MarketCounsel gave us three to four days to prepare our documents. We burnt everything we thought they'd want to see onto CDs. It took one morning to separate out everything just as we would have done if the SEC were coming into the office."
MarketCounsel, in its verification process, asked both for client information Halbert Hargrove had burned onto CDs, and information it hadn't. "We knew they'd ask for the complete files on certain clients, so we just extracted everything from Avante related to those clients. For each client file, we have folders in Avante that contain everything from scanned stuff to quarterly reports, our invoices, forms executed by clients, agreements, etc., so we just burned the client's entire folder." Metadata wasn't required to get this information, since the firm's client files are organized alphabetically and a last-name search sufficed.
What did MarketCounsel ask for during its verification that Halbert Hargrove had not already burned onto a CD? "Once in our offices," says Abusaid, "they drilled further for information. What we do is run the verification from our conference room where we have the Avante system up and running, and in real time could give them whatever they wanted to see. We wanted to make sure we could actually get to the data quickly, which we were able to. If MarketCounsel asked for data for clients in similar circumstances, we just pulled it up and they liked the fact there was no time lag."
Did MarketCounsel "write them up" for anything? "No, we're uber-conservative," says Abusaid. "Whereas the last audit we had from MarketCounsel was more superficial (more sampling and less detail), we felt we needed something more substantial this time around. We got the same prognosis as before, though: We're up to date."
An area where Halbert Hargove did need help, he admits, was in marketing materials. Says Abusaid, "Our letterhead and business cards are all available for review, but they hadn't been captured in Avante by the firm's compliance department."
Bernstein says a client like Halbert Hargrove needs a couple days onsite and about a half day for follow-up in which MarketCounsel's report is delivered in person or by phone. "For a client who's not on retainer, there's more time spent because we don't know them. We might spend one day before our onsite visit preparing, then two to three days for the onsite review and another full day offsite."
Are most advisors using document management systems, we asked Bernstein? "No, but it's a good thing, and it makes our lives and the advisor's life easier. If you look at sheer numbers, the majority of advisors is not using document management; they're using paper or they might be keeping documents on a Windows drive or in a CRM system. Additionally, some documents are kept with their custodian.
"And that's where they have trouble: knowing where everything is kept."
David J. Drucker, MBA, CFP, is the editor of Technology Tools for Today: The Newsletter, and co-chair of the annual Technology Tools for Today Conference for independent financial advisors.