Form ADV: what is it, and how do you read it?

Summary 

What is a Form ADV? 

The official term for Form ADV is Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Adviser.  

In simpler terms, it is the official form used by the SEC to register an investment advisor with more than $25 million in AUM.  

Both state security regulators and the US Securities Exchange Commission (SEC) require the submission of a completed Form ADV as an investment advisory firm application document.  

If a firm is starting up, it will need to complete Form ADV and submit it to the SEC before it can be considered legitimate. Once the form has been received and registration is granted, Form ADV must be revised and re-submitted annually or whenever SEC updates are issued.  

Form ADV is a crucial reference point for investors. It is a public record of a firm’s fee structure, services, total assets under management, business activities, and disciplinary issues. This information provides a transparent overview of what is on offer and the costs and implications behind it.   

What are the components of a Form ADV? 

There are two parts of Form ADV: Part 1 and Part 2. Form ADV Part 1 is a blank fill-in form, and Form ADV Part 2 is written in prose for reading. This means that Form ADV instructions Part 1 will differ from Form ADV Part 2. 

Understanding the various components of an ADV form is critical for investor review. You can familiarize yourself with the two main sections here:  

Form ADV Part 1 

Form ADV Part 1 covers everything from basic contact information and the firm's office address to detailed disciplinary reporting and any felony or investment-related misdemeanor that may have occurred within the firm over the last decade.  

It also includes business, affiliations, and ownership structure. It requires information about a business's identity, ownership, and services. You can access Part 1 via the SEC’s Investment Adviser Public Disclosure (IAPD) website. 

Form ADV Part 2 

Part 2 of Form ADV includes fees, services, strategies, conflicts of interest, and disciplinary information. It also covers information relating to supervisory and compliance principles, investment-related arbitrations and civil judicial action, and other miscellaneous firm details.  

Working with a financial advisor via Unbiased can help you decipher Form ADV Part 2, as it is a complex document that may require expert understanding.  

What are the updating and filing requirements for a Form ADV? 

Form ADV must be completed and submitted at the beginning of an investment advisory firm’s development and, assuming it is granted, on an annual basis. Additional amendments will be necessary when SEC updates or major changes occur in a firm.  

Maintaining and filing Form ADV is mandatory, as is staying compliant with evolving SEC and state regulations.  

What are some common misconceptions about an ADV Form? 

Form ADV is a lengthy document that can sometimes be subject to interpretation. This can lead to common missteps and misconceptions about how to fill in certain blanks or interpret sections of information.  

The most common issue with filling out an ADV form is a lack of understanding of investment and legal terminology. One way to mitigate this issue is to keep an ADV glossary on hand and seek the advice of a financial expert to clarify confusing terms.  

Another common misconception is that Form ADV only needs to be submitted once. As per the filing requirements, submissions must be annual.  

While Form ADV provides critical information, it does not endorse any advisor or firm. It is a purely documentative and regulatory procedure.  

Get expert financial advice 

Form ADV is an SEC-regulated document for financial professionals starting an investment advisory firm. It is divided into two components (Form ADV Part 1 and Form ADV Part 2), each containing a brochure and a blank section for filling in information about the firm.  

Understanding the various components and submission requirements for Form ADV is critical for anyone starting an investment advisory firm. It’s also crucial for investors to review as it allows you to learn about a firm’s services, fees, investment strategies, and other important information. Knowing this information helps you to choose a firm or financial advisor that you can trust and that best suits you. 

If you need expert financial guidance, get matched with an advisor through Unbiased.