I have to admit, when the Investment Advisor cover story proclaimed that the SEC was broken, I expected the discussion to go beyond the pernicious influence of government sunshine laws and Dodd-Frank. If you’re interested, I created an incomplete list of the things that I think are broken at the SEC, none of which were discussed or, perhaps, even recognized by the author. Very disappointing, but maybe Investment Advisor will take another crack at it someday.
Better to turn to Mark Tibergien’s advice on what to do (and what not to do) when creating a compensation plan at your firm. The recommendations include not overpaying for bringing in new business because it can make it hard to maintain profitability in good times, and because more new business comes from serving existing clients well and the rise in markets than from new clients coming in the door. Also remember that compensation is not, in itself, a motivator; it should be used as a reward to the motivated members of our staff.
Angie Herbers, meanwhile, recommends that you start preparing now for the next downturn, especially in the marketing area. She says that the best time to bring in new clients is when the public is spooked by a bear market. Build your cash reserves and add capacity, and most importantly, create a marketing plan that you can roll out when the inevitable happens.
Meanwhile, Dan Skiles offers some great procedural advice for handling the cost basis reporting by the custodians, harmonizing their data with your system’s, choosing your reporting method individually for each client and each client’s different asset classes, and recognize that this can add to the potential for errors. If you manage retirement plan assets, Tom Giachetti offers some guidance on Department of Labor rules, specifically around model portfolios that are, or are not, made up of the underlying investments offered to plan participants.
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