Video instructions and help with filling out and completing Who Form 8815 Advisors

Instructions and Help about Who Form 8815 Advisors

We're going to talk a little bit about Form ADV today as you see States on their website before you have someone to be your investment advisor always ask for and read carefully both parts of the advisors Form ADV but what is it for maybe if you don't know the answer don't feel bad most investors even many investment professionals and not familiar with it form a TV is the form used by investment advisors to register with the SEC it describes all aspects of a firm's practice including its fee schedule conflicts of interest disciplinary information and a much more why is it important to read this form in the financial service industry a firm can have as many arrangements as it likes that result in conflicts of interest as long as they're legal and in compliance with applicable rules and if the firm does not adhere to the fiduciary standard they will not be obligated to put investors interest the first luckily however they are required to disclose all arrangements that result in conflicts of interest on the form adv let me give you another example say you're considering two advisors advisor a and advisor B advisor a coats you 1% to manage your assets while advisor B quotes you 0.5% does that mean advisor be charge alas not necessarily some financial advisory firms earn their revenue not from advisory services but mainly from sell of proprietary products commissions and kickbacks from product companies in other words they can charge you 0% to manage your assets but still potentially make a lot of money from you at the cost of your investment in return one big Wall Street firm disclosed on their adv filed in 2016 that on annual basis less than 1% of their revenue was actually from consulting services its principal sources of revenue included commissions and other compensation for sale of investment products in a financial service industry talk is cheap that's why it is important to read the writing on the wall and that the only writing you should trust is what's required to be on Form ADV the forma consists of two parts part one is to check the box section which is used mainly by the SEC for regulatory purpose part two the narrative brochure is what you as the investor should read very carefully here are some highlights of part two item four describes a firm's financial advisory business and item 10 lists the firm's other financial industry affiliations and activities if a firm produces proprietary products as part of its advisory business it would generate disclose it in item four or a firm can have one subsidiary to produce proprietary products and another subsidiary to investment advisor as the sales force to sell the products in this case they will disclose it in item 10e either cases it is important for you to watch out for potential conflicts of interest as firm alpha has incentive to sell its own proprietary products over the alternatives another important items is item 15 custody personally I cannot emphasize enough the importance of having an independent third party Kasturi a custodian is a financial institution that holds investors securities for safekeeping to minimize the risk of theft or loss and custodians are also responsible to send investors periodical account or portfolios statements one of the reasons Bernie Madoff was able to defraud investors for so many years was by not using an independent third-party custodian well article on us news even stated that if an advisor tells you that you don't need a third-party custodian ended the meeting and leave right away this is a deal breaker and it should raise so many red flags there are many benefits to segregating as a management from as a custody safeguarding is just one of them as a public document form a DV can be obtained by visiting the link on the screen thank you for watching for more on this topic and many others please visit us at them financial.com