Glossary term
Form ADV Part 2 - Investment Adviser Brochure
Form ADV Part 2 is the investment adviser brochure that explains an adviser's services, fees, conflicts of interest, disciplinary history, and business practices.
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What Is Form ADV Part 2?
Form ADV Part 2 is the brochure portion of Form ADV, the registration and disclosure form used by investment advisers. It is written in plain English and explains the adviser's services, fees, conflicts of interest, disciplinary information, investment methods, and other business practices.
For clients and prospective clients, Part 2 is one of the most useful adviser documents because it describes how the adviser actually works. It can reveal compensation structure, custody arrangements, referral payments, disciplinary history, and conflicts that may not be obvious from marketing materials.
Key Takeaways
- Form ADV Part 2 is the narrative brochure for an investment adviser.
- Part 2A is the firm brochure; Part 2B is the brochure supplement for certain supervised persons.
- The brochure covers services, fees, conflicts, disciplinary history, and business practices.
- Clients should read it before hiring or continuing with an adviser.
- Form ADV Part 2 complements, but does not replace, checking registration and disciplinary records.
How Form ADV Part 2 Works
Registered investment advisers must prepare brochure disclosures that follow required items. Part 2A describes the advisory firm. Part 2B provides information about certain individuals who provide advice, such as their education, business background, disciplinary history, and other activities.
The document is meant to help clients understand the advisory relationship before relying on advice. It should explain how the adviser is paid, what services are offered, what conflicts exist, whether the adviser has custody of client assets, and whether the adviser receives compensation from third parties.
Clients may receive the brochure when starting the relationship and when material updates are required. It is worth saving alongside the advisory agreement because it can help later if fees, services, or account practices become unclear.
What to Look For
Brochure Area | Why It Matters |
|---|---|
Fees and compensation | Shows what the client pays and what incentives may exist. |
Conflicts of interest | Identifies business arrangements that could affect advice. |
Disciplinary information | Flags events a client should understand before hiring. |
Investment methods | Explains how portfolios or recommendations are developed. |
Custody and brokerage practices | Shows how assets, trading, and account arrangements are handled. |
Using It in Adviser Due Diligence
Form ADV Part 2 is not a sales brochure. It is a disclosure document. A reader should compare it with the adviser's website, fee schedule, client agreement, Form CRS when applicable, and public registration records on IAPD or BrokerCheck.
Strong due diligence means looking for mismatches. If an adviser markets itself as simple and conflict-free, but the brochure describes referral fees, product compensation, complex strategies, or disciplinary events, those details deserve follow-up questions.
The Bottom Line
Form ADV Part 2 is the plain-English disclosure brochure for investment advisers. It is one of the best documents for understanding how an adviser is paid, what conflicts exist, and what a client is really agreeing to.