Panoramix, an innovative advisor technology platform focused on performance reporting and billing, directly challenges whether financial advisors are serving their clients’ best interests by the manner in which they handle fees in their performance reporting with the company’s seventh Industry Content Series white paper titled Performance Net of Fees Vs Gross of Fees: Are We Doing it Right?
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“When faced with the myriad of options available in performance reporting systems,” said Chris Hastings, CEO of Sapphire Software Services, the makers of Panoramix, “advisors frequently ask their technology vendor ‘What should I do?’ While we’re not your legal counsel, we do tackle that difficult question in this publication by looking at it from multiple viewpoints.”
The Panoramix piece begins with a look at both SEC requirements and GIPS guidelines before considering the impact of taxable vs non-taxable fees, fees levied outside the advisory, fee collection from sources outside the custodial accounts, and how the advisor’s clients view fees, fee reporting, and the impact of those fees upon their total investment return.
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“When we first launched Panoramix seven years ago we didn’t offer a gross of fees reporting option,” said Hastings. “We added it a couple years ago and since then the industry conversation has only intensified.”
The advisor’s decision on how to handle reporting of fees has a reverse impact on billing and how firms break out fees—differentiating between those directly related to managing assets and those that are not. “This also led us to introduce new features to Panoramix billing over the past two years,” Hastings said.
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