Friedman’s Law of the First Thing: Using the Investment Adviser Public Disclosure Site to Smarten Up About Financial Planners and Money Managers

Monday, June 3, 2013 at 8pm
By John Friedman

Oodles of ’em. Oodles and oodles of ’em, even.

There are oodles and oodles — and then some — of articles out there about how to find, interview and ultimately hire yourself a good financial planner or money manager.

I can’t recall a single one of them, though, talking about the IAPD. Which is too bad because, up from its humble and essentially unusable beginnings, the IAPD is now an excellent and quick way to smarten up about the financial planning and money managing folks you are thinking of bringing into your life (or those you already have in your life . . . ).

So what’s that you say? You’ve never even heard of the IAPD?

You are not alone!

But you really should know about it because, when it comes to being smart about financial planners and money managers and the like, to know how to use the IAPD — the Investment Adviser Public Disclosure website — is to know the first thing about how to be smart about those particular kinds of financial services professionals, and you really owe it to yourself to know, at least, the first thing about each aspect of your financial life, so if you have that kind of financial service professional in your life, or if you are considering bringing one in, then you really ought to take a look-see at that FSP in the IAPD and see what there is to see.

Or at least so sayeth Friedman’s Law of the First Thing, as applied to this very important part of building up and maintaining your financial brain trust.

*  *  *

Most regulated industries have websites which allow you to look up the people who are regulated within the industry. For instance, keeping it close to (my) home, there are online lookup sites that spit out licensing info about California lawyers, California realtors, California CPAs, California insurance agents, California doctors, and California contractors, to just name a few. And here in the ever-so-loverly SFCA, we are just now embarking on regulating dogwalkers, so no doubt you can expect to soon see an online licensee database lookup site for Ess Eff Sea Ay dogwalkers, too.

Most apropos here, though, is the online licensee database lookup site for financial planners and money managers, called the Investment Adviser Public Disclosure site, or IAPD for short.

Aside: financial planners and money managers are usually lumped together, regulatorily speaking, within the same Investment Adviser regulatory regimen, and I will also lump them together here. And just to keep things accurate but further confusing, stockbrokers are not regulated as Investment Advisers — except when they kinda are. It’s all very confusing — intentionally so some would surmise.

 

Like most of the licensee-lookup sites linked-to above, when the IAPD first launched it was difficult to use and difficult to link-to. Happily, these days it’s easy to use and it’s possible to link to actual licensee records, which the IAPD will then happily serve up to all comers via a single click. Very nice (update: though, as that now not-great link demonstrates, those links don’t work over the long-run)!

Sorry to say, though, as best I can tell the IAPD isn’t used very much. My evidence for this statement is only indirect but it is, I think, quite solid. The first bit of evidence is that, outside of folks in the industry, I’ve never run into anyone who has ever heard of the IAPD: I’ve asked, and no one I’ve ever asked knows it exists, either by name or description. The second bit of evidence is that, when I just now did a search for “IAPD” on Google, the first entry on the results page was for the much more mainstream (!?!) International Association of Plastics Distribution. So it appears the international plastics cartel folks are stomping the IAPD in SEO-land big-time!

And let’s get narrow on this, too, shall we? They say Google really knows who each of us is, right? It/they track what we do, it/they track what we read, it/they track what we search, etc., and then, using that information about us, it/they tailor everything it/they serve up to us. Yet, here I was, doing that search on my everyday computer, which has Google’s paw prints all over it, and plastics came up first. Hey GOOG-machine-in-the-sky, you really think I want to know more about plastics than about investment advisers? Well, why then, you don’t know me. And also: IAPD folks, might you work towards upping your mindshare?

*  *  *

And so what comes next on our search to find the elusive IAPD?

I’m sorry to say that the news on the IAPD web-presence front gets yet worse, because, while the second entry on the Google-search results page is in fact for the Investment Adviser Public Disclosure site, that entry is not a link to the licensee-lookup page; it’s a link to an “answers” page about the IAPD rather than to the licensee-lookup page itself. Hey IAPD folks: your page answering questions about the IAPD is getting more hits than the IAPD itself. What’s wrong with that picture?

But I protest too much. Dothly, even. By my recollection, it used to be that that FAQ page blurb didn’t even have a link to the actual IAPD licensee-lookup page; now it does have such a link, but clicking on that link takes you to a page which has some text which in turn tells you where to click on the left nav-bar on that page to get to the actual page with the IAPD tool. Not great web design, folks!

So three clicks past the second entry on a Google search result page, and that’ll get you there — that’ll get you to the IAPD.

*  *  *

Once you’re there, things get better — information flows and your smartening-up begins.

To begin, you’ll be warmly greeted by this page:
 

With three clicks, you'll get to the actual licensee lookup tool


With three clicks, you’ll get to the actual licensee-lookup tool

 

Once you get to this page, you’re about two clicks away from getting smartened up (yup: that’s five clicks to get you to the good stuff — given the pace of past IAPD developments, perhaps we can expect two years from now the IAPD designers and coders will have this down to two clicks).

You’ll usually want to click on the “Firm” radio button at the bottom of the tool because that’s where the good stuff is — later on you can always look up the individual with whom you’re having direct dealings.

Once you select that button, the blank box at the bottom of the screen below the radio buttons will sprout into this:

 

The actual IAPD search box


The actual IAPD search box

 

From there just type in the name of the planning or money management firm you want to research — which for me this morning was Ameriprise — and hit “return,” at which point you’ll see something like this:

 

Ameriprise IAPD front door


A fairly complex results page when searching for “Ameriprise”

 

If you are typing in the name of a small firm — particularly one with a unique name — you’ll usually just get one entry. Here, looking up “Ameriprise” we get a bunch, but if you look carefully at the picture above, you’ll see that every entry shown is for an “inactive” Ameriprise-something-or-other except for the entries in the second chunk — the entries in the first slightly-darker-blue stripe. That’s where the meat of the current Ameriprise regulatory matter is.

If you then click on the “Investment Adviser Firm” link in that slightly-darker-blue stripe, you’ll see one last page that you have to click on before you get to the good stuff. This page will tell you either that the firm you are looking at is registered with the SEC or with a state regulator. The difference can be important, but, for our present purposes, you don’t much care about what’s on this page (or, for that matter, what the SEC is or whether you should care if you are transiting through a state or an SEC interstitial page); it’s stuff that is important from some perspectives, but from your perspective in this particular context it is all just another log-jammin’, slow-ice-flowin’g, legalese’y piece of info interjected into your info stream, running the very real risk of losing your impatient eyeballs to all the other eye-candy click-bait readily available elsewhere on the Net via a single, effortless, swift click. Poof, you’re gone.

But don’t let that be you. Please stay! Please stick to it! You’re almost there. Just click through those interstitials and continue on, because now, a mere seven clicks in, you’re at the front door of the information you seek.

*  *  *

Here’s what it looks like:

 

Ameriprise's first page of IAPD


The top of the first page of Ameriprise’s IAPD listing

 

From there you can click on each of the Items in Part 1A, as shown in the left nav-bar, and reach each page individually. If you have a decent Internet connection and are happy with very long-scroll pages, then you might well find that the better practice for you will be to click on the “View All” link in the left nav-bar — just below where it says “Sections of Form ADV” and to the left of the word “business” just above the “C.”

Click on that puppy and a pop-up window will open containing all the pages of the main document you’ve been seeking. Now you’ve got something you can navigate around in — something you can print to a pdf or save as a Word file, etc. Because by now you’ve probably gotten the idea that the IAPD site is, by today’s standards, a click-efficiency nightmare, right? So think about grabbing a hold of that whole document and get ye out of the IAPD web space, OK?

*  *  *

Now that you’ve lassoed this big, admittedly-gnarly document, it’s a really good idea to look through the whole thing.

But we’re all busy, right? So, at minimum you want to look at Item 5, where you’ll find most of the juicy, useful information, including, among other things:

    • The number of employees the firm has (an astonishing 12,528 workers for Ameriprise, not including clerical workers, with 10,834 of those 12,528 workers, I would presume, happy, able and licensed to sell you some insurance too)
    • The number of clients the firm has (an also astonishing 1,319,600 clients) and the types of clients it has (something up to half of Ameriprise’s clients are NFs, i.e., Normal Folks, as opposed to HNWs, i.e., High Net Worth individuals, who in turn account for something up to a quarter of its client base)
  • The dollars the firm is managing ($124.65 billion for Ameriprise) and the number of customer accounts (1.08 million Ameriprise customer accounts).

 
And then, just like when you look up lawyers and doctors and such, you want to find out if the firm you’re looking up has ever been in trouble and/or ever gotten in hot water for doing the wrong thing with respect to the people it serves. For this you go to Item 11. You want to see a lot of “no” answers. For Ameriprise, you’ll see a lot of “yes” answers.

And if you really want to know what the firm is up to — what its business model is like, what it values, how it speaks about itself, etc., then be sure to also see Part 2, which is where you’ll find links to the firm’s Brochures. Brochures fulfill a relatively new requirement in this regulatory context, having been a part of the regulatory filing process for about three years now. The Brochure requirements obligate each firm to write out a narrative in which the firm has to answer broad questions and speak its peace about broad topics, so that, through the firm’s narrative, you can really get a good taste for the look and feel and sound and touch of the firm, and for the way it makes its way through the world and makes its bed and butters its bread within the Financial Services Industrial Complex — within the FSIC.

Is the firm’s Brochure all formal and legalese’y and boilerplate’y and CYA’y, or is it something else? Friendly and personable and helpful, maybe?

*  *  *

The firm you’re looking up is apt to look quite different in the IAPD from what Ameriprise looks like in there because Ameriprise is a pretty unique outfit. I use it as an example here because it is so very full-bore: everything about it is magnified.

For instance, if you’re looking at a small firm that’s been in any kind of hot water, that’s pretty troubling because, while big firms have problems like this due to their sheer size (if you had 12,000 employees, do you think you could keep all of them on the straight and narrow?), small firms are usually able to run a tight ship and clean house quickly when one of their own is in even lukewarm water.

Likewise, if the firm you’re looking up has a handful of employees, as many do, then it might have something less than a hundred-handfuls of clients and some tens of millions or perhaps some handfuls of hundreds of millions of dollars under management. And if it has a billion or more dollars under management and is not a household name? Then, to my way of thinking, that firm is pretty darn large and, in terms of dollars-managed at least, pretty highfalutin to boot; it’s apt to have gross revenues of $10 million or more (because most firms charge annual assets under management fees in the neighborhood of 1% of assets under management, i.e. and a/k/a 1% AUM Fees).

And, oh yea: are you wondering how assets under management has anything to do with financial planning and financial advice? I always wonder about that too, and write about it from time to time, most recently when I posed the question, When You Get Financial Advice for Free, are You the Product? and in which I declared:

The business you’re in is the one for which you get paid

 

by which, as seen from the client’s perspective, I meant: if you’re paying some firm an Assets Under Management fee, then the service you’re buying from that firm is an assets management service, not a financial advisory service.

*  *  *

So please remember: reading up about your financial planning firm or money management firm on the IAPD is the first thing — it’s the first thing you should do to learn about those folks. You can also think of this in negative terms: how big a schmo would you feel like if you hired a money management firm and learned, after the fact, that if you had simply looked that firm up on the IAPD when you were first considering bringing that firm into your financial life, then you would’ve learned that the firm had gotten into all sorts of hot water over the years for doing things to its clients which it — guess what? — ultimately did to you too? So you were constructively forewarned, but you totally failed to read the forewarning: big time schmo-feeling, that.

If you have a firm whose IAPD information you’d like to discuss with me, please contact me and we’ll make it so. I’m always happy to help people smarten up about the financial planner or money manager they are thinking about bringing into their life — or have already brought into their life, because, let’s face it, sometimes the first thing comes second and the second thing comes first.

 

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