Transcript CLIENT FILE REVIEW - North American Securities

CLIENT FILE REVIEW
NASAA 2010
INVESTMENT ADVISER TRAINING
Number of files to be reviewed?
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The number of files reviewed at an
examination is an issue. How many is
enough? More importantly is the number
of clients reviewed. Clients may have
multiple accounts and it is important to
review the client as a whole to have a
better understanding of suitability, fees,
performance, etc…
How are files selected?
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Type of business
AUM, Financial Plans, Consulting
 Trade Blotter –recent activity
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Type of investments
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Mutual Funds, Variable Annuities, Stocks,
Options, Alternative Investments, etc…
Type of account
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Discretion/Non-discretion, Trust, Margin,
IRA, Education, Pension, etc…
How are files selected?
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Complaints
Size of account – largest/smallest
Accounts of IARs and relatives
New accounts/Established accounts
Terminated accounts
Random
Managed Accounts
Client File Review
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Client Contract
Custodial Application
Legal Documents
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Trust Instrument, POA, Will, etc…
Suitability
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Review investment holdings (custodial statements) as
compared to investment objectives, risk tolerance,
and other suitability information & insurance
products
Age of suitability information
Investment holdings consistent with legal documents,
if applicable.
Managed Accounts
Client File Review
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Trading Activity
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Trade Blotter
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Look for signs of excessive trading, front running,
bunched trades, commissions, mutual fund
breakpoints/type of shares
Verify that trades on the custodial statements have
been properly recorded on the IA’s trade blotter
Fee Calculation
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Review fee invoices - verify fee calculations and make
sure fees paid agree with contract/Form ADV - make
sure IA has proper authority to deduct fees from
custodial account
Managed Accounts
Client File Review
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Performance Calculations
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Correspondence
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Verify individual performance calculations
Review correspondence for false or misleading
information, and questionable commentary
Reports/Statements generated by IA
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Review and compare reports/statements generated by
IA to those generated by custodian – discuss
differences
Money Manager Accounts
Client File Review
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Contract
Money Manager Contract
Solicitor Disclosure Document
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Fee Calculation
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Verify the client received both Form ADVs, separate
solicitor disclosure document
Review fee invoices - verify fee calculations and make sure
fees paid agree with contract/Form ADV - make sure IA
has proper authority to deduct fees from custodial account
Correspondence
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Review correspondence for false or misleading information,
and questionable commentary
Financial Plans
Client File Review
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Contract
Financial Plan
Suitability
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Review Financial Plan to ensure contracted services
are met – Example: Estate Planning, Retirement Planning
Review Financial Plan for reasonableness of
recommendations in relation to suitability
information
Fee Calculation
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Review fee invoice, verify fee calculations, and make
sure fees paid agree with contract/Form ADV
Financial Plans
Client File Review
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Correspondence
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Review correspondence for false or misleading
information, and questionable commentary
Plan Delivery
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Recommend a plan delivery receipt be signed by
client to document receipt and date of delivery
If portion of the fee is collected in advance, delivery
receipt provides evidence plan was delivered within
six months – custody issue if more than $500 is
collected six or more months in advance
Hourly Consulting
Client File Review
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Contract
Fee Invoice
Documentation of services provided
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Review consulting documents to ensure contracted
services are met
Verify fee calculations and make sure fees paid agree
with contract/Form ADV