Under the heading “Do you or your financial professionals have legal or disciplinary history?” firms will have to disclose any disciplinary information.
In the four sections of the document that follow the introduction, firms must include “conversation starters,” which are questions that retail investors are encouraged to ask their financial professional with the intention of prompting a discussion, Hunter said.
“Although form CRS does not require written responses to these conversation starters, we believe that firms will want to actively train their representatives and prepare a script to address each question,” Hunter said.
Automated investment advisors and broker-dealers that provide services only online must provide investors with a hyperlink or other means of facilitating access to the section of their website with written answers. If these firms also makes a financial professional available to discuss the firm’s services, they must make the professional available to discuss the “conversation starters” with the retail investor, Hunter added.
Form CRS “will help [investors] select or decide whether to continue to use a particular firm or financial professional. It will encourage them—and empower them—to have meaningful and individualized conversations with their financial professionals. It will also help them to easily find additional information because of the layered disclosure approach we adopted,” Clayton told investors at the Boston roundtable.
“What type of services do you want?” Clayton urged investors to think about when interviewing prospective advisors. “Do you want someone managing your account on an ongoing basis or do you want recommendations on a few stocks, bonds, mutual funds and ETFs? How do you want to pay for those services? How is the financial professional compensated and what conflicts of interest do they have?
“And if you’re not sure what to ask, try my favorite question: How much of my money is going to fees and costs, and how much is going to work for me?” Clayton concluded.