Other choices for cash management."Choosing the Best Compensation Plan" (October issue), discusses the merits of fee and non-fee cash investment managers. It is appropriate to highlight the importance of this decision, particularly in these days of increased regulatory oversight and executive accountability. Too often, the selection of a cash manager is a default decision--with the company choosing the financial institution that houses their credit facility or the brokerage firm offering investment-banking services. The choice of a cash manager should be a strategic business decision and given proper fiduciary consideration, independent of bundled service arrangements. I applaud the article for addressing this subject, but see some points of clarification. First, framing the discussion as "Fee, or non-fee?" over-simplifies the real issue. If given this choice, who would want to pay a fee? The real question is whether to hire a broker or a registered investment advisor Registered Investment Advisor (RIA) is a designation obtainable in the United States by an individual who has registered with the U.S. Securities and Exchange Commission or state regulatory agency (where the primary business is situated or multiple States in some cases) in (RIA (Rich Internet Application) A Web-based application that approaches the speed and elegance of a local application. An RIA may refer to a browser-based application that uses AJAX or another enhanced coding technique. ), and that question requires one to ad-dress fiduciary responsibility, investment expertise and alignment of interests. One must weigh the motivation of brokers to sell securities verses the RIA's directive to act in a more consultative portfolio management role. Second, there should not be a general assertion that non-fee managers are "designed primarily for companies pursuing a buy-and-hold strategy Buy-and-hold strategy A passive investment strategy with no active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon. Opposite of active strategy. ." Again, the choice of an appropriate cash management strategy should be given a more detailed review with deeper fiduciary consideration. Moreover, the contention that RIA's should not be hired to manage less actively traded accounts because of FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). No. 115 guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. is misguided mis·guid·ed adj. Based or acting on error; misled: well-intentioned but misguided efforts; misguided do-gooders. mis·guid . There is not a requirement for corporations to classify cash portfolios as "held-to-maturity." In fact, most cash portfolios are typically classified as "available for sale" to appropriately allow for the ability to sell securities to accommodate cash flow needs. By classifying the portfolio as "available-for-sale," you are also required to mark-to-market each security--providing much more transparency as the market value of your portfolio. In the current Sarbanes-Oxley environment, finance professionals are increasingly tasked with assuring proper controls are in place, especially when outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. particular functions. The importance of this decision as it relates to cash management cannot be underestimated. Christopher Kennedy EVP EVP Executive Vice President EVP EGR (Exhaust Gas Recirculation) Valve Position Sensor EVP Electronic Voice Phenomenon EVP Europäische Volkspartei (Germany) EVP Employee Value Proposition and Treasurer Capital Advisors Group Newton, Mass. |
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