How do I verify the performance claims of an advisory firm?

When I vet an advisory firm, I start with the numbers but finish with the process. Demand a complete, audited performance history that is net of fees and includes all withdrawals, for at least a full market cycle. I want the data shown as a single composite, plus sub-strategies if they claim more than one approach. Make sure the benchmark is appropriate and that returns are reported on a risk-adjusted basis (Sharpe, Sortino) with clear drawdown figures. Be wary of survivorship bias: if the firm only shows winners, walk away. Ask for client references you can actually talk to, not just anonymized case studies. Require independent verification of the data source and confirm how often the numbers are updated. Finally, demand clear disclosure of fees (including any performance fees) and a plain-language summary of risks. In my experience, the best firms publish verifiable data, include a straightforward risk section, and are upfront about limits, those are the ones I trust.

Honestly, I treat performance claims like a hypothesis that needs independent testing. My due-diligence routine starts with regulatory disclosures (Form ADV Part 2A), custodian relationships, and fee schedules, then moves to the data: where it comes from, how often it's updated, and whether there is third-party verification. I always interview PMs about their process, trading discipline, and risk controls; I want to hear specifics, not generic claims. I push for client references, realistic assumptions in backtests, and a clear explanation of scenarios that could break the strategy. Finally, I test the firm's claims with a small, time-bound allocation and close monitoring, if performance diverges from the claimed risk, I reprice the relationship or walk away. A credible advisory reveals its data, its governance, and its limits in plain language; anything murky should be a red flag.

From a technical angle, I verify data integrity: ensure performance is net-of-fees, not back-tested, and free of look-ahead bias. I want GIPS-compliant reporting or independent CPA verification, a transparent composite-to-benchmark setup, and clear risk metrics, Sharpe, drawdowns, beta, plus a documented leakage policy.

Request audited, net-of-fees performance, the same across all strategies, with a clearly stated benchmark; compare to a couple of independent sources and ask hard questions.