Kyle Wiggs / Writing / Independence

Independence

How to actually read a Form ADV

It is public, it is free, and almost nobody reads it. Four items contain most of what matters.

Where to find it

The Investment Adviser Public Disclosure system holds a filing for every registered firm and a record for every registered individual. No login, no cost.

Every claim a firm makes about itself can be checked against what it told a regulator.

Item 5 — fees and compensation

How the firm charges, what the rates are, whether fees are negotiable, and critically whether the firm or anyone at it receives compensation from anyone other than the client.

Compare this against how the firm describes its pricing publicly. Discrepancies are informative.

Item 10 — other affiliations

Relationships with other financial industry entities: affiliated broker-dealers, affiliated managers, ownership of product providers.

This is where you find out whether a firm recommending a product has an interest in it. That is not automatically bad — it is bad when it is not disclosed, which is precisely what this item exists to prevent.

Item 11 — conflicts and personal trading

Conflicts of interest and the firm's code of ethics. Read it alongside Item 10; together they describe every economic interest the firm has that is not the advisory fee.

Items 10 and 11 tell you who else the firm is paid by. That is the whole point of the document.

Item 9 — disciplinary information

Any disciplinary history, and the same information appears on individual records.

A disclosure is not automatically disqualifying. Read what it actually says, when it happened, and whether the firm's account of it matches the filing.

The test that takes five minutes

Read the firm's website, then read Items 5, 10, and 11. Ask whether the person who wrote the website would recognise the firm described in the filing.

Almost all of them match. The interesting cases are the ones that do not.