Form ADV: How to Read It Before You Hire Any Financial Adviser

FORM ADV: HOW TO READ IT BEFORE YOU HIRE ANY FINANCIAL ADVISER

TL;DR

Form ADV is the mandatory SEC disclosure document that every registered investment adviser must file. You need to read it before you hand over your money.

Start Here: adviserinfo.sec.gov

Before you hire a financial adviser or RIA, spend 20 minutes on the SEC's Investment Adviser Public Disclosure database at adviserinfo.sec.gov. Search your adviser's name or CRD number. You will find their Form ADV for free. This document tells you everything you need to know about fees, conflicts, disciplinary history, and investment strategy. Most investors skip this step. You should not.

What Form ADV Is and Why It Exists

Form ADV is required by Rule 204-3 of the Investment Advisers Act of 1940 (17 CFR § 275.204-3). Every SEC-registered investment adviser must file it. Every state-regulated adviser must file it with their state. As of 2026, 15,870 SEC-registered advisers manage $144.6 trillion in assets across the United States. Form ADV is the single disclosure document that separates your adviser from a broker operating without regulatory oversight.

The filing requirement exists because Congress decided advisers owe you a fiduciary duty. That means they must put your interests ahead of their own. Form ADV is how they prove it. The document must be updated within 90 days of the adviser's fiscal year-end. Material changes must be disclosed within 30 days. If your adviser refuses to give you their Form ADV or cannot point you to it on adviserinfo.sec.gov, walk away immediately.

The Two Parts: What Each One Tells You

Form ADV has three numbered sections. Only two matter for your purposes.

Part 1A is quantitative data. This section lists the adviser's assets under management (AUM), client count, service lines, ownership structure, and disciplinary history. The AUM number matters because it determines whether the adviser is regulated by the SEC (if AUM exceeds $110 million) or by their state. You will not spend much time here, but verify the AUM figure against the adviser's marketing materials.

Part 2A is the firm brochure. This is where the real disclosure happens. It must contain 18 required items. You need to read every one. Item 4 discloses fees. Item 5 discloses account minimums. Item 6 discloses performance claims. Item 8 discloses conflicts of interest. Item 9 discloses disciplinary history. Item 10 discloses other financial industry activities. Item 11 discloses codes of ethics. Item 12 discloses brokerage practices. Item 14 discloses client referral arrangements. Item 15 discloses custody. Item 16 discloses investment discretion. Item 17 discloses voting proxies. Item 18 discloses financial information. Read them in order. Do not skip any.

Part 2B is the individual adviser supplement. If you are hiring a specific adviser (not the firm), ask for Part 2B on that individual. It lists their background, employment history, disciplinary record, education, and outside business activities. Many RIAs also file a form called Form CRS, which is a relationship summary designed specifically for retail investors. Ask for it if it exists.

How to Find and Read One: Step-by-Step

Go to adviserinfo.sec.gov. Click "Search for an Investment Adviser."

Type the adviser's name. If you have their CRD number (Central Registration Depository number), use that instead.

Click the adviser's name from the results. You will see a snapshot of their registration status, AUM, and number of clients.

Look for a link labeled "Form ADV" or "SEC Filings." Click it.

You will see multiple filings. Download the most recent Form ADV. The filename will be something like "form_adv_123456789.pdf."

Open the PDF. Scroll to "Item 2A" to begin reading the firm brochure. This is Part 2A.

If you want to know about a specific adviser at the firm, request Part 2B separately. Many firms require you to ask for it.

Read Item 4 (Fees and Compensation). Write down the fee structure in plain English. If you cannot understand it after reading, ask the adviser to explain it in writing. Do not accept vague answers.

Read Item 8 (Conflicts of Interest). This is the second most important section. Look for the red flags listed below.

Read Item 9 (Disciplinary History). If there is any entry here at all, ask the adviser to explain it in detail. Do not assume a minor infraction; investigate every one.

That is it. You have now done what 99 percent of investors do not do.

The 8 Red Flags to Look For in Form ADV

Red Flag 1: Dual Registration as Broker-Dealer

If the adviser is also registered as a broker-dealer, they have a conflict of interest. They can earn commissions while also charging you advisory fees. Ask why they are dual-registered. The answer should satisfy you completely or you should move on. Most independent RIAs are not dual-registered.

Red Flag 2: Wrap Fee Programs

A wrap fee program charges one flat percentage fee that covers all advisory and brokerage services. Wrap fee programs sometimes hide high costs. Item 5C in Part 2A discloses wrap fee details. If fees are not transparent here, ask why.

Red Flag 3: Principal Trading

Principal trading means the adviser trades with you, not for you. They buy securities from their inventory and sell them to you at a markup. This is a massive conflict. If Item 5B mentions principal trading, ask for a full explanation of how the adviser manages this conflict. Many RIAs prohibit it entirely.

Red Flag 4: Undisclosed Soft Dollars

Soft dollars are cash rebates from brokers to the adviser. The adviser uses your commissions to pay for research or technology. If the adviser is earning soft dollars, they must disclose it in Item 12. If Item 12 is vague, ask for a detailed breakdown. Undisclosed soft dollars are a violation.

Red Flag 5: No Custody Audit

If the adviser has custody of your money (holds it directly), they must have an annual audit by an independent accountant. This is disclosed in Item 15. If Item 15 says the adviser has custody but provides no audit confirmation, that is a red flag. Most RIAs use a third-party custodian like Schwab or Fidelity to avoid this issue.

Red Flag 6: Unlawful Performance Fees

Some advisers charge fees based on how well they perform (a percentage of gains, for example). These are called performance fees. Performance fees are legal only in specific circumstances. If the adviser discloses performance fees in Item 6, ask a compliance professional to review whether those fees are lawful. Performance fee abuse is common.

Red Flag 7: Outside Business Activities

Item 10B lists outside business activities. An adviser might be a real estate agent, insurance agent, or run a separate business. If the adviser has substantial outside income, they may not have adequate time for your portfolio. Ask how many hours per week they spend on your account versus their outside business.

Red Flag 8: Any Disciplinary History at All

Item 9 discloses disciplinary history. If there is a regulatory action, a settlement, or even a minor fine, read the full details on the SEC website. Never hire an adviser based on explanations they provide. Look up the regulatory action yourself. The SEC's FINRA BrokerCheck database (brokercheck.finra.org) has complete details on most actions.

Real Example: Reading Fisher Investments' Form ADV

Fisher Investments is a large, SEC-registered RIA headquartered in Camas, Washington. Their CRD number is 107342. Their SEC file number is 801-29362. Let us look at what their Form ADV tells us.

Go to adviserinfo.sec.gov. Search for Fisher Investments or enter CRD 107342. Download their most recent Form ADV.

Key facts from their disclosure

Assets under management: $386.7 billion. This firm is enormous.

Number of clients: Approximately 199,922. They serve retail and institutional clients.

Compensation structure: AUM-based fees ranging from 0.65 percent down to 0.40 percent depending on account size. No performance fees. No wrap fees.

Disciplinary history: Zero. No regulatory actions. No settlements. No fines. This is positive.

Disclosed conflicts: Item 8 discloses two conflicts. Fisher receives soft dollars from brokers (cash rebates used for research and technology). Fisher also invests in proprietary research products. Both are disclosed clearly.

Custody: Fisher uses Fidelity as their custodian. Fidelity holds client assets. This eliminates custody risk.

Outside business activities: Minimal. Fisher focuses on investment advisory work.

Conclusion: Fisher Investments' Form ADV shows a large, stable, well-managed RIA with transparent fees, no disciplinary history, and managed conflicts. This is what you want to see.

Now, do your own research. Search for five advisers you are considering. Read their Forms ADV. Compare the disclosures. You will see massive differences.

Five Questions to Ask Every RIA Before You Write a Check

After you have read the Form ADV, schedule a call with the adviser. Ask these five questions and listen carefully to the answers.

1. "I have read your Form ADV. Can you explain your fee structure in writing in plain English?" A good adviser will do this immediately. A bad adviser will deflect or use jargon. If they cannot explain fees clearly, do not hire them.

1. "Item 9 of your Form ADV shows [specific finding]. Can you explain this regulatory action in detail?" If there is any disciplinary history, make them explain it. Do not accept vague answers. Ask why they are still in business if the action was serious.

1. "Who is your custodian?" They should name a major, independent custodian like Charles Schwab, Fidelity, or E-TRADE. If they tell you they are the custodian, ask why they do not use an independent third party.

1. "What is your fiduciary standard?" They must commit in writing that they operate as a fiduciary 100 percent of the time. If they equivocate or mention "suitability" instead of "fiduciary," walk away.

1. "How many clients do you serve and what is your average client account size?" Compare this to the Form ADV data. If the numbers do not match or the adviser cannot answer, that is a red flag.

Jeff's Verdict

Form ADV is not optional. It is the most important document in the adviser selection process. Fifteen thousand RIAs manage nearly $150 trillion. You are not unique. Your adviser has already filled out the paperwork. The SEC has already published it for free. Your only job is to read it.

Spend two hours on adviserinfo.sec.gov. Find the adviser's Form ADV. Read Part 2A cover to cover. Cross-check the eight red flags. If you see anything that concerns you, hire a fee-only financial planner to review the Form ADV with you. The cost is a thousand dollars. The protection is invaluable.

You would not buy a used car without a Carfax report. You would not rent an apartment without checking Google reviews. Do not hire a financial adviser without reading their Form ADV. The money at stake is too large and the information is too easy to access.

DISCLOSURE

Jeff Barnes is a registered investment adviser representative with Clearview Financial Advisors. Clearview Financial Advisors is SEC-registered and files Form ADV. You can access our Form ADV on adviserinfo.sec.gov using our CRD number 105643. No compensation was received in exchange for this article. The opinions expressed are based on publicly available regulatory data and general financial principles.