By AIMkts Editors
A new survey by the Institute for Fiduciary Standard finds that conflicts of interest are rising among Registered Investment Advisers (RIAs), who claim to offer clients objective fiduciary advice.
The organization looked at conflicts of interest disclosed in the ADVs of 135 RIAs with assets between $250 million and $164 billion, according to WealthManagement.com. It also looked at the ADVs of nine large financial services firms: Edward Jones, Merrill Lynch, Ameriprise, J.P. Morgan, LPL Financial, Morgan Stanley, PNC Investments, UBS Financial Services and Wells Fargo. The institute says the survey sample represents a small portion of all the nearly 12,000 RIAs in the country that collectively serve more than 36 million clients.
Form ADV is the uniform two-part form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. It requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations and any disciplinary events of the adviser or its employees.
The ADV form also requires a disclosure document to clients that explains in plain English information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser.
The institute’s survey also identified other conflicts at RIAs. About one in five RIAs report recommending proprietary products. In addition, 66 percent of RIAs say they receive other forms of compensation besides fees, including brokerage and insurance compensation. More than three-quarters of firms have a “relationship material to their business that creates a material conflict of interest with your clients.”