Form ADV: How to Research Financial Advisory Firms for Free

Form ADV from the Securities and Exchange Commission (SEC) is your not-so-secret weapon for researching a financial advisory firm’s background. This required annual filing contains vital information about a firm’s business, investment strategy, fees and disciplinary information— all of which are important to know as a potential client.

And while it’s a comprehensive document, MagnifyMoney is here with a step-by-step guide. We’ll teach you how to perform a completely free Form ADV search and how to read it once you find it.

What is Form ADV?

Form ADV is the uniform application for investment adviser registration. After initial registration, all registered investment advisers (RIAs) must file an updated Form ADV with the SEC and state securities authorities by March 31 each year. Firms must report exhaustive information on their investment advisory business in the Form ADV filing, including exact facts on figures on:

• Fees
• Service offerings
• Conflicts of interest
• Investment strategies
• Disciplinary actions, if any
• Assets under management (AUM)

RIAs must file Form ADV so that current and prospective clients can evaluate an advisor’s business practice beyond industry jargon and self-promotion and on a firm’s website — including any risks the investor may face when working with the advisor.

Where can you find Form ADV?

You can find any SEC-registered investment adviser’s Form ADV on the SEC’s Investment Adviser Public Disclosure (IAPD) website. There, you can perform a Form ADV search for any firm using the firm’s name, location or Central Registration Depository (CRD) number, which is the license number the industry regulatory authority FINRA issues to firms.

Here’s the search box you’ll see.

The site then brings you to a page with your search results.

To make sure you’re clicking the correct result (as firms can have multiple listings), look for the listing with “IA – Investment Adviser Firm” and click “More Details.” 

That will bring you to the firm’s official IAPD page and its most recent Form ADV.

What can a Form ADV search tell you?

There’s a wealth of information inside a Form ADV. We’ll help you navigate each section like a pro and highlight the information you’ll find in each part.

Form ADV Part 1a

Part 1 is a disclosure that’s in a check-the-box, fill-in-the-blank format, which is not the most exciting to read, but it does contain helpful information, such as:

• States licenses. You can see the states where the advisor is licensed to do business under Item 2.C: State Securities Authority Notice Filings and State Reporting by Exempt Reporting Advisers.
• Employees, clients and compensation. Find the number of employees, advisors and clients the firm has, client types and how advisors earn money in Item 5: Information About Your Advisory Business.
• Assets under management. See how much money others have entrusted the firm to manage and the firm’s total number of clients in Item 9: Custody.
• Disclosure information. See if the firm or its employees have been subject to regulatory actions in the past 10 years in Item 11.
• Disciplinary action. If the firm or its employees have disclosures, you can get the details of all disciplinary actions and resolutions in DRPs (Disclosure Reporting Page).

To help you quickly navigate to the sections above, we recommend using the “View Form ADV By Section” feature in the IAPD website left-hand sidebar.

This will bring you to this page where you can click just the sections you want to read instead of scrolling through a long Form ADV.

Form ADV Part 2

Part 2 items are generally an easy read and broken into two subparts: Part 2a and Part 2b.

Part 2a

You can think of Part 2 as a marketing brochure that explains how the firm works, its fees and how it handles clients’ money. Inside this PDF document, you’ll find much of the same information in Part 1, but more detail on the firm’s fees, commissions, investment offerings and strategy and any potential conflicts of interest you may encounter as a client. We won’t say it’s a light read, but we will say that all firms must report the same information in the same sections. So, once you’ve read a couple of Part 2 brochures, you’ll know that Item 7 is always “Types of Clients” (the kinds of investors a firm serves and any investment minimums).

If the firm changes how it does business, it must clearly outline the changes in Part 2a when it files a new Form ADV each year, then offer you a revised brochure.

Part 2b

Called the “brochure supplement,” advisory firms must provide you with a Form ADV part 2b for each person who provides you with investment advice. This includes anyone at the firm who makes discretionary investment decisions on your behalf, even if that person never has direct contact with you.

Form ADV Part 3

Form ADV part 3, called the “Relationship Summary,” is the easiest part of the form to digest. The advisor must summarize in “plain English” much of the information in Part 2, including services, fee structure, conflicts of interest and disciplinary actions. And yes, it’s a much easier read than a Part 2 Brochure.

Part 3 also includes key questions to ask an advisor and how to get more information about the firm.

After your Form ADV search

Hopefully, your search for an advisor won’t stop with reviewing the firm’s Form ADV, as there’s truly no substitute for an in-person interview. Trusting someone with your money, hopes and dreams is a major decision, so don’t be shy about wanting to meet a prospective advisor or asking questions before you engage.

And finally, don’t hesitate to meet with multiple advisors before making an investment decision. You deserve an advisor who gets you, understands your goals and who you like as this should be the beginning of a long-term relationship for you both.