s decision to expand its examinations of advisory firms to include contact with clients…
The agency’s decision to go directly to clients is a legitimate way to track their account positions and balances against what advisers are showing on their books, said Gene Gohlke, associate director of the SEC’s Office of Compliance, Inspections and Examinations…
[According to] William Stockwell, branch manager at Stockwell Wealth Management of Boston, an affiliate of LPL Financial of Boston…[if] this policy was instituted five years ago, it would it have uncovered the Madoff scheme…
There was some vigorous push back from the advisers interviewed for the article. In our opinion, only two of them gave the right answer:
Tim Kochis, founder of Aspiriant LLC, a San Francisco-based RIA…has no problem with the adjusted exam procedures, or its focus on custody.
“The SEC and other regulators are doing well to look at issues like this, rather than on the fill-in-the-blank, check-the box inspection regime,” he said. “If this changes to more in-depth exams, I think that would be great."
Mr. Kochis said he would not be concerned if an examiner calls a client, noting that accounting firms that audit his company check at times with clients selected at random to verify certain records.
And
“I think it’s great,” said William Stockwell… “Absolutely anything that can be done to verify and reassure clients is a good thing…”
Let’s be clear: if you’re running your practice the right way, you will have nothing to hide. Not only that, but you will also be adept at winning and keeping your clients’ trust, whoever they may talk to, and a big part of that is (obviously) open and effective communication. Let your clients know that the SEC is instituting this tactic into its auditing practices – it’s really not a big deal. And as Kochis and Stockwell both note, more effective regulation and consumer protection can only strengthen the industry. If an individual practice would be weakened by regulators speaking with clients, well…that raises some red flags, in our view.
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News and Views | art March 12, 2009
