Apr 17th 2017 - by David E. Fred
Editor's Note: We are thrilled to have David E. Fred guest blogging for us. David is a 30 year financial services veteran with deep experience in due diligence and research with large broker/dealer and RIA platforms. He has been a rich source of insight to us as we continue to build technology to enhance the investment research landscape.
Whether or not you are a fee-only financial advisor, or a commission-based financial advisor using a best interest contract exemption, you will be compelled to provide evidence of a standardized and robust fiduciary process which leads to the selection of investments (including fee structures and other potential conflicts of interest) for your clients.
Shifting industry perceptions has us thinking clearly about client recommendations in terms of “best interest fiduciary” (top-down, holistic approach) which is more stringent that an historically utilized “suitability standard” (bottom-up product requirement).
While some Financial Advisors have embraced documentation of actions, the ability to have such information readily available may be a different story. Decisions made with respect to research, fee comparison, expense metrics and the ultimate decision-making around the fiduciary decision must be documented, stored and accessible. Technology is playing an ever-increasing role in the management and manipulation of data inputs (CRM, investment positions, and research data) and the data outputs (comparison of client positions with research recommendations, fiduciary decisions). Management of the information in and out of this process will need to be easy to use, interpret and produce evidence of a fiduciary process. Not only that, but the disclosure of fees and conflicts of interests begs the standardization and production of such on a client-specific basis.
Critical to managing the fiduciary obligation will be to perform such in a concise and cost-effective manner. Given the fiduciary obligation with respect to retirement accounts, providing a worthwhile manner in which to document the process followed to ultimately derive product selection, including model allocations, is critical when managing smaller accounts, but it will also factor in profitability of a financial advisor’s business by streamlining the approach to documentation of actions taken on individual accounts.
Quite possibly, there will be a suite of tools that will assist the Financial Advisor in creating a fiduciary process. Financial planning software to gather personal and financial data, risk tools will deliver quantifiable drivers to asset allocation, CRM tools will keep it all organized, and portfolio management software will provide reports and decisions on when to rebalance/reallocate. Lastly, a solution to the documentation of the research processes and decision-making involved in selection of specific products to fill the asset allocation/model portfolio was, until now, a critical piece that was lacking in the process.
Integrating RedQuarry into your fiduciary process will free-up time in your day (all information is at your fingertips, rather than rooting around in hard copy files or filing hierarchies in operating systems), will allow an instant snap-shot of where any research review is at any moment, and will actually notify you when something is stale or needs to be updated.
RedQuarry is a robust Research Management Software (RMS) that organizes and documents the entire investment research management process. It has an impressive array of services and customization that will allow any user to create their research world in a flexible, backed-up and immediately accessible package. The user can design the system to work around processes already in place, and allows for team collaboration (even in remote locations), drag-and-drop ease of operation, tickler files for action items and can produce client facing disclosures.
RedQuarry's cutting edge research management software is used by leading investment firms around the world to manage their investment process, due diligence files, documents, reporting, and research compliance. Contact us for a demo