Massachusetts Requests Public Comment On Advisor Fee Table Amendment

The Massachusetts Securities Division requests public comment on a proposed amendment to existing disclosure obligations on advisors registered in the state.

The proposal would require registered advisors to provide clients and prospective clients with a table of fees for services. The Division says the purpose of the fee table is to increase transparency of advisory fees and costs and alleviate confusion among investors. This would enable investors to make more informed decisions when choosing a financial advisor, regulators said.

The Division said in a statement that it believes that a fee table will simplify advisory fees for investors.

The Fee Table will achieve this goal by distilling the information about fees and services from the investment adviser’s Brochure into a simple, digestible format that will enable side-by-side comparison of investment advisers and facilitate more informed questions and conversations about services and fees.

The proposed fee table will be a one-page document based on information that is already in each advisor’s Form ADV Part 2A. A blank fee table sample and instructions for its use have been included with the request for public comment.

So far, comments have been steadily streaming in on the proposed amendment.

“My concern with the regulation is that there are many different business models in the RIA world,” said Jim Beaulieu, president of Beaulieu Financial Services. “Comparing fees between a firm that simply offers money management with a firm that offers truly comprehensive financial planning doesn’t help the consumer discover value but only price. I am all for fee transparency but the proposal only answers half of the question, ‘what does it cost and what do i get for that.’”

Herbert Shanzer, principal at Shanzer Management commented, “In my opinion this is a classic ‘belt and suspenders’ approach to disclosure – more paper, not more facts. The additional paperwork is likely to cause confusion rather than better understanding. As a one person advisory firm I would find the additional schedule to be a significant burden.”

Some respondents have had more conflicted feelings over the proposed fee table.

“I think that requiring investment advisers to provide a standardized fee table would be a very bad idea. Let me take that back a step – I want it to be a good idea,” said Peter Canniff, a financial planner with Advanced Portfolio Design. “I have been trying to create one for my business for nearly 25 years and have been unable to produce one that adequately relates the many different types of services I provide to different people.”

“I admit that my scope on this is purely on how it would impact my business and not the industry as a whole. The trap is that if you publish a fee table and you need to create a customized arrangement with a unique client, an investment adviser is at risk of being accused of fraud for varying from their disclosure material.”

The deadline for written comments is Friday, May 3 by 5 p.m. Additionally, a public hearing will be held on the matter on Thursday, May 2 in Boston.

AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.