The XYPN ADV Update Process


ADV Update season is upon us! Here's what you can expect for the update process. 

STEP 1

Compile the Info and Submit the Form

The Annual ADV Update form submission deadline was March 18, 2022.

STEP 2

Review Your Revised Form ADV Drafts

Promptly review the updated ADV Part 1 and Part 2A when sent back to you by the compliance team.

Respond with any corrections within 3 business days. 

STEP 3

Grant Us Authorization To File Your Annual ADV Update

Within 3 business days of receiving your revised documents, when no additional corrections are needed, respond to the email you received from the compliance team instructing them to file your Annual ADV Update on your behalf.

STEP 4

Document the Annual ADV Update Completion

Document the filing of your Annual ADV Update Submission in SmartRIA or your internal compliance folder depending on what you use to manage your compliance program and tasks.

Tip: If using SmartRIA, you can go to My Calendar, sort by Task Name, and quickly find the task labeled “Annual Updating Amendment” or a similar title, to Mark The Task as Complete.

 
 

 

Have questions? Check out the Frequently Asked Questions section at the bottom of the page.

Newly Registered Firms: If you have not launched your firm after becoming registered in the calendar year and therefore do not yet have ANY clients or assets under management to report and no other material changes have been made on your ADV Part One or Part 2A, you can complete a No Changes - Authorization to File form. We will complete your Annual ADV Update using the existing information on your FINRA Firm Gateway and send you a confirmation when filed.

New XYPN Members: If you joined XYPN on or after the deadline listed above please complete the ADV Update questionnaire as soon as possible. The deadline for new members to engage in our Annual ADV Update process is March 18th, 2022.

2022 Timeline


Advisors can expect the ADV Update process to follow this general timeline.

January 3, 2022

Annual ADV Update Questionnaire Opens

Within 24 Hours

Confirmation of questionnaire receipt and assignment to compliance team

Within 5 Business Days

Anticipated timeline for completion of ADV Update 

Within 3 Business Days

Advisor reviews any edits or gives authorization to file

2-3 Business Days

Completion of filing by compliance team confirmed

March 18, 2022*

Deadline to submit Annual ADV Update form 

*Refer to Step 1 for additional details.

Next Steps: Deliver Your Updated ADV Part 2A & 2B to Clients


You must provide your clients with your ADV Part 2A & 2B every year within 120 days following your fiscal year-end. For most of you, this will be April 30, 2022.

Summary of Material Changes

The ADV Part 2 must either include a summary of material changes in Item 2 of the Part 2A or you can provide your clients with a summary of material changes as a separate document, as long as you include an offer to provide a copy of the updated brochure and information on how a client may obtain the brochure. We recommend simply sending the revised ADV Part 2A & 2B in its entirety.

Privacy Policy

We recommend that you deliver a copy of your privacy policy at the same time that you deliver the Form ADV Part 2 in order to satisfy your annual delivery requirements for the Privacy Policy.

Method of Delivery

As state rules and interpretations vary, it is typically best to err on the side of caution or reach out to your state regulator directly regarding what satisfies your annual delivery requirements. If sending your ADV and Privacy Policy to your clients electronically, we recommend attaching those documents directly to the email and logging the delivery of the documents to each client in your compliance folder or in your CRM. Simply including a link to the documents via email rather than including an attachment is typically not sufficient unless you have the ability to view or receive confirmation that the client accessed, reviewed, downloaded, and/or printed the linked documents. 

 

Have questions? Check out the Frequently Asked Questions section at the bottom of the page.

Join Us for Office Hours


Join one of our existing firm hours calls that are held on Tuesday or Wednesday each week and bring any Annual ADV Update related questions to discuss with one our compliance experts.

Reserve your spot here on our weekly calls.

Frequently Asked Questions


Investment Management - Regulatory AUM

The SEC indicates that regulatory assets under management should only include “the securities portfolios for which you provide continuous and regular supervisory or management services as of the date of filing of this Form ADV".

You would not include assets or portfolios for which you advised on but only review on a periodic basis with the client, such as quarterly or annual meetings, and where the client is responsible for implementing any recommendations.

Not when determining your Regulatory Assets Under Management on the ADV Part 1. For purposes of your ADV Part 1, you do not include Assets Under Advisement.

Although it may be permitted on the ADV Part 2A, subject to certain conditions, we recommend using the same method for calculating Regulatory Assets Under Management on the ADV Part 2A as you do on the ADV Part 1 which does not allow for Assets Under Advisement to be included.

The ADV Part 2A instructions ask for the amount of assets you manage on a discretionary and non-discretionary basis. If you choose to include Assets Under Advisement and therefore calculate that total amount differently than you calculate Regulatory Assets Under Management, then you must maintain clear documentation of your methodology behind that calculation for a period of at least 5 years.

Discretionary AUM would include any assets in which you have the authority to choose the securities to purchase or sell in a client’s account without obtaining their consent each time you make changes in that account. Even if you do not exercise this authority, you would count those assets as discretionary AUM if you have the authority to exercise discretion when trading or rebalancing accounts.

Discretionary or non-discretionary trading authority should be spelled out at a minimum in the client’s agreement but may also be explained in an investment policy statement.

Breakdown of AUM by Asset Type

Typically a mutual fund is best categorized as a security issued by a Registered Investment Company or Business Development Company.

Typically an ETF is best categorized as a security issued by a Registered Investment Company or Business Development Company.

Determine what you believe the most appropriate type should be and only count the percentage toward that asset type. Do not count it toward more than one asset type. Keep in mind this is for the security itself and not the underlying holdings of funds.

Financial Planning Services - Investments

The question on your ADV Part 1B regarding securities and non-securities investments made as a result of your financial planning recommendations asks for the approximate amount by selecting the most appropriate range.

This depends on how your services our set up. If you have investment management and financial planning as separate services, we recommend only including the investments that you made recommendations on as part of the financial planning services.

If you have one service that includes both investment management and financial planning, it would be reasonable to include both your AUM and outside investments that you recommended to those financial planning clients.

Types of Clients

This is really up to you, however you want to be consistent in how you calculate all clients.

The SEC definition for “client” includes, “any relative, spouse, or relative of the spouse of the natural person who has the same principal residence”.

If you have separate agreements with each of those individuals and/or your management style lends itself to working with each person on an individual basis and not as a family of clients, you may count them as separate clients.

The Glossary to Form ADV provides that a “United States person” has the same meaning as in rule 203(m)-1 under the Advisers Act, which includes any natural person that is resident in the United States.

Using FINRA’s definition for the ADV Part 1A: A “high net worth individual” is an individual with at least $1,100,000 managed by an adviser, or whose net worth exceeds $2,200,000. The net worth of an individual may include assets held jointly with his or her spouse.

For purposes of Item 5 of the ADV Part 1, you must determine which client type is most appropriate for that client.

For purposes of the Annual ADV Update, and when counting your number of clients in each state, you should include any project based and hourly clients that you had in the preceding 12 months.

Primary Custodians

Any custodian that holds ten (10) percent or more of your regulatory assets under management must be disclosed.

List the appropriate custodians and values as it was on December 31, 2021.

Separately Managed Accounts

For Form ADV purposes, a separately managed account includes any account managed for an advisory client that is not an investment company (mutual fund), business development company or pooled investment vehicles. Therefore, nearly all accounts will fall under separately managed accounts (“SMAs”) for the purposes of the ADV Part 1.