(Dow Jones) The Securities and Exchange Commission wants registered investment advisors to describe themselves to clients and prospects in plain English, something likely to require significant time and money.

In the name of providing "new and prospective advisory clients with clearly written, meaningful, current disclosure of the business practices, conflicts of interest and background of the investment advisor and its advisory personnel," the SEC has just amended Part 2 of its Form ADV, which investment professionals must use to register as investment advisors and update every year.

For this new "brochure" section of the form, RIAs must employ "short sentences, definite, everyday words, and the active voice" to provide detailed, paragraph-form resumes for all professional staffers, and disclose things like amount of assets under management, fees, transaction costs, fund expenses, conflicts of interest, loss risks, and legal or disciplinary events that are "material to a client's (or prospective client's) evaluation of the integrity of the advisor or its management personnel," according to the SEC's 174-page explanation of the new disclosure requirements.

"If you ever had a personal bankruptcy, that has to be there," says Zachary Gronich, chief executive of RIA In A Box, a firm that helps financial-services professionals prepare materials for registering as investment advisors. "If you ever had a customer complaint--even years ago, at a different firm--that has to be there."

Preparing the form will take between 16 and 60 hours the first time around, the SEC estimates. It foresees RIAs having to shell out between $3,200 and $10,400 in legal fees and, optionally, a further $3,000 to $5,000 for consulting services.

"This is going to anger a lot of people, cost a lot of money, and put up a barrier to entry for people thinking of becoming RIAs," Gronich predicts.

For Barbara Roper, head of the investor protection arm of the private-sector Consumer Federation of America, benefits to investors from the new disclosure rule outweigh its inconvenience to investment advisors. "We strongly believe you need plain-English disclosure [for RIAs], and we hope the SEC extends plain-English requirements to brokers."

The rule change goes into effect at the end of the year. For now, it's aimed the 11,500 or so RIAs under federal sway. But it's nearly certain that individual states--which oversee 14,830 firms with another 4,200 on the way due to new jurisdictional thresholds--will require identical procedures.

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