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FINANCIAL ADVISOR DISCLOSURES TO KNOW

FINANCIAL ADVISOR DISCLOSURES TO KNOW

It's important to trust your financial advisor, and part of that is understanding the disclosures you are given when beginning a relationship with your advisor. While some of these disclosures are standard client agreements, others can communicate critical information regarding fees, prior disciplinary action, and potential conflicts of interest.

Managing Director F. Michael Zovistoski said you shouldn't assume the fees listed on Form ADV 2A--which provides 17 other disclosure items about the advisory firm in addition to the fees--are nonnegotiable. "An advisor may have fee flexibility and charge a client fees lower than those stated in the ADV Part 2," he said. Additionally, Form ADV Part 2 is only required to be given to fee-based clients; commission-based advisors may not have the Form readily available.

If the concern is transparency regarding any prior action or litigation against the advisor, there are several online resources, including the Investment Adviser Public Disclosure (IAPD) and BrokerCheck websites. For information regarding any advisor litigation, Zovistoski recommended looking for details on the SEC's Action Lookup site.

At the end of the day, Zovistoski said it's in the advisor's best interest to be trusted by their clients. "We feel as though 90% of our job is educating the client, so that they're comfortable in working with us and comfortable making decisions regarding their financial goals and the path to achieving those goals," he said. This research is critical to being transparent regarding any past wrongdoings so they can be discussed and clients can enter the relationship with full awareness. "Sometimes bad things happen to good people; sometimes people do not learn from past mistakes, and they have a tendency to recur," he said.

 

Read the full article published by U.S. News & World Report.

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