GIPS Project Variables
What we can provide are some helpful pieces of information to help your Firm gain an understanding of the factors that can affect the costs and time frames involved in a GIPS Compliance endeavor. Who better understands your Firm other than you? There are many factors that can affect your GIPS Compliance Project. Listed below are just some of the items to consider:
GIPS Firm Inception Date: A GIPS Compliant firm must have a minimum 5 year GIPS compliant track record OR be Compliant since the Firm’s inception. What would be the Inception Date of your GIPS firm and/or how far do you want to go back?
Number of Accounts: EACH account must be accounted for in a GIPS Composite, including closed accounts. How many accounts has your Firm managed, since its Inception Date?
Types of Accounts: Some Firms are strictly large Institutional managers, some Firms utilize Wrap relationships, etc. What types of accounts does your GIPS Firm manage?
System Conversions: A portfolio accounting system conversion is the #1 GIPS Killer. Has your Firm gone through any system conversions? And if so, do you have ALL of the underlying data to support ALL of your accounts’ returns, IE GIPS compliant track record?
Excel: Some Firms utilize Excel for all its calculations. This is NOT recommended in your post GIPS Compliant world. Have you factored in transitioning off of Excel to a proper portfolio accounting system?
System Capabilities: In our experience, Portfolio Accounting Systems are good at Portfolio Accounting, and Composite systems are good at creating/calculating Composites, but we have not seen a ‘one size fit all’ system that could adequately handle everything. Have you factored in purchasing an additional Composite system for your needs?
Mergers and Acquisitions: In thinking about System Conversions, has your Firm undergone any mergers or acquisitions?
Number of Strategies: While Firms tend to only think of its ‘Marketable’ strategies for GIPS Compliance purposes. All Strategies need to be GIPS Compliant, for your FIRM is GIPS Compliant, not any one strategy. Therefore, how many Strategies (and therefore, Composites) does your Firm have or wish to have, including Terminated Strategies?
Organizational Structure: Some Firms have offices in multiple locations, using different systems, and performance-related duties are segregated and not under one Department. A GIPS Compliance endeavor spans the ENTIRE Firm (Marketing, Portfolio Accounting, Reconciliation, Trading, Billing, Performance, Client Reporting, Compliance & Sales). How many offices does your Firm have? How many employees would be affected? How is your Firm Organizationally structured?
Organizational Change: In our experience, some employees are resistant to change, and this can be a major hurdle to overcome. Therefore, is everyone on board with becoming GIPS Compliant at your Firm? Does everyone understand that Processes may need to change from what they are used to?
Advisor vs Performance Manager: In our experience, Firms tend to seek the assistance of an outside Contractor because the workload is just too great, or employees just do not have any additional bandwidth for this type of Project. Does your Firm want someone to walk them through the process OR someone to actually DO the work?
Data Gaps: Does your firm have all of the Basic Data Elements needed and can support the Recordkeeping Requirements, for ALL accounts since the inception of the Firm?
Paperwork: Becoming GIPS Compliant requires possible changes to your Firm’s Paperwork processes, and also requires much historical contractual documentation. Does your Firm have all of the necessary contracts to support GIPS Compliance?
Verification: Becoming GIPS Compliant does not require a Verification from an outside, 3rd party firm. However, most Firms will want to be Verified. Does your Firm plan to be Verified?
