Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Sunday, March 20, 2011

New Disclosure Document Will Help Investors

By the end of this month registered investment advisors will be required to begin using a new disclosure document that will help investors better evaluate and compare investment advisors.

The new documents will replace one of two forms investment advisors have to file with the Securities and Exchange Commission (SEC). The documents are called the ADV Part I and ADV Part 2. ADV Part I is filed online, primarily for review by the SEC and the States that investment advisors operate in. The ADV Part 2 is referred to as the “brochure” and must be provided to prospective clients for their review.

In the past, the ADV Part 2 was unavailable in an electronic format and was extremely cumbersome to change. The new version can be created in Microsoft Word and uploaded into Adobe Publisher, making copies available online via a PDF file.

The new ADV Part 2consists of two parts, Part 2A and Part 2B. Part 2A must be written in “plain English”. The SEC has even provided investment advisors with a plain English handbook with suggestion regarding how to simplify their ADV.

The ADV Parts 2A and 2B provide detailed information regarding who the investment advisors are, how they do business, how they are compensated and what, if any, conflicts of interest may exist. It also includes a detailed explanation of the strategies employed by the advisor and the risks involved in those strategies.

We found that it was quite time consuming creating the new ADV Part 2A but feel strongly that the new documents describe clearly who we are, what we do and how we are compensated. We believe our approach better supports the interests of our clients and believe that the new ADV Part 2 better makes that case to prospective clients. Investors will be able to make better decisions when hiring an advisor to help them manage their financial affairs.


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