Registered Investment Advisors are required to prepare and maintain a plain English Form ADV Part 2 Disclosure Brochure that properly describes their business model and how the firm operates. Unfortunately, some registered investment advisors, once the Form ADV Part 2 Disclosure Brochure is initially prepared, that document is not reviewed again until the regulators come knocking on the door for an exam.
Be proactive! Review your Form ADV Part 2 Disclosure Brochure at a minimum to confirm the following:
- Item 4 Advisory Business, confirm that the description of how your firm operates is still current;
- Item 5 Fees and Compensation, confirm that the information in this section actually explains how your firm will charge for the services offered, including what the advisory firm’s actual fees are for the described services;
- Item 9, Disciplinary Information, confirm that any new client issues, regulatory issues, arbitrations, court actions, etc. are properly disclosed within this item;
- Item 10, Other Financial Industry Activities and Affiliations, make sure that all of your firm’s affiliations and those of your Investment Advisor Representatives are included within this section along with any conflicts of interest;
- Item 15 Custody, carefully review this section of your Disclosure Brochure to confirm you have included any and all instances where your firm may have custody of your client’s funds or securities. For example, if an advisor is named as a Trustee on a trust account for a client, this will be deemed as custody.
To be clear, a complete review of your Form ADV Part 2 Disclosure Brochure is a must, every year. Reviewing this document when you have the time versus when you have a regulator in your office is never a good option. Review your document today!
