Q&A with Timothy F Peterson, Partner, Ashland Partners & Company LLP
Timothy F Peterson, CFA, CAIA, CIPM,
Ashland Partners & Company LLP
Timothy shares his views on some of the topics being covered at the Summit for Performance, Risk & Attribution 2013- North America
QOn the performance measurement side of things, what are the biggest/most significant developments have you seen in the past six months/year?
I would say it is the new GIPS handbook, the alternatives guidance statement, and the slew of new GIPS Q&A which is coming out. There are 100 new pages of discussion and over 70 GIPS Q&As issued recently. Not all of it is unexpected, but it is a lot to sift through and clients need to be informed as to how it affects them.
Q What are the top three things on your desk right now? In other words, what takes up most of your time/what are your priorities?
The top three things on every Ashland Partner’s desk always involves service leadership, market leadership, and thought leadership. I know that sounds like a sales pitch, but it is literally how we think. So, in no particular order – Client service, which is the bedrock of what everyone at Ashland Partners does. It’s things like reviewing marketing materials, giving guidance on methodology and best practice, meeting with investment advisors, and supporting our verification work. Secondly, I’m heavily involved in industry engagement, and I’m working the NCREIF and REIS on implementing the Real Estate Information Standards, as well as the Performance Measurement Manual. And lastly, there is our client education efforts, and I shepherd our webinar series and newsletters. Given the recent outpouring of material from GIPS and the current regulatory environment, there is lots of education to be done.
QWhat new tools/technologies, if any, are you using at Ashland with regard to GIPS verification? Do the tools vary depending on where a client is in the verification process?
The framework and specific procedures for conducting a verification are codified in the GIPS standards and AICPA SOP 12-1, and we follow those procedures. But each client’s circumstance is different, and professional judgment is used when applying those tools. I think of our technologies as a toolbox and you have to know which tool to use that will get the job done best. And we constantly upgrade our toolbox. For example, we’ve developed a new tool which examines every single account in a composite, not just a sample, for materiality and outlier characteristics – be it performance, minimum account size, or what have you. It does it in an instant. But our number one tool is our well trained staff. We spend about ten per cent of our annual budget on training our staff. In any given month there is approximately six hours of mandatory training, excluding our annual training week and other professional development endeavors such as the CIPM program. We want our employees to bring their analytical and communications skills to bear on the examination and not spend lots of client time and money on pure data management.
Q With the new GIPS handbook now released as well as what seem like ever changing laws surrounding the finance industry, how do you ensure your firm is keeping abreast of all the regulations and maintaining transparency to investors?
This is a fundamental responsibility and it goes hand in hand with the training we described above. We will sometimes give pop quizzes to our employees to ensure they are up to date. We interact with a number of regulatory consultants and share expertise and insight with each other. We monitor the GIPS website and SEC websites almost continuously. And we talk to our clients, and get their perceptions and experiences as well.
QWhat are the biggest compliance challenges firms are facing now and where do you think the industry is headed?
I would say the overriding challenge is the steadily increasing cost of compliance. A recent survey shows that the cost of compliance is of greater concern to an advisor than any actual examination by the SEC. And I would include the time involved, including the time it takes to keep up with the rules, as part of that cost. It’s not just cash expenditures. I think much of the increased regulation of this industry is warranted. But it’s difficult to strike a balance between protecting consumers and promoting free markets. I think increased regulation, be it legislative or via standards, will continue indefinitely. My concern is that oversight becomes too limiting, where firms are not able to react nimbly to market environments (such as shorting price bubbles) or bureaucracy becomes concerned with minutiae and the intended benefits of regulation are wasted.
You can hear more from Timothy and these topics at the upcoming Summit for Performance, Risk & Attribution 2013 – North America conference being held June 19 & 20 in New York.
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