Supplement to the Form ADV
The adopting release notes "the Fee Table is intended to provide a simplified and more accessible overview of the investment adviser’s fees and services, consistent with the more detailed descriptions in Form ADV Part 1A and the Brochure. The Fee Table is intended to supplement, not replace, the more detailed disclosure of fees and services in the Brochure." Much like the recently passed Form CRS requirement by the Securities and Exchange Commission, the Massachusetts Securities Division "believes that requiring investment advisers to distill this information into a simple, easy-to-read Fee Table will ultimately benefit investors by increasing awareness and encouraging discussion with their advisers."
Guide to Table of Fees for Services
The Massachusetts Securities Division has released a guide to help create the table of fees for services. The new Fee Table consists of four key parts and is highly prescriptive:
- Part 1: Firm Name and Logo, Document Title, and Preamble;
- Part 2: Fee Table;
- Part 3: Discussion box; and
- Part 4: Date
Parts 1, 3, and 4 are fairly straightforward with detailed instructions provided in the guide. Part 1 requires the disclosure document to be titled "Tables of Fees for Services" and also requires a preamble to be included. Part 3 is designed to "prompt your clients or prospective clients to ask questions regarding additional costs and fees their accounts may incur in connection with implementation of the adviser’s recommendations and/or services," and must be titled "For Additional Discussion with Your Adviser." Part 4 requires the firm to "include a dat field to reflect the most current version in use by the firm."
The most substantial section is part 2 which includes three sections related to the Fee Table. As required, the first two sections have four columns each while the third section has only two columns. The first section focuses on "fees charged by the investment adviser." The second section targets "fees charged by third parties." The third section is designed to prompt a discussion with the client around the "total fees" charged. However, "a numerical total fee amount is not expected to be on the Fee Table."
It's also important to note that RIA firms may include numerical footnotes to refer to the firm's Form ADV Part 2A narrative brochure to provide additional detail on the services provided.
Fillable Fee Table Template
In addition, the Massachusetts Securities Division has provided a fillable fee table template which can be downloaded here. The template is designed to help firms properly create the Fee Table as required in part 2 and the discussion box as required in part 3 of the new disclosure document.
Next Steps for Impacted RIA Firms
State-registered RIA firms registered with the state of Massachusetts should immediately begin preparation to meet the January 1, 2020 compliance deadline which includes the requirement to add the new Table of Fees for Services to the firm's website.