Assessing the financial condition and compliance status of an investment advice vendor is not only a best practice for all investors, but it’s also mandated for retirement plan sponsors by regulators across multiple federal agencies.
Pulling Back the Covers
FSMA’s rating program evaluates the business processes and risk management systems used by registered investment advisors, broker-dealers, insurance companies, and commercial banks. Our rating methods are based on standards published by independent organizations and regulatory agencies including the American Purchasing Society, the Office of the U.S. Comptroller of the Currency, and the U.S. Department of Labor.
FSMA’s rating assessments examine an investment firm’s financial strength, conflicts of interest, fee structures, compliance system, cyber security program, and a host of other business process issues.
An FSMA Procurement and Risk (“PAR”) rating report contains an expert opinion, from a buyer’s viewpoint, of an investment advisor’s risk management policies, procedures, controls, and pricing rationale. A PAR rating embraces all sectors of the investment advice industry that advise retirement plans qualified under the Employee Retirement Income Security Act (“ERISA”) and Individual Retirement Accounts (“IRA”).
The PAR rating provides ERISA plan sponsors and high net worth individuals a way to confirm the compliance qualifications and service ranking of their current investment advisor or a prospective advisor. It’s an essential RFP tool.
A PAR rating assessment addresses four risk management categories.
We assign a rating only when we believe we have adequate information to form a credible opinion, and only after we have conducted applicable quantitative, qualitative, and legal analyses.
Investment advisors: Inquire directly about a PAR rating for your firm.
PAR rating reports are an FSMA member benefit.