40% Faster ADV Filing via Automation for Granite Peak

40% Faster ADV Filing via Automation for Granite Peak

Executive Summary

Granite Peak Advisors, a growing Registered Investment Advisor (RIA), struggled with the time-consuming and error-prone process of manually compiling and filing their ADV forms, consuming over 100 hours annually. Golden Door Asset developed a custom ADV automation tool that directly integrated with their existing portfolio management system and CRM, automatically populating the required forms and flagging potential discrepancies. This resulted in a 40% reduction in ADV filing time, saving Granite Peak over 40 hours per year and significantly minimizing the risk of regulatory penalties.

The Challenge

Granite Peak Advisors, managing over $350 million in assets for high-net-worth individuals, faced a significant challenge in meeting their annual ADV filing requirements. Their process was entirely manual, relying on staff to gather data from multiple sources, including IRESS XPLAN, their CRM (Salesforce), and various spreadsheets. This involved sifting through client account information, investment holdings, fee schedules, and business affiliations.

The process was not only time-consuming but also prone to errors. With over 250 client accounts, ensuring data accuracy across all required ADV sections was a daunting task. A single error, even a minor discrepancy in reporting assets under management (AUM), could trigger an SEC audit, leading to potential fines and reputational damage. The cost of non-compliance was estimated to be upwards of $10,000 in potential penalties and associated legal fees.

Specifically, the biggest pain points were:

• Manual Data Entry: Staff spent approximately 80 hours manually inputting data into the ADV forms, a task that could be easily automated. This diverted valuable time away from client interaction and strategic planning.
• Reconciliation Issues: Reconciling data from multiple sources (XPLAN, Salesforce, spreadsheets) was a major hurdle. Discrepancies often arose due to inconsistencies in data formatting and incomplete records. This reconciliation process alone consumed an estimated 20 hours annually.
• Risk of Errors: Human error was a constant threat. Incorrect AUM calculations, inaccurate reporting of outside business activities, or omissions in disclosure statements could have severe consequences. They estimated a 5% error rate using their manual process.
• Scalability Concerns: As Granite Peak continued to grow its client base and AUM, the manual ADV filing process became increasingly unsustainable. They recognized the need for a more efficient and scalable solution to maintain compliance and avoid costly errors. Their projected growth rate of 15% annually meant the existing system would be completely overwhelmed within three years.
• Opportunity Cost: The time and resources spent on manual ADV filing represented a significant opportunity cost. Advisors could have dedicated those hours to client acquisition, portfolio management, or other revenue-generating activities. They valued the opportunity cost at $8,000 annually based on the billable hours the advisors spent on ADV compilation.

The Approach

Golden Door Asset collaborated closely with Granite Peak Advisors to understand their specific needs and pain points. Our approach was centered on developing a custom ADV automation tool that seamlessly integrated with their existing systems and minimized the risk of errors.

The key steps in our approach were:

1. Data Mapping and Assessment: We conducted a thorough analysis of Granite Peak's data sources (IRESS XPLAN, Salesforce, spreadsheets) to identify the relevant data points required for ADV filing. This involved mapping each data field to the corresponding section of the ADV forms.
2. Integration Strategy: We developed a robust integration strategy to automatically extract data from XPLAN and Salesforce. We prioritized the XPLAN API for direct access to client account information, investment holdings, and fee schedules. We established a secure connection to their Salesforce instance to retrieve data on client relationships and business development activities.
3. Automation Logic: We designed a custom automation engine that used pre-defined rules and algorithms to populate the ADV forms with the extracted data. This included automated calculations for AUM, performance metrics, and other key indicators. The engine was built with built-in validations to flag any discrepancies or inconsistencies in the data.
4. Error Detection and Reporting: We implemented a sophisticated error detection and reporting system that automatically flagged potential errors or inconsistencies in the data. This allowed Granite Peak's compliance team to review and correct any issues before submitting the ADV forms.
5. User Interface and Workflow: We designed a user-friendly interface that allowed Granite Peak's compliance team to easily review the automatically populated ADV forms, make any necessary edits, and submit the forms electronically. The workflow was streamlined to minimize manual intervention and ensure a smooth and efficient filing process.
6. Compliance Review: We worked with Granite Peak's compliance officer to incorporate their existing compliance checks and procedures into the automated workflow. This ensured that the automated system aligned with their internal controls and regulatory requirements.
7. Testing and Validation: We conducted rigorous testing and validation of the automated system to ensure its accuracy and reliability. This included comparing the automatically populated ADV forms to manually prepared forms to identify any discrepancies.
8. Training and Support: We provided comprehensive training and ongoing support to Granite Peak's compliance team to ensure they could effectively use the automated system and address any issues that may arise.

Our strategic decision framework focused on minimizing disruption to Granite Peak's existing workflows while maximizing the benefits of automation. We prioritized integration with their existing systems rather than requiring them to adopt new platforms. This reduced the learning curve and ensured a smooth transition to the automated system.

Technical Implementation

The technical implementation involved a combination of API integrations, data transformation, and cloud-based storage. Key components include:

• IRESS XPLAN API Integration: We leveraged the IRESS XPLAN API to directly extract client account information, investment holdings, and fee schedules. This provided a reliable and up-to-date source of data for ADV filing. We utilized Python scripts to authenticate with the XPLAN API, retrieve data in JSON format, and transform it into a format suitable for ADV form population. The retrieval was scheduled nightly to capture any changes.
• Salesforce API Integration: We established a secure connection to Granite Peak's Salesforce instance using the Salesforce API. This allowed us to retrieve data on client relationships, business development activities, and outside business activities. We used the Salesforce Object Query Language (SOQL) to query the Salesforce database and extract the required data. The integration utilizes OAuth 2.0 for secure authentication.
• Data Transformation and Cleansing: We developed custom Python scripts to transform and cleanse the extracted data. This involved standardizing data formats, correcting inconsistencies, and removing duplicates. The scripts included logic to handle different data types and ensure data accuracy. This included cleaning data from spreadsheets to integrate, a legacy CSV that was stored locally.
• ADV Form Population: We developed a custom ADV form population engine that used the transformed data to automatically populate the required sections of the ADV forms. This engine was built using Python and the SEC Edgar's iXBRL taxonomy. The engine automatically calculated AUM based on the aggregate value of client portfolios.
• Error Detection and Reporting: We implemented a sophisticated error detection and reporting system that automatically flagged potential errors or inconsistencies in the data. This system used pre-defined rules and algorithms to identify anomalies and discrepancies. For example, any client with a missing risk tolerance profile would be flagged.
• SEC Edgar Integration: We integrated our tool with SEC Edgar's filing system using Python scripts, allowing Granite Peak to submit their ADV forms electronically directly from our platform. This streamlined the filing process and eliminated the need for manual data entry into the SEC Edgar system. The data is submitted via Edgar using EDGARLink online.
• Cloud Storage: We utilized Amazon S3 for secure document archiving and storage. This ensured that all ADV forms and supporting documentation were securely stored and readily accessible for audit purposes. All files are encrypted at rest and in transit using AES-256 encryption.

The entire system was built on a secure and scalable cloud infrastructure using Amazon Web Services (AWS). We implemented robust security measures to protect the confidentiality and integrity of Granite Peak's data.

Results & ROI

The implementation of the automated ADV filing tool yielded significant results for Granite Peak Advisors:

• 40% Reduction in Filing Time: The automated system reduced the time required to prepare and file ADV forms by 40%, from over 100 hours annually to approximately 60 hours. This saved Granite Peak over 40 hours of valuable staff time.
• Reduced Error Rate: The automated system significantly reduced the risk of errors in the ADV forms. The error rate decreased from an estimated 5% to less than 1%, minimizing the risk of regulatory penalties and reputational damage.
• Improved Data Accuracy: The automated system ensured data accuracy by directly extracting data from XPLAN and Salesforce, eliminating the need for manual data entry. This reduced the risk of human error and improved the reliability of the data.
• Increased Efficiency: The automated system streamlined the ADV filing process, allowing Granite Peak's compliance team to focus on more strategic tasks. The time saved on ADV filing was redirected to client service, portfolio management, and business development activities.
• Cost Savings: The reduced filing time and lower error rate translated into significant cost savings for Granite Peak. The estimated cost savings from reduced labor costs and avoided penalties were over $5,000 annually. The opportunity cost savings of advisors spending less time on ADV compilation also represents a significant value.
• Scalability: The automated system provided a scalable solution that could accommodate Granite Peak's future growth. As their client base and AUM continue to increase, the automated system will be able to handle the increased data volume without requiring additional staff time.
• Faster Filing Cycle: The entire ADV filing process, from data gathering to submission, was shortened from over two weeks to approximately three days. This allows Granite Peak to respond more quickly to regulatory inquiries and changes.
• Eliminated Reconciliation Time: The reconciliation time between sources was virtually eliminated, as the data was automatically reconciled and validated by the system. This represents a 100% reduction in reconciliation effort.

Granite Peak Advisors experienced a clear and measurable return on investment (ROI) from the implementation of the automated ADV filing tool. The cost savings, increased efficiency, and reduced risk of errors justified the investment in the automated system.

Key Takeaways

For other Registered Investment Advisors (RIAs) considering automation for compliance tasks, we offer the following key takeaways:

1. Prioritize Integration: Seamless integration with existing portfolio management systems and CRMs is crucial for successful automation. Focus on solutions that leverage APIs to directly extract data from your existing systems.
2. Automate Data Validation: Implement robust data validation rules and algorithms to automatically detect and flag potential errors or inconsistencies in the data. This will help minimize the risk of regulatory penalties.
3. Focus on Scalability: Choose a solution that can scale with your business. As your client base and AUM grow, the automated system should be able to handle the increased data volume without requiring additional staff time.
4. Compliance Officer Involvement: Involve your compliance officer in the design and implementation of the automated system. Ensure that the system aligns with your internal controls and regulatory requirements.
5. Invest in Training and Support: Provide comprehensive training and ongoing support to your compliance team to ensure they can effectively use the automated system and address any issues that may arise.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors automate compliance tasks and gain insights to improve client service and profitability. Visit our tools to see how we can help your practice.