IAA: form ADV data burden nearly doubled since 2011

The Investment Adviser Association reported that the average number of data points federally registered advisers had to submit in two sections of Form ADV nearly doubled, rising from 566 in 2011 to 1,026 last year. The group published the finding in its latest industry snapshot.

The snapshot examined Part 1A and Schedule D only and excluded other parts such as Schedules A, B and C. The number of distinct questions in Part 1A and Schedule D climbed from 228 in 2000 to 577 last year.

Registered advisers must file Form ADV annually within 90 days of the end of their fiscal year and file revisions when previously reported information becomes materially inaccurate. The association said the larger number of required responses increases compliance work and costs for firms.

Karen Barr, president and chief executive of the IAA, criticized regulators for regularly adding new questions without removing older ones. “They never subtract,” she said, noting the SEC added advertising-related questions in 2022 while continuing to ask about wrap fees as commission-free trading became common.

Smaller firms and advisers without dedicated compliance staff reported the greatest strain. Jeff Judge, managing partner at Chesapeake Financial Planners in Maryland, recounted telling a client his recent meeting felt rushed after he had spent multiple mornings on regulatory filings. He called some reporting “data collection for its own sake.”

The IAA provided a breakdown of the average data points. Slightly more than one-quarter came from Schedule D items such as affiliates and alternative business names, just over one-quarter stemmed from Part 1A items about client counts and assets under management, nearly 30% related to private funds, and about 16% concerned portfolio holdings, borrowings and derivatives in separately managed accounts.

The growth in reporting followed regulatory changes. The largest single addition of questions came after the Dodd-Frank Act in 2010. Private fund questions were added in 2012, wrap fee and account questions in 2017, and the SEC began requiring a customer relationship summary, Form CRS, in June 2020. Advertising-related questions appeared in 2022.

The SEC is considering proposals to reduce reporting for advisers that file Form PF. The IAA said it hopes a similar simplifying approach could be applied to Form ADV. The SEC did not respond to a request for comment.