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The Spaulding Group Applauds LPL's Controls to Protect Investors From Another Bernie Madoff

Requiring three-Year Audited GIPS® Returns from Managers 

As recently reported by Barron’s (“Avoiding Madoff – or Just a Troubled ETF Manager,” by Brendan Conway; January 28, 2014), LPL Financial “requires a three-year audited GIPS [Global Investment Performance Standards] performance record in order to consider adding a manager to its platform,” as stated by Melanie Hardin, LPL’s EVP for corporate development and investment-platform solutions at the Inside ETFs conference in Florida. Ms. Hardin went on to explain that this is part of a broader set of criteria designed to avoid problems.  She credited the firm’s strict rules as being a reason they warded advisors away from Bernard Madoff.

“Compliance with the Standards is not enough; it is clear that firms must also undergo verifications performed by independent third-parties,” said David Spaulding, CIPM, TSG’s founder and CEO. “LPL’s objective is to avoid managers who make unfounded claims; their desire is to protect both their advisors as well as the clients they serve. Verification is a way to add confidence to the process.” 

“We are pleased to see that LPL requires compliance with GIPS,” said Jed Schneider, CIPM, FRM, a TSG SVP who heads the firm’s verification practice. “While compliance is a de facto requirement in the institutional space, it can be a marketing advantage for those who serve the retail market. It is recognized globally as best practice to report past performance to prospective clients.”