New Clients? First, Form ADV Part 2

“Closed to new clients. Please take your business elsewhere.”

In effect, that is a sign many RIAs will put on the door if they fail to file their new Form ADV Part 2 A brochures by March 31.

The advisors most affected are those with fiscal years ending 12/31/11. Those advisors have until 5/31/11 to make the piece available to current clients.

“Whenever possible, I’ve directed advisors to resources and experts in the DBJ Associates (DBJ) network,” said Bruce Johnston recently. Founder and president of DBJ, Bruce blogs on the Form ADV Part 2 subject at RIA Marketplace http://tinyurl.com/4kpvs2u .

“The pressure is on. Many advisors just haven’t focused on this – especially since its tax season,” he continued. “That’s why I’ve assembled a team of plain language writers to help meet increasing demand as the deadline draws closer.”

Called the “Form ADV Part 2 Survival Kit,” the service will offer content delivery for both the new ADV Part 2A and 2B. “The new Form ADV  Part 2 is really different from the old ADV Part II,” Bruce added, “and a lot of professionals, who are do-it-yourselfers, are finding that they can’t do this for themselves.”

For $2500, the Survival Kit will provide advisors with the complete electronic filings they need to stay compliant. “After a brief discovery conversation and document request, we go right to a first plain English draft,” he said. “We anticipate turnaround times of between three and five days.”

Advisors in a hurry can contact DBJ Associates at 405.381.9390 or by sending an email to bruce@dbjassociates.com

According to AdvisorTweets, Financial Industry Regulatory Authority Inc. (FINRA) says the delay is needed to reconcile comments from their membership.

As reported in DBJ Associates, the industry is taking a closer look at social media as sales literature because advisors and investors want to have a hand choosing the communications forms they prefer. “The cost of not communicating to advisors and clients through their preferred vehicles (social media) does not make a lot of long-term business sense.” Mr. Johnston said recently.

You can download your copies of Proposed New FINRA rules and Comment on Notice here.

Mutual fund marketers want to use social media

FINRA has no intention of addressing  the social media question directly.  In fact, the term “social media” appears nowhere in both the text of the new rule, nor Regulatory Notice 09-55, the comment notice.

The notice invites interested readers to call Joseph P. Savage, Vice President and Counsel, Investment Companies Regulation, at (240) 386-4534; or Thomas A. Pappas, Vice President and Director, Advertising Regulation, at (240) 386-4553 and state opinions.

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Neil Bathon

A comment on social media from Neil Bathon, founder, FUSE Research Network LLC

Separating the facts from the hype of social media’s promise or menace has never been more important.

Is social media new and different — or a repackaging of traditional communications techniques? We invite promoters and skeptics in equal measure to weigh in on the veracity of what social media consultant, D. Bruce Johnston has termed, “nothing less than the transformation of how investment products will be packaged and distributed through social media.”

This week’s guest post is from Neil Bathon, founder at FUSE Research Network LLC and Managing Director at PMR Associates LLC.

Mr. Bathon has devoted his professional career to improving the productivity and effectiveness of the resources dedicated to the development and distribution of investment products and solutions.

Two way communications puts the 'social' in social media

Mr. Bathon recently commented on last week’s Social Media Memo post, RIA Steege turned to social media “to do opposite of what everyone else was doing.” To adhere to Mr. Bathon’s own standards for accuracy and courtesy, the following is published in unedited form.

“I am sure I am being overly simplistic but the article seems to suggest that Mr. Steege sent out an e-mail to a qualified list of prospective clients with an invite to a seminar.

“I did not pick up on (and do not get generally) the social media aspect of the initiative.

“I am all for using different mediums to reach people (phone, e-mail, website, posters, flyers, etc.). It seems like there is a desire to raise traditional sales and marketing tactics to a new special level and place mostly by the consultants and purveyors of social media services that are trying to differentiate themselves in order to build their business and gain clients.

“Said another way…if I use my Blackberry to put together a thank you e-mail in the parking lot of the B/D I just met with…and I attach a document that is relevant to what I just discussed with the broker…that is good follow-up. But if I use twitter to deliver a 40 character thank you, is that social media?

“Maybe it is definitional. For me, social networking is where people that have a common interest and connect or link themselves with the purpose of advancing their “cause”…whatever that may be…cooking, politics, hunting, etc.

“Also, the fact that people can use LinkedIn to find out how they are (or could be) connected to someone is, for me, a neat sales prospecting tool but unless we (at FUSE) develop a deeper bond and connection between folks where they ‘participate’ in something….I don’t think we have created a network.

“Just a thought… Neil”

Could all of the educational efforts mutual funds and trade associations like the ICI have put into educating the public on mutual funds be insufficient?

You could certainly wish for more funding for education after viewing CNBC’s squawk box confusion over the difference between stocks and derivatives.

Before stepping into a recent Senate Finance Committee vote, Barney Frank was interviewed by a CNBC trio about the merits of letting shareholders set pay limits for TARP Fund recipients. The first dude came back with an off-handed statement about just letting the board of directors and senior executives of a TARP company sort things out.

Why get the shareholders involved? According to the ICI Fact Book, a shareholder is “An investor who owns shares of a mutual fund or other company.” Barney had to remind the fellow that shareholders are, literally, owners of a company; and, as such, are obligated to play a role in corporate governance.

The best was saved for last, when a squawk-boxer, said to Barney, “It seems to me that you’re dealing with a model (shareholder voting) that no longer works. We don’t have mom and pop sitting at home holding these shares. These shares are primarily in mutual funds and the ownership is a derivative instrument.”

Of course, without broad-based common stock shareholder participation, a good chunk of the equity markets — and still another $12 trillion — can vanish over night. Well, even if mom and pop are sitting at homing holding the shares, they still have ownership rights; even if they own shares of mutual funds only, they have the right to pressure the Fund board on matters of equity investment policy. This right, ensures, for example, that company selections have robust shareholder participation on stuff like, I don’t know, executive comp.

“These shares” confuses traditional equity investing with credit default swaps, options, and other derivatives. Whether it goes up or down, a stock is a real, tangible asset — unlike the derivative.

Squawkbox, heal theyself. You can download your free copy of the ICI Fact Book here.