Financial Advisor question


R

Rich LeGrand

Hello,
We are using a fee-based financial planner and she increased her fees
without telling us. I'm wondering that besides being a questionable
practice, are there any SEC or similar requirements for disclosing
this information?

Thanks,
RAL
 
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B

BMS

Did she give you her ADV Part 2?

What is in her fee agreement?

Who does she work for?
 
T

Tad Borek

Rich said:
Hello,
We are using a fee-based financial planner and she increased her fees
without telling us. I'm wondering that besides being a questionable
practice, are there any SEC or similar requirements for disclosing
this information?
Rich-
Fee advisors (ie registered investment advisers and adviser reps) are
required to provide you complete information about fees, for a number of
reasons, but especially under what's called the "brochure rule." We
usually do it by giving a copy of the filing of a regulatory document
called "Form ADV Part II." Technically it's OK to provide that identical
information within another document, but it's usually easier to provide
the filing itself. Full disclosure of fees is required, though.

What were the specifics? I can think of plenty of scenarios where fees
go up without any new disclosure being required. The obvious one being
when you're paying an asset-based percentage fee, and the assets go up
(or down, perhaps - to the point where it triggers a minimum fee). Or
some new service is provided that's still governed by the original fee
agreement. You do have a written fee agreement, yes? Is the billing
being done in accordance with that?

Another option: billing error - it happens!

-Tad
(fee-only advisor)
 
R

Rich LeGrand

We have a fee schedule that is a percentage of our managed securities.
The fee goes down as the balance increases. What's odd is that it is
clear that the _rate_ increased within the last year while our balance
also increased. (The fee went up as expected, but I'm concerned with
the rate.)

We meet with her next week to go over our account, but I wanted to get
the facts.

Thanks,
RAL

Tad Borek said:
Rich-
Fee advisors (ie registered investment advisers and adviser reps) are
required to provide you complete information about fees, for a number of
reasons, but especially under what's called the "brochure rule." We
usually do it by giving a copy of the filing of a regulatory document
called "Form ADV Part II." Technically it's OK to provide that identical
information within another document, but it's usually easier to provide
the filing itself. Full disclosure of fees is required, though.

What were the specifics? I can think of plenty of scenarios where fees
go up without any new disclosure being required. The obvious one being
when you're paying an asset-based percentage fee, and the assets go up
(or down, perhaps - to the point where it triggers a minimum fee). Or
some new service is provided that's still governed by the original fee
agreement. You do have a written fee agreement, yes? Is the billing
being done in accordance with that?

Another option: billing error - it happens!

-Tad
(fee-only advisor)

======================================= MODERATOR'S COMMENT:
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A

Andy

Rich said:
We have a fee schedule that is a percentage of our managed securities.
The fee goes down as the balance increases. What's odd is that it is
clear that the _rate_ increased within the last year while our balance
also increased. (The fee went up as expected, but I'm concerned with
the rate.)
Just applying the basic principles of contracts law, there can be no
change in the rates without your consent. That being said, I don't
know if there is some federal regulatory scheme which allows them to
jack up rates without client consent by filing some disclosure with the
feds.

I personally would politely tell the advisor that you never consented
to the rate increase, nor were you given advance notice of it so that
you could have taken your business elsewhere before the increase was
imposed, and so you would like the rate increase retroactively rolled
back. Regardless of regulatory technicalities, I think it is
unacceptable to have rate increases imposed without notice and an
opportunity to take your business somewhere else.

Thanks,

Andy
 

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