How Does the CRS Model Work?
The CRS model is a mandatory written report that securities brokers and registered investment advisors must provide to clients, revealing key information about the background and practices of securities brokers. It aims to provide individual investors with information about the background of the securities broker firm and any prior legal or disciplinary issues, details about fees and commissions, and other information that can be used to assess and compare potential investment managers.
Similar Disclosure Documents for Investors
The CRS model is not the only document available for investors to disclose financial advisors. It includes Form ADV, which is available on the public disclosure website of the Investment Adviser Registration Depository (IAPD) of the U.S. Securities and Exchange Commission (SEC), providing information about the financial advisor’s business, company ownership, clients, employees, business practices, affiliations, and any other disciplinary events. Additional registration forms submitted by advisors include Forms U4 and U5, which are used respectively to register individual advisors or terminate their registrations. Information from those forms is compiled on the BrokerCheck website maintained by the Financial Industry Regulatory Authority (FINRA).
Limitations of the CRS Model
The CRS model is useful, but it does not provide investors with everything they need to know about an investment advisor. Even the U.S. Securities and Exchange Commission acknowledges that the form is merely a starting point for investors, who are encouraged to verify regulatory processes and follow up with specific questions. While the form may disclose the presence of conflicts of interest, it is not required to explicitly describe them.
Alternatives to the CRS Model
There are some other ways to verify a financial advisor besides the CRS model. Investors can search the public disclosure database of investment advisors maintained by the U.S. Securities and Exchange Commission, which contains registration documents provided by financial advisory firms through the Investment Adviser Registration Depository (IARD). The Department of Labor (DOL) publishes its own list of questions that investors should ask when considering an advisor for retirement accounts. The Department of Labor also provides a guide for understanding retirement plan fee disclosures. Brokers managing less than $110 million in client asset are not required to register with the U.S. Securities and Exchange Commission, but they must register with their state’s financial regulatory authority. Contact information for state regulators is published by the North American Securities Administrators Association.
Source: https://www.thebalancemoney.com/what-you-need-to-know-about-form-crs-5220064
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