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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 advisor's 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, are not familiar with it. Form ADV 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 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' interests 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 quotes you 1% to manage your assets, while advisor B quotes you .5%. Does that mean advisor B charges less? Not necessarily. Some financial advisory firms earn their revenue not from advisory services, but mainly from the sale of proprietary products, commissions, and kickbacks from product companies. In other words, they can charge you a percentage 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 an annual basis, less than 1% of their revenue was actually from consulting...