GIPS Prospective Client Definition

The entire GIPS compliance effort is focused around providing the GIPS Report to GIPS Prospective Clients.  Typically, a client becomes a Prospect when you present materials during a one-on-one presentation of a specific strategy.  If you are just sending out mass emails and/or doing cold calls to gain interest in your firm, those would NOT be considered Prospective Clients, but rather Potential Clients.  Therefore, this section only deals with the individuals that you have specifically met with about the possibility of investing in a specific strategy.

GIPS Requirement 1.a.11 - Reasonable Effort

The firm must make every reasonable effort to provide a GIPS Composite Report to all prospective clients when they initially become prospective clients. The firm must not choose to which prospective clients it presents a GIPS Composite Report.

GIPS Recommendation 3.b.1

If the firm has a minimum asset level for portfolio inclusion in a composite, a compliant presentation SHOULD not be given to a prospective client when the composite is known not to meet that requirement.  If the client does NOT have that minimum amount of funds, your firm SHOULD not solicit funds from that individual.

 
 

GIPS Prospective Client Information

Prospective clients are defined as:

  1. Any person or entity that has expressed interest in one of the firm’s composite strategies and qualifies to invest in the composite.

  2. Existing clients could also be prospective clients for any strategy that is different from their current investment strategy.

  3. Investment consultants and other third parties are prospective clients if they represent investors that qualify as prospective clients.

Additionally, procedures need to be developed that cover:

  1. When an INTERESTED PARTY becomes a prospective client.

  2. How the GIPS Report is delivered to a prospective client.

  3. How ongoing prospective clients are tracked.

  4. How the GIPS Reports are provided to ongoing prospective clients (databases, consultants, wrap sponsors, etc.).

GIPS Prospective Client Guidelines

2 tests Must be met in order to qualify as a Prospective Client:

  1. The interested party must have expressed interest in a specific composite strategy or strategies.

  2. The firm must have determined that the interested party qualifies to invest in the respective composite strategy.

Assume a GIPS firm is meeting with an interested party to introduce the firm to the interested party.  At this initial meeting, the firm provides information about itself in an attempt to attract the interested party to the firm.  At this point, the two tests to qualify as a prospective client have not been met; therefore, the interested party is not yet a prospective client, and the firm is not obligated to provide a GIPS Report.

Once the interested party expresses interest in a specific GIPS composite strategy and the firm determines that the interested party qualifies to invest in the composite strategy, the interested party then becomes a prospective client.

At that point, the GIPS firm must make every reasonable effort to provide the prospective client with the appropriate GIPS Report(s).

If for some reason you are Mass Mailing out the GIPS Report, say as an email blast to all people in your database, then this would not meet the criteria of a Prospective Client, and then this method of dissemination would fall under the Advertising guidelines.

Current clients can qualify as prospective clients, IF they are interested in a different strategy.

Some GIPS prospective clients are ONGOING prospective clients, meaning, they remain prospective clients for extended periods of time. More or less, greater than 1 year.

Once you have provided a GIPS Report to a prospective client, then, you must keep providing them a newly updated report (each year), until they are no longer a GIPS prospective client.

 
 

GIPS Prospective Client Definition Samples

GIPS PROSPECTIVE CLIENT DEFINITION - Example #1

A Prospective Client means any entity (person or organization) listed on the Horvath Investors global sales pipeline that has been actively solicited to invest in one or more of HI’s composite strategies.  Such entities represent all potential investors actively solicited to invest and who are qualified to invest in the composite strategy.  An existing client may be considered a Prospective Client if there is an active solicitation of that client for a strategy that is different from their current investment strategy with HI.  Additionally, all active relationships with investment consultants and any investment databases populated by Horvath Investors with information about HI composites would qualify as Prospective Clients.

A Prospective Client is no longer considered prospective, if/when:

  • the Prospect becomes an actual client

  • The Prospect requests to no longer be contacted

  • The Prospect is no longer listed on the sales pipeline

GIPS Report tracking procedures are maintained by HI Relationship Management and are available upon request. 

GIPS PROSPECTIVE CLIENT DEFINITION - Example #2

XYZ has defined a Prospective Client as:  

  • Any person or entity that has expressed interest in one of the firm’s composite strategies, qualifies to invest in the composite strategy.

  • Any existing clients that have expressed interest in any strategy that is different from their current investment strategy with XYZ.

  • All investment consultants and other third party relationships (including investment databases and RFP proposals) that represents investors which would qualify as prospective clients.

Prospective clients can be ongoing prospective clients, meaning, they remain prospective clients for extended periods of time (1 year or more).  If marketing materials, including the GIPS Report have been provided to this prospective client, and they are still a prospective client after 1 year, XZY will continue to provide prospective clients a newly updated report (each year), until they are no longer deemed a prospect.

A Prospective client is no longer considered prospective, if/when:

  • The Prospect becomes an actual client

  • The Prospect requests to no longer be contacted

  • Six months has elapsed since the date of last contact with the Prospect

GIPS Report tracking procedures are maintained by XYZ Relationship Management and are available upon request.

*Information is created from a variety/multiple sources of CFA Institute materials.

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