RIA Trend Report 2016: Average Advisors' Written Plans and Procedures

RIA Trend Report 2016: Average Advisors' Written Plans and Procedures

Practice Management & Operations

Having written procedures helps advisors reduce risk on a number of dimensions, allowing them to focus on their core competencies, such as asset management, client acquisition and research. The types of plans and procedures being documented range from compliance and client agreements to training and executive policies. Not surprisingly, client agreements and compliance manuals – at 96% and 90%, respectively – stand out as most important, an observation consistent with last year’s findings. Additionally, errors and omission insurance, business plan, and employee handbooks registered relatively high response rates – all in excess of 60% – and demonstrated meaningful increases year-over-year. The aforementioned five categories that exceed 50% response rates indicate that RIAs are increasingly aware of potential legal and regulatory risks with the recent surge in regulatory oversight. Strangely, having a written marketing plan actually shows a lower response rate in 2015 compared to 2014, which appears inconsistent with the top scoring initiatives in Figure 1 – growing AUM and revenues, and improving marketing and business development efforts. However, it is likely that advisors tend to articulate their strategy for pursuing those initiatives within their Business Plan, which as previously mentioned, registers an increase over prior year. Other responses are largely consistent with 2014 findings, but we do note an increase from 18% to 27% in training/educational manuals. The increase in training and education likely indicates that RIAs are responding not only to an increasingly wider variety of investment products and strategies available to them, but also to new technology and operations platforms. 

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