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News January 10, 2011 Issue

Survey Says! "Methods Of Analysis" Is Brochure’s Trickiest Item

Remember the quip made famous by "Family Feud’s" first, and longest running host, Richard Dawson? Just before each answer was revealed, Dawson would bark out "Survey SAYS!" and the most popular (or next most popular) answer from 100 people polled would come tumbling off the leader board.

The National Society of Compliance Professionals (NSCP) recently completed a survey of their own regarding advisers’ efforts to create their new plain English brochures. Of the 1,563 requests sent to NSCP members, 295 responded (demonstrating that folks are too busy building the new brochure to answer questions about it).

Of those folks who did respond, however, it may be comforting – as in misery loves company – to know what they’re saying.

Nineteen percent of the responding advisers said they are finished creating their new brochure. Congratulations! Almost half (47 percent) of the advisers that are done said it took them more than ten hours. "It may be the case that considerably more time than ten hours was needed to complete the brochure," said Ph.D. Don Callaway in the survey’s executive summary.

A whopping 79 percent of all respondents decided to have their brochure reviewed by a consultant or counsel.

The biggest problem area of the new brochure identified by advisers was "Item 8 – Methods of Analysis." Brochure supplements also scored high for difficulty. Advisers with finalized brochures ranked both Item 8 and the brochure supplements equally as the two most challenging aspects of new Form ADV Part 2. Of advisers still working on their brochures that expressed an opinion, the number one ranked concern was Item 8.

Of the respondents, about one third managed more that $100 million but less than $1 billion, about a third managed between $1–$10 billion, and twenty-one percent managed more than $10 billion. Seventy-eight percent of all responding advisers have five or fewer compliance personnel.

Almost seventy-two percent of the respondents attended at least one instructional workshop or webinar on the creation of a firm’s brochure. Of the respondents that did not, sixty percent of them said they’d like to attend a workshop.

Thirty-eight percent of responding advisers are drafting their brochures from scratch. Thirty-one percent are using "commercially available" templates, and fifteen percent of responding advisers are farming the project out.

Interestingly, whether the adviser drafted a brochure from scratch or used a template, the time commitments to complete the brochure remained similar, with roughly equal numbers of advisers distributed across the relevant time categories (0-5 hours, 5-10 hours, and >10 hours). The survey’s time estimates appear low based on adviser comments and the final estimated burdens noted by the SEC in the final rule of 15-60 hours for small advisers, and approximately 100 hours for medium-sized and large advisers. These estimates were for the brochure alone and did not include preparation of brochure supplements.

Even with the NSCP’s shorter time categories, the survey responses may indicate that whatever method of brochure preparation an adviser chooses, the nature of their business may remain the controlling factor in just how long the project will take.