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Putting Non-Cash Compensation Where it belongs – On the Books

The importance of reconciling non-cash compensation right has grown with new regulations.


For financial advisors who count on non-cash compensation from asset management sponsors for education or business development purposes, keeping track of this resource presents each one with a confounding riddle: “How do I value something that’s intangible?”

The importance of getting the reconciliation of non-cash compensation right has only grown in importance as regulators ratchet up their oversight of all things compensation related. Wealth managers and broker-dealers count on their advisors to provide accurate, timely records of any gifts, business tools, meals, education and training received. For advisors who are not professional accountants, tracking non-cash compensation is more than painstaking – it subtracts valuable time away from counseling those clients spooked by the C-19 marketplace.

For everyone in the firm’s eco-system, inaccurate reporting can represent a regulatory breach. “Too many non-cash compensation events still go unreported,” one compliance officer told us recently. Another executive said, “I’m worried that up to 80% of our firm’s total dollar amount may be off the books.” However, a look at the tracking routine of the average firm and its advisors during normal times, not to mention during today’s troubled climate, quickly illustrates why so much non-cash compensation goes missing.

  • Too much “guesstimating.” A financial advisor might have qualified for and participated in an asset manager-sponsored education event. An estimate of value of the advisor’s part may not align with the true dollar amount the asset manager recovered from its fund shareholders.
  • Not enough data. A broker-dealer or wealth manager might aggregate all given costs from their advisors, but miss a few of the events because of reporting delays or omissions.
  • The result: inaccurate reporting. The sum of guesswork and missing data is inaccuracy. Often it’s when asset managers receive and send broker-dealer expense reports to their operations group for reconciling and data cleansing, that a firm first learns that it has a problem. The consequence of a non-cash compensation event “going missing” though is always the same: a compliance breach.

Fortunately, technology offers a better approach to data reconciliation than today’s cumbersome, error-prone manual spreadsheet approach.

Solution Ahead: Reconciling Non-Cash Compensation the Digital Way

A new, innovative digital web portal solution now offers a significant improvement over manual entry. Regardless of the number of stakeholders across your eco-system, each constituency gains access to the same event histories and values as everyone else. That way all stakeholders access the same standardized functions through a single, unique portal:

  • Receive data directly from each asset manager: Eliminate the increased risk of low-quality reconciliation. Employing a web-based tool to track non-cash compensation offers a unique way to receive information directly from each asset manager whether your firm is working with 10 product vendors or a 1000.
  • Advisor view: Time-pressed professionals can quickly post an event and assign a value through drop-down menus right from their digital device.
  • Compliance review: Officers then scan each advisor’s non-cash compensation usage against representative categories and asset manager allocations. If an advisor’s usage then exceeds a threshold pre-set by the firm, alerts could be sent to internal stakeholders.
  • Reconciliation: The web-based portal allows broker-dealers to compare the advisor’s reporting to an asset manager’s event allocations in real-time.

Advisors have told survey sponsors for decades that they feel too much time is spent on back office tasks and recordkeeping and not enough time on client service. A non-cash compensation web portal solution offers them another digital tool for providing better service to the clients they have as well as a chance to acquire a few more.

Want More? To learn more about Broadridge’s Non-Cash Compensation solution, contact Broadridge today.

Dan Mezaros, Product Manager, Broadridge.

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