I have a question for any RIA’s or anyone here managing client money … what legal/compliance limitations are there (if any) in terms of sharing Portfolio or Book performance with the general public via a website, etc.? Obviously the standard disclaimers would apply, but I’d like to share one or more of my Books, possibly by embedding the performance chart & statistics, and I’m wondering if that’s permissible? Would welcome any input.
Thanks.
As a former RIA I can tell you that advertising anything other than actual performance (AUM in the portfolio) is frowned upon by compliance principles. Furthermore, if you are dual registered (RIA plus 7) anything you use in marketing must be approved by your licensing authority (NASD, NYSE) not to mention your BD.
IMHO, you’re better off staying a mile away from performance advertising unless you’ve got the trade prints and statements to prove it… The SEC/NASD/State audit will likely cost you otherwise.
If you’ve got live performance numbers you can report them to publications such as Money Manager Review and get some traction.
P123 and the Designer Models walk a fine line in this regard…
It really comes down to the opinion of each state’s auditors opinions. I’m state licensed with a base in Colorado and they approved of my use of a “Model” portfolio on Collective2.com
Ok thanks Brad, good to know.
questions for RIAs…what fee structure do you use? 2/20?
For color on the SEC’s views of performance advertising, you may want to Google the phrase “sec clover capital.” Click on a link that gives you a copy of the agency’s “no action” letter.
That involved a money management firm that availed itself of opportunities the SEC offers to render advisory opinions regarding proposed courses of conduce. The clover capital letter contains a pretty comprehensive view of the way the SEC thinks about this issue.
Not all advisers are SEC registered, but SEC opinion is a pretty good proxy for how state regulators are likely to evaluate questions. And even for those who aren’t advisers (such as the many who disseminate advice under the “newsletter exception” including our own designer models), the issue of performance advertising arises out of the general prohibition against fraud – and rules of fraud apply to everybody, not just those who are registered.
So when it comes to performance, use Clover Capital as your guide, and copy disclaimers you see all around (which most likely were developed with Clover in mind). The ultimate safety valve, though is: When in doubt, don’t or as a legal ethics professor I had years ago said, “If you have to ask, the answer is ‘no’” (but then, he wound up going to prison later, so maybe he wasn’t as foolproof as we thought – sigh . . .)
question for RIAs…what % do you charge for non-qualified clients? 2%? 1%?
And what do you charge for qualified? 2/20? 1/10?
Many RIAs charge a sliding scale. As an example, 2% on the first $100K, then 1.8% from dollar $101K to dollar 250K, then 1.5% on dollar $251K to dollar $500K, then 1.25% on dollar $501K to $1M, then 1% on anything over $1M. Of course, some RIAs start with much higher minimums.
Typically, the management fee breaks down as follows. 25% or so for the investment signal, 25% for back office, and 50% for the person who has the client relationship. Referral fees vary between 25% to 50% of the fee.
On HNW clients, they usually get some sort of sliding scale management fee as described in the first paragraph UNLESS they negotiate a special rate or are involved in a private placement. Hedge fund fees are all over the place.