Thank you for this question. I hope the following information provided
will help you adequately evaluate investment advisors for your
organization and its employees and to identify an advisor that is
fully competent and capable and suitable to your company's needs.
Following is brief background about federal law governing investment
advisor registration, federal and state information sources and
instructions regarding "check out investment advisors", industry
references, relevant associations, and some additional articles on the
subject.
First are informative excerpts from the U.S. Securities and Exchange
Commission (SEC) site regarding laws regulating investment advisors,
and "Tips for Checking Out Brokers and Advisors", partly annotated for
clarity and explicitness. The full information behind these passages
is available at http://www.sec.gov/about/laws.shtml and
http://www.sec.gov/investor/brokers.htm.
The same information is also presented by an organization named NASD,
a private not-for-profit organization that regulates virtually all
brokerage firms, branch offices, and registered securities
representatives. (See http://www.nasdr.com/investors.asp) NASD
registers member firms, writes rules to govern their behavior,
examines them for compliance and disciplines those that fail to
comply. Its core mission is ensuring market integrity and investor
confidence. Information is also available from NASD by telephone at
(800) 289-9999.
THE LAW
Investment Advisers Act of 1940
The Investment Advisors Act of 1940 regulates investment advisers.
With certain exceptions, this Act requires that firms or sole
practitioners compensated for advising others about securities
investments must register with the SEC and conform to regulations
designed to protect investors. Since the Act was amended in 1996,
generally only advisers who have at least $25 million of assets under
management or advise a registered investment company must register
with the Commission. The full text of this Act is available online at:
http://www4.law.cornell.edu/uscode/15/ch2D.html.
If advisors manage less than $25 million, they generally must register
with the state securities agency in the state where they have their
principal place of business.
Investment adviser representatives, the people who actually work with
clients must also be in most cases licensed or registered with your
state securities regulator to do business with you.
Federal or state securities laws require brokers, advisers, and their
firms to be licensed or registered, and to make important information
public.
CHECKING OUT INVESTMENT ADVISORS
Before you invest, make sure your brokers, investment advisers, and
investment adviser representatives are licensed to sell securities.
Always check and see if they or their firms have had run-ins with
regulators or other investors.
To find out about advisers and whether they are properly registered,
read their registration forms, called the "Form ADV." The Form ADV has
two parts. Part 1 has information about the adviser's business and
whether they've had problems with regulators or clients. Part 2
outlines the adviser's services, fees, and strategies. Before you hire
an investment adviser, always ask for and carefully read both parts of
the ADV. [The investment advisor should be able to provide you the
Form ADV Part 2].
You can view an adviser's most recent Form ADV online by visiting the
newly launched Investment Adviser Public Disclosure (IAPD) website.
(Go to: http://www.adviserinfo.sec.gov/IAPD/Content/IapdMain/iapd_SiteMap.asp,
and click "Investment Advisor Search" at the left). At present, the
IAPD database contains Forms ADV only for investment adviser firms
that register electronically using the Investment Adviser Registration
Depository. In the months ahead, the database will expand to encompass
all registered investment advisers-individuals as well as firms-in
every state.
You can also get copies of Form ADV for individual advisers and firms
from the investment adviser, your state securities regulator, or the
SEC, depending on the size of the adviser. You can find out how to get
in touch with your state securities regulator through the North
American Securities Administrators Association, Inc.'s Web site
(http://www.nasaa.org/nasaa/abtnasaa/find_regulator.asp). If the SEC
registers the investment adviser, you can get the Form ADV at a cost
of 24 cents per page (plus postage) from the SEC at
Office of Public Reference
450 5th Street, NW, Room 1300
Washington, D.C. 20549-0102
phone: (202) 942-8090
fax: (202) 628-9001
e-mail: publicinfo@sec.gov
The SEC web site also refers you to publications: "Get the Facts: The
SEC's Roadmap to Saving and Investing", "Invest Wisely: Advice from
your Securities Regulators", and it recommends asking the candidate
investment advisor the following questions:
What experience do you have, especially with people in my
circumstances?
Where did you go to school? What is your recent employment history?
What licenses do you hold? Are you registered with the SEC, a state,
or NASD?
Are the firm, the clearing firm, and any other related companies that
will do business with me members of SIPC?
What products and services do you offer?
Can you only recommend a limited number of products or services to me?
If so, why?
How are you paid for your services? What is your usual hourly rate,
flat fee, or commission?
Have you ever been disciplined by any government regulator for
unethical or improper conduct or been sued by a client who was not
happy with the work you did?
For registered investment advisers, will you send me a copy of both
parts of your Form ADV?
COMPETENCE AND STATE REGISTRATION
The NASD administers "criterion based" minimum competency exams for
investment advisor representatives, referred to as Uniform Investment
Adviser Law Examination, or "Series 65".
These exams are administered to professionals within the investment
industry. Criterion based means that a minimum passing criterion is
established. Those candidates who pass the exams are considered to
have met the minimum competency level and those who fail do not meet
the minimum competency level. The items for these exams were drafted
to clearly differentiate those candidates who qualify as minimally
competent from those who do not.
Passing this test is one of the requirements for state registration.
Others requirements may include a background check and bonding.
The North American Securities Administrators Association mentioned
(NASAA) above can direct you to the state securities regulators. The
representatives for the three states you mentioned are listed below.
The others can be found on its web site (see above). They can tell you
about the investment advisor's registration status and provide
additional information.
California
Department of Corporations
1515 K Street
Suite 200
Sacramento, CA 95814
(916) 445-7205
(916) 445-7975 (Fax)
www.corp.ca.gov
Demetrios A. Boutris
California Corporations Commissioner
(916) 324-9011
Timothy L. Le Bas
Assistant Commissioner & General Counsel
Office of Law & Legislation
Texas
State Securities Board
208 East 10th Street
5th Floor
Austin, TX 78701
P.O. Box 13167
Austin, TX 78711-3167
(512) 305-8300
(512) 305-8310 (Fax)
www.ssb.state.tx.us/
Denise Voigt Crawford
Securities Commissioner
(512) 305-8306
(512) 305-8336 (Fax)
dcrawford@ssb.state.tx.us
Washington
Department of Financial Institutions
Securities Division
210 11th Avenue, SE
3rd Floor West, Room 300
Olympia, WA 98504-1200
P.O. Box 9033
Olympia, WA 98507-9033
(360) 902-8760
(360) 586-5068 (Fax)
www.dfi.wa.gov/sd
Deborah R. Bortner
Director of Securities
(360) 902-8797
(360) 704-6997 (Fax)
dbortner@dfi.wa.gov
COMPREHENSIVE INDUSTRY SOURCES
Standard and Poors publishes a series of reference books the "Money
Market Directories". Some information about them is available at
http://www.mmdaccess.com.
Two in particular that provide information that may help you evaluate
the qualifications of your prospective investment advisor are: "Money
Market Directory of Pension Funds" (price is $1095) and "Registered
Investment Advisors" (price is $495). These include and rank
information such as types of plans and amount of assets managed and
numbers of clients. You can contact them at
Money Market Directories
320 East Main Street
P.O. Box 1608
Charlottesville, VA 22902
Phone (800) 446-2810
(434) 977-1450
Sales Fax (434) 979-9962
they will be able to describe these materials in more details and send
you brochures.
You can most likely also find these available at a large public
library with a good business section.
PROFESSIONAL ASSOCIATIONS:
Following are a number of links that I have found to professional
and/or accrediting organizations for advisers and financial
consultants. They can usually serve at least as consumer referral
sources, they should able to provide information about the criteria or
standards that their members must comply with.
International Association of Registered Financial Consultants
http://www.iarfc.org
National Association of Insurance and Financial Advisors
http://www.naifa.org/sh_index.html
Million Dollar Round Table
http://www.mdrt.org/
Society of Financial Service Professionals
http://www.financialpro.org/
Financial Planning Association
http://www.fpanet.org/
National Association of Personal Financial Advisors
http://www.napfa.com/
Concerned Planners Group
http://www.cpg-usa.org/
Society of Financial Service Professionals—formerly the American
Society of CLU & ChFC
http://www.financialpro.org/welcome.cfm
Consumer referral system
Only accredited individuals and firms
ADDITIONAL ARTICLES
Institutional Investor, July 2002 v36 i7 p43(15) has a relevant title:
America's top 300 money managers: financial services companies have
spent huge amounts of time and money assembling massive asset
management operations. Now they're taking a second look to see how the
pieces fit together. Rich Blake.
Bloomberg Wealth Manger (http://wealth.bloomberg.co) has recently
been publishing an annual industry ranking of "wealth management
firms. Following are the top 25 of the top 100 for 2002 as reported
inPR Newswire, July 1, 2002.
Bloomberg Wealth Manager, top 25 of "Top 100 Wealth-Management Firms"
for 2002
Rank Company Name Location Avg
Client
Account Size
($MM)
1 myCFO Investment Advisory Services San Francisco, CA
51.46
2 BBR Partners New York, NY
12.09
3 Plante & Moran Financial Advisors Southfield, MI
4.71
4 Advisors Financial Services Minnetonka, MN
4.17
5 Signature Financial Management Norfolk, VA
3.96
6 Manchester Capital Management Manchester, VT
3.31
7 Paragon Capital Management Denver, CO
2.74
8 Wealth Management Services Towson, MD
2.65
9 Brookstone Advisory Lutherville, MD
2.63
10 Reinoso Asset Management New York, NY
2.62
11 Adams Hall Investment Management Tulsa, OK
2.60
12 Plancorp Chesterfield, MO
2.48
13 Financial Design Associates Stinson Beach, CA
2.36
14 Woodside Asset Management Menlo Park, CA
2.10
15 Riverbridge Partners Minneapolis, MN
2.06
16 Brighton Jones Seattle, WA
2.03
17 Kochis Fitz Tracy Fitzhugh & Gott San Francisco, CA
1.91
18 Budros & Ruhlin Columbus, OH
1.80
19 Tanager Financial Services Waltham, MA
1.77
20 Coldstream Capital Management Bellevue, WA
1.72
21 Florida Investment Advisers Tampa, FL
1.64
22 F&D Advisors Atlanta, GA
1.61
23 Homrich & Berg Atlanta, GA
1.61
24 Presidio Wealth Management San Francisco, CA
1.61
25 Evensky, Brown & Katz Coral Gables, FL
1.50
Worth Magazine has published its list of "The Top 250 Financial
Advisors", most recently in July, 2002.
FURTHER SUGGESTIONS
Finally, the U.S. Department of Labor
http://www.dol.gov/dol/topic/health-plans/fiduciaryresp.htm) manages
ERISA (Employee Retirement Income Security Act) filings, which covers
most private sector pension plans. Among other things, ERISA provides
protections for participants and beneficiaries in employee benefit
plans, including providing access to plan information. Also, those
individuals who manage plans (and other fiduciaries) must meet certain
standards of conduct under the fiduciary responsibilities specified in
the law. You might contact the Department of Labor Locator at (202)
693-5000.
I hope this provides you the information that you were seeking. I
found researching this subject to be educational. Please feel free to
let me know if any clarification of further information in particular
could be additionally helpful.
Best wishes,
Vitalmed |
