Why Not GIPS?

I was just reviewing our 20 year returns recently for all of our portfolios and was pleasantly surprised how well the market has performed in the last 20 years. Despite the government involvement, the credit bubble, the tech bubble, and the energy bubble, the market has still performed extremely well.

You may be wondering, how can he have such a strong level of confidence about the returns of the last 20 years? The answer my friend is because our returns are audited to show returns net of fees.

Many years ago prior to working with the academics we would get return reports, but there was no such thing as a net or audited return. Believe it or not, the vast majority of returns that you see out there today are not audited or net. I am talking about major players in the industry. That’s right, it is still rare to find an audited return today.

There is a global standard for the industry; it’s called GIPS or Global Investment Performance Standards. This process does require a fair amount of time and expenses that a lot of firms just do not want to incur. You see GIPS, “was established as an ethical standard rather than a prescriptive rulebook for the purposes of ensuring disclosure and fair presentation of a firm’s performance track record.”

GIPS lays out very clear requirements to ensure that every investors’ account is included in the audit and that any type of account cherry picking is illuminated, so that full disclosure is achieved.

As you can see from the GIPS website http://www.gipsstandards.org/about/pages/index.aspx, the ultimate question that an investor should have for the investment platform is: “Why it is not GIPS compliant? If a firm is genuinely compliant then they can be expected to be verified, for their own benefit as well as the clients’.”

Again see the link to learn more about GIPS and if you have any questions or need any coaching we are only a phone call away. Have a great day!

About Paul Nichols

Paul is the founder of Financial Abundance, a Registered Investor Advisory firm and EDI, an Estate Planning Firm with offices in State College and Lewisburg. He has been working with individuals, families and businesses for over twenty years, including many Fortune 500 companies. He has educated tens of thousands of people through seminars, workshops and various international speaking engagements where he shared the stage with many notable individuals such as Ronald Reagan, Robert Kiyosaki (author of Rich Dad, Poor Dad), Mike Ditka, General Schwarzkopf, and Newt Gingrich to name a few.

In 2000, after many years of traveling to consult companies and individuals, Paul decided to relocate from Colorado to State College, PA (his wife’s hometown) to develop a local advisory firm.

Paul operates under the core belief that education plus understanding leads to clarity and confidence; resulting in peace of mind. He is a proud father of three and devoted husband of 20 plus years.

Some of Paul’s accomplishments:
Regular contributor to the Centre Daily Times, via the “It’s Your Money” blog
Featured in the movie Navigating the Fog of Investing
Regular contributor to Town & Gown as the publications Investor Coach
Host of the weekly iTunes Podcast, It’s Your Money
Member of the Western PA Better Business Bureau
Member of the Centre County Chamber of Business and Industry