The Massachusetts Securities Division is seeking comments on proposed regulatory changes that would require investment advisors in the state to present a stand-alone fee table to their clients.
Some registered investment advisors already include fee tables in Part 2 of their Form ADV, which requires RIAs to file a brochure about their services, fee schedule, disciplinary information, conflicts of interest and the background of management. But advisors are tinkering with their pricing models, and some are becoming convoluted. In addition to fees for investment management and financial planning, some clients also pay retainer fees, subscriptions and fees for third-party automated advice platforms, or so-called robo advisors, to name a few.
The proposed changes would force advisors to itemize those fees. Standardizing the fee table would also help investors compare financial advisors, the regulator said.
“Recent changes in the financial services industry, many fueled by fintech innovations, have resulted in evolving fee structures for investment advisors,” William F. Galvin, Massachusetts Secretary of the Commonwealth, said in a statement. “It is no longer the case that advisors simply charge their clients a fee for assets under management.”
The securities division plans to hold a public hearing and hear testimonies about the proposed amendments May 2 in Boston.
Galvin's office has been one of the most vocal state regulators in its defense of investors. Last month, the division announced it had charged two advisors for failing to act as fiduciaries and "gambling" their clients' money away.
In February, in an effort to help fintech companies navigate regulatory requirements in Massachusetts, the state securities regulator also created the FinTech Advisory Working Group. The formation of the group comes just months after the SEC levied charges against Wealthfront and Hedgeable in December, the first-ever enforcement actions by the agency on robo advisors.
