Update Y’alls ADV
Books and records maintenance is a tedious chore for many RIAs but believe me when I say that it is one of the most important compliance tasks. If you don’t take the time to update ADVs annually or after material changes to your business you might as well hang a neon “Audit Me SEC” over your door. Now yes; it is a simple error usually done out of not knowing what constitutes a material change or just filing every year without updating numbers and no; regulators are not banning advisors for not updating. However what outdated books and records tell regulators is that you aren't keeping up with basic compliance needs and that maybe your overall compliance program needs to be reviewed. If you can't update ADVs timely and correctly – a regulator will wonder if you are doing any firm compliance. Speaking from my personal experience in audit and supervision; I loved deep dives and research. In a role that can be dry and often contentious, taking the time to really investigate a potential issue is really rewarding. A good examiner or supervisor is going to find a dangling string and pull till see what is unraveled at the core. The main emphasis on having up to date and accurate books and records is to show that you take compliance seriously and that you have someone dedicated to handle compliance needs. That’s the vision behind BackStop Compliance – providing great advisors the training and support they need so all the hard work and sacrifice that went into building their business isn't unraveled by compliance risk.
OK onto ADVs and when to update:
1. Annually - You must amend your Form ADV each year by filing an annual updating amendment within 90 days after the end of your fiscal year. So, by end of Q1 is usually the time frame for the majority of firms. I highly recommend tracking and updating quarterly so by the time the form is available for annual updates you already have the data and you simply update. Make sure you update all necessary items even if they change is minimal. Again, having up to date and clean books and records shows regulators that you taking the compliance requirements of your business seriously.
2. Material Changes – several events are considered “material changes”
A material change includes most items disclosed on the Form ADV Part 2A:
Updates to RIA services offered to the public (adding financial planning)
Updates to RIA advisory fee arrangements (changing your fees)
Any new relationships with registered persons and entities (adding a custodian)
New partners joining the firm or partners leaving (M&A)
New conflicts of interests (profit sharing, solicitor agreement etc)
Any updates to the RIA firm in the organization itself (new name or moving)
Basically, update your ADV if your business has had any changes in service offerings, new affiliations, new partners or any new name to the firm. If you make a change that would affect whether or not a client would do business with you or anything that materially changes your business thus possibly affecting clients – file the non-annual amendment immediately.
Unforced errors always hurt businesses and properly maintaining books and records is an easy way to stay compliant and show that you take compliance seriously.
