How Well Do Advisor Recommended Portfolios Perform?

By Hal M. Bundrick

NEW YORK ( MainStreet) -- Just how good is the investment advice consumers receive from a financial advisor? A group of industry leaders is proposing a new performance standard to help consumers find out. The "Universal Advisory Performance Standards" would allow investors to compare results based on the performance of advisor recommended portfolios - before the advisor is hired.

A white paper proposing the new performance reporting standard has been issued by the investment research company BrightScope and The Spaulding Group, an investment performance measurement firm. An advisory board backing the initiative includes representatives from major brokerage and advisory firms and industry associations, including Morgan Stanley, Merrill Lynch, Morningstar and the American Society of Pension Professionals & Actuaries.

"Investors are able to search for and compare the merits of mutual funds, insurance policies and many other types of financial products before making a purchasing decision. However, when it comes to their most important financial relationship - their financial advisor - they are frequently unable to evaluate the advisor's background or investment performance in advance of hiring him or her," the group states in the report's introduction.

"A performance standard that covers advisors of all types (both investment advisers and brokers) will create a strong incentive for all advisors to calculate and disclose performance. Access to consistent performance across all advisors would assist consumers in their selection of an advisor, and help advisors efficiently grow their practices."

The group says the intended Universal Advisor Performance Standards (UAPS) would provide reliable investment performance reporting to both existing and prospective clients.

"After more than a year of meetings with our advisory board, we are ready to release the paper for public comment," says David Spaulding, founder and CEO of The Spaulding Group, Inc. "We are grateful for the assistance our board members have provided. UAPS provides 'best practices' for both client and prospect reporting of performance and risk."

"Our belief still remains strong that every financial advisor will want to and should need to disclose the performance of their investment selections on behalf of clients," says Mike Alfred, CEO and co-founder of BrightScope. "We are expecting to continue to see a positive response to this initiative now that we're soliciting feedback from the advisor community. UAPS is a standard that should be achievable by all investors."

The free white paper can be downloaded at The comment period will continue until October 18, 2013. Comments should be e-mailed to and may be sent anonymously. The UAPS Executive Board is currently exploring options for moving forward with the new standards, including transferring responsibility to a third-party.

--Written by Hal M. Bundrick for MainStreet