What is Form ADV?
Form ADV is the public disclosure form that every Registered Investment Adviser must file with the SEC or a state securities regulator. It is the main record an investor uses to size up an RIA. The form has three parts. Part 1 is a list of facts about the firm — assets, employees, registration, ownership, and any disclosure events. Part 2A is the brochure. It is written in plain English and covers services, fees, conflicts, and how the firm runs client money. Part 2B is a short supplement for the specific advisor you would work with. There is also a related document called Form CRS. Every RIA that serves retail clients must hand a new client this two-page summary. All of these are free to read at adviserinfo.sec.gov, the SEC's public database. The point of Form ADV is simple: the firm has to tell you the truth in writing.
What each part of Form ADV covers
A quick map of where to look:
- Part 1A. Items 5.A–5.C: number of clients and assets. Item 5.E: types of compensation the firm earns. Item 7: business affiliations. Item 11: disciplinary disclosures.
- Part 2A (the brochure). Item 4: advisory business. Item 5: fees and compensation — the most-read section by clients. Item 8: methods of analysis. Item 10: other financial industry activities. Item 12: brokerage practices. Item 14: client referrals and other compensation.
- Part 2B. Education, work history, and any disciplinary events of the specific advisor you would meet with.
- Form CRS. A two-page summary, mandatory for every new retail relationship.
Why Item 5 matters most for clients
Item 5 of Part 2A is where you learn whether the firm is fee-only or fee-based. Fee-only language reads, "We are compensated solely by fees paid directly by our clients." Fee-based language reads, "In addition to our advisory fee, certain of our representatives are licensed insurance agents or registered representatives..." The phrase "in addition to" is the tell.
Who reads Form ADV
The SEC reads it during examinations. The CFP Board uses it for enforcement. Journalists, lawyers, and verification services like Fiduciary Check read it to compare firms. You can read it too — every page is public, and the SEC updates filings as soon as a firm submits new information.
Where to start as a new reader
Skip Part 1 the first time. Open Part 2A, jump to Item 5, and read the fee paragraph. Then read Item 12 on brokerage practices. Those two items tell you most of what you need to know in about ten minutes.