Researching Adviser Fees Gets Easier

The U.S. Securities and Exchange Commission (SEC) has made it easier for investors to look up and compare financial adviser fees and policies. The Form ADV Part II Brochure now discloses information that advisers previously did not have to include in regulatory filings.

Perhaps the most notable information is the disclosure of fees. Clear information is provided on what the firm charges and what is required for clients to qualify for discounted fees. (Most typically, certain minimum dollar amount thresholds must be exceeded.) Also included is information on investment strategies, research methods, disciplinary actions, and whether the adviser receives commissions.

Though the filings are open to the public, accessing them at the SEC website is not straightforward. These instructions from SmartMoney.com should get you to them:

Go to www.sec.gov;
Click on Check Out Brokers & Advisers in the Investor Information section;
Click on Research Investment Advisers next to one of the blue arrows;
Click on Investment Adviser Search in the gray left-hand column;
Choose Investment Adviser Firm;
Enter the name of the firm;
Click on the suggestion that represents the closest match, based on name and address;
Looking at the gray left-hand column, scroll down to the part that says Part 2; click Part 2 Brochures; and
Click on the link under Brochures for your account type.

Not every financial professional you work with will be listed at SEC.gov. For instance, advisers who work on a commission basis are regulated by the Financial Industry Regulatory Authority (FINRA), www.finra.org. Others may have information listed on both the SEC’s and FINRA’s websites.

As far as how much you should pay, fees vary, with most advisers charging between 1% and 2% of portfolio dollars placed with them. Though costs matter, it is better to pay a higher fee to have access to the adviser best suited to handle your needs than to choose solely on the basis of the size of the fee charged.

Sources: “New Tools Help Investors Price Financial Advisers,” SmartMoney.com, June 1, 2011; “ADV-2: How Much Can You Learn About Your Competitors Now?,” InvestmentNews, June 5, 2011.