May 21, 2009
The proposal as I understand it, to subject RIAs to surprise audits if they deduct fees directly from client accounts is, to my mind, excessive, unnecesary and misallocates resources.
This is the case because clients are aware, or should be, of their obligations by way of contract.
An invoice is presented each quarter, or for whatever time period, and can be checked.
In my experience, the debit to the account is approved by the client,however, the advisor does not have any other means of obtaining funds.
Unfortunately, this proposal appears to be an overreaction to the Madoff and other frauds.
Finally, I'm sure that the third-party custodians could perform indepedent functions to eliminated the thought of a CPA's surprise audit.