On January 22, 2019, Advisor Magazine published their article “How to Know If Your Best Interests Come First”. Our Founder and Senior Wealth Advisor, Scott Coles was interviewed to provide insight on the subject. Below is an excerpt from the article:
Ask for Federal Proof
Advisors that are RIAs are required by the federal government to annually file a document known in the regulatory world as the “ADV Part 2.” ADV is the abbreviation for “Advisors Public Disclosure.” It is a form filed on the federal level with the U.S. Securities and Exchange Commission (SEC) and on a state-by-state basis with the appropriate agency within each jurisdiction.
As of 2011 – post the 2008 housing bubble burst and the Bernie Madoff-type scandals – the SEC established Part 2 of the ADV requiring RIAs to prepare a narrative brochure statement describing: the advisory services offered, a fee schedule outline, details on any disciplinary actions taken against them as well as any conflicts of interest, plus the educational and business background of all key advisory personnel within the firm. This represents a significant bump up in the amount of information the federal government required in the past.
Previously, the original ADV contained limited information: the name of the business, ownership, clients, employees, business practices, affiliations and any disciplinary events of the advisor or its employees were also included.
These filings are readily available to the public online at the SEC website.
The SEC also offers a free pamphlet, “Investment Advisers: What You Need to Know Before Choosing One.”
Scott Coles, founder and president of WMBC based in Lake Forest, California in the foothills south of Los Angeles, said clients shouldn’t have to go to federal websites to get a copy of the ADV. He believes an advisor ought to provide the document without even being asked to do so.
“If an advisor doesn’t offer this to you (as a client) without being asked something may be wrong,” Scott said.
Clients are supposed to receive this information upon accepting the offer made by an advisor for planning. Coles thinks potential clients ought to see the documentation as early as possible in the interviewing phase. Additionally, an annual update of this document is also supposed to be provided to clients. If that isn’t happening or an advisor balks at this request, Coles theorizes that might be a red flag.
At WMBC, we understand that the foundation of healthy client relationships is trust and security. We set out to develop a wealth planning experience that is transparent so our clients can have greater peace of mind.