For investment advisers, the Form ADV captures the most important attributes of their services, and it is important to spend time ensuring that investors have enough to make an informed decision about selecting a wealth manager. Thus, we highly recommend that you pay extra attention to disclosures, and in this case, more is more. When it comes to 2024 ADV filings, our mantra is, “Err on the side of caution, and when in doubt – DISCLOSE.”
Regulatory bodies are focusing on firms’ adherence to proper disclosure practices and any processes and procedures, or lack thereof, that threaten their fiduciary duty of care to their clients. For this year’s annual amendment, we recommend focusing on the following:
Form ADV Part 1
Carefully review Part 1 of the SEC Form ADV, which requires material information about the investment adviser, such as:
- Number of clients and employees
- Types of clients and accounts
- Compensation agreements
- Prior bad acts, such as bankruptcies or civil or criminal proceedings
- Detailed information on any Material Changes that have occurred since the last update
- Thorough description of the Advisory Business including services offered, AUM, and investment risks and practices
- Key information on Fees and Compensation, including a detailed breakdown of compensation structures for advisory services and additional costs such as administrative, custodial, or brokerage fees
- Disclosures on Financial Conditions that can impact the adviser’s ability to perform contractual obligations to clients
- Interact with the clients
- Strategize, implement, or analyze investment advice
- Manage or have discretionary authority over clients' portfolios
- Relationships and services
- Fees
- Conflicts of interest and standards of conduct
- Disciplinary history
- Complete a conflict inventory worksheet
- Review Form U4s
- Review product lines, fee billing, and compensation arrangements to consider disclosures
- Gather information related to outside business activities for disclosing conflicts
- Form questionnaire to advisory personnel
- Review personnel resumes and background checks
- Interview those who require a brochure supplement