BrightScope and The Spaulding Group released on Tuesday a white paper calling for an industry consensus on performance standards for financial advisors.
The standards presented in the paper, “Universal Advisor Performance Standards,” address how advisors in the retail or high-net-worth space should address reporting to prospective and existing clients.
The paper notes that the Global Investment Performance Standards are appropriate for institutional assets managers, but don’t apply to many brokerage firms.
“We are not attempting to dissuade a firm from considering or achieving GIPS compliance if they are able to,” the paper asserts. “However, it is our belief that this would be a virtually impossible task for most brokerage firms. Hence the need for a standard that is sensitive to its characteristics.”
Investors can easily find information on products like mutual funds and insurance policies, but evaluating an advisor is more difficult, according to the paper.
“Over time, we envision that every financial advisor will want and need to disclose the performance of their investment selections on behalf of clients,” Mike Alfred, CEO and co-founder of BrightScope, said in a statement.
Furthermore, as brokers and advisors increasingly perform similar duties for clients, it’s become more difficult to effectively report on performance, the paper asserts.