Galvin wants investment advisers to lay out fees for clients

One-page document would crystalize costs highlighted in Form ADV

Apr 4, 2019 @ 2:19 pm

By Mark Schoeff Jr.

Massachusetts investment advisers would be required to provide their clients with a one-page document listing their fees under a proposal released Thursday.

Secretary of the Commonwealth William Galvin said the fee table, which would distill information from an adviser's Form ADV Part 2A, is meant to help investors understand increasingly complicated fees that go beyond charging a percentage of assets under management.

"It is not uncommon for consumers to pay different types of fees for advisory services, including retainer fees, subscription fees and third-party robo-adviser fees," Mr. Galvin said in a statement. "The fee table that my Securities Division is proposing is intended to address these new fee models by increasing transparency. The table is also intended to make fees and costs more understandable and to enable investors and savers to make informed comparisons between investment advisers."

John Power, owner of Power Plans in Walpole, Mass., has tested the fee-disclosure document on his clients. He listed his flat fee for a financial plan, the percentage of AUM charged for investment management as well as third-party fees for investment management services.

"They like it universally," said Mr. Power, who participated in a working group formed by Mr. Galvin. "It was a one-page document with simple, easy-to-read information that's pretty clear."

T.J. van Gerven, owner of Modern Wealth Builders in Woburn, Mass., backs the fee-table proposal.

"We should disclose what we charge in dollar terms," Mr. van Gerven said. "Let the consumer decide if they value your service at that price."

Another Massachusetts investment adviser endorsed the proposal but said it doesn't go far enough. Bill Nelson, founder of Pacesetter Planning in Natick, Mass., said Mr. Galvin should expand the disclosure to include a description of services that are attached to fees.

"Financial planning or investment management advice can take many forms," Mr. Nelson said. "It's not enough to just know how much it costs, you need to know what you're paying for, too."

The proposal comes as the Securities and Exchange Commission is working on an investment advice reform package. The disclosure document included in the SEC proposal has faced withering criticism.

Knut Rostad, president of the Institute for the Fiduciary Standard, praised Mr. Galvin for illuminating fees at the state level.

"Secretary Galvin's proposal for a uniform price list is an excellent step forward," Mr. Rostad said. "It provides needed clarity and transparency. We know it's not going to happen on the federal level. It's fantastic that some states are taking the lead."

The proposal is open for public comment until May 3. There will be a public hearing in Boston on May 2. Following the comment period, Mr. Galvin can promulgate the new rule.

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