Recently Byrnes Consulting and AdvisorAssist teamed up to give a webinar called “Online Marketing Mistakes to Avoid.” Conor Anderson, the VP of Advisor Compliance at AdvisorAssist shared this advice related to the U.S. Securities Exchange Commission's latest risk alert identifying the most common deficiencies related to advertising:
Disclosures Of Performance
If communications have any performance information in them, know what the performance is, what disclosures are needed and have back-up information for the performance. Anderson gave examples of model calculations, treatments of fees shown net of advisory fees and back-tested performance.
Gross-of-fees performance should only be used with one-on-one “table setting” types of interactions, said Anderson. It should be accompanied by performance figures that show the impact of investment advisory fees and it should be clear what those fees are.
Cherry Picking
When making claims around holdings, the area of fair, balanced and misleading comes into play, explained Anderson. If showing top holdings, bottom holdings should also be shown for a balanced attribution presentation. Clients should receive disclosure that they can request a full holdings list.
When comparing performance to an index, especially a custom index, the communications has to have an apples-to-apples comparison. “Our guidance is to always add a common-based benchmark,” advised Anderson.
Do not omit any material facts from communications.
Complying With GIPS
If representations of things like being in compliance with GIPS standards are made, make sure you engage with an independent third-party verifier for the review of an investment management firm's performance measurement processes and procedures.