A. Firm Information
Palo Alto Wealth Advisors, LLC (“Palo Alto” or the “Advisor”) is a registered investment advisor with the U.S.
Securities and Exchange Commission (“SEC”). The Advisor is organized as a Limited Liability Company (“LLC”)
under the laws of the State of California. Palo Alto was founded in September 2016 and is owned and operated
by Ryan K. Schmidt (Partner) and Nathan T. Blair (Partner and Chief Compliance Officer). This Disclosure
Brochure provides information regarding the qualifications, business practices, and the advisory services
provided by Palo Alto.
B. Advisory Services Offered
Palo Alto offers investment advisory services to individuals, high net worth individuals, trusts, estates, and other
types of clients (each referred to as a “Client”).
The Advisor serves as a fiduciary to Clients, as defined under the applicable laws and regulations. As a
fiduciary, the Advisor upholds a duty of loyalty, fairness, and good faith towards each Client and seeks to
mitigate potential conflicts of interest. Palo Alto’s fiduciary commitment is further described in the Advisor’s Code
of Ethics. For more information regarding the Code of Ethics, please see Item 11 – Code of Ethics, Participation
or Interest in Client Transactions, and Personal Trading.
Wealth Management Services
Palo Alto provides Clients with wealth management services, which generally include a broad range of
comprehensive financial planning and consulting strategies as well as discretionary and nondiscretionary
management of investment portfolios.
Investment Management Services – Palo Alto provides customized investment advisory solutions for its Clients.
This is achieved through continuous personal Client contact and interaction while providing discretionary
investment management and related advisory services. Palo Alto works with each Client to identify their
investment goals and objectives as well as risk tolerance and financial situation in order to create an investment
strategy. Palo Alto will then design a portfolio tailored to the Client that will be primarily constructed with
exchange-traded funds (“ETFs”) and mutual funds. The Advisor may also utilize individual stocks, options
contracts, alternative investments, structured notes, private collective investment funds, and/or other types of
investments, as appropriate, to meet the needs of certain Clients. The Advisor may retain certain legacy
investments based on portfolio fit and/or tax considerations.
Palo Alto’s investment approach is primarily long-term focused, but the Advisor may buy, sell, or re-allocate
positions that have been held for less than one year to meet the objectives of the Client or due to market
conditions. Palo Alto will construct, implement, and monitor the portfolio to ensure it meets the goals, objectives,
circumstances, and risk tolerance agreed to by the Client. Each Client will have the opportunity to place
reasonable restrictions on the types of investments to be held in their respective portfolio, subject to acceptance
by the Advisor.
Palo Alto evaluates and selects investments for inclusion in Client portfolios only after applying its internal due
diligence process. Palo Alto may recommend, on occasion, redistributing investment allocations to diversify the
portfolio. The Advisor may recommend employing cash positions as a possible hedge against market
movement. Palo Alto may recommend selling positions for reasons that include but are not limited to harvesting
capital gains or losses, business or sector risk exposure to a specific security or class of securities,
overvaluation or overweighting of the position[s] in the portfolio, change in the risk tolerance of Client,
generating cash to meet the Client’s needs, or any risk deemed unacceptable for the Client’s risk tolerance.
Retirement Accounts – When the Advisor provides investment advice to Clients regarding ERISA retirement
accounts or individual retirement accounts (“IRAs”), the Advisor is a fiduciary within the meaning of Title I of the
Employee Retirement Income Security Act (“ERISA”) and/or the Internal Revenue Code (“IRC”), as applicable,
which are laws governing retirement accounts. When deemed to be in the Client’s best interest, the Advisor will
provide investment advice to a Client regarding a distribution from an ERISA retirement account or to roll over
the assets to an IRA or recommend a similar transaction including rollovers from one ERISA sponsored Plan to
another, one IRA to another IRA, or from one type of account to another account (e.g., commission-based
account to fee-based account). Such a recommendation creates a conflict of interest if the Advisor earns a new
(or increases its current) advisory fee as a result of the transaction. No client is under any obligation to roll over
a retirement account to an account managed by the Advisor.
At no time will Palo Alto accept or maintain custody of a Client’s funds or securities, except for the limited
authority as outlined in Item 15 – Custody. All Client assets will be managed within the designated account[s] at
the Custodian, pursuant to the terms of the agreement. Please see Item 12 – Brokerage Practices.
Donor-Advised Fund Services
– The Advisor provides the Pershing Donor-Advised Fund (“DAF”) to Clients via
the American Endowment Foundation, a solution for charitable giving to philanthropic vehicles, for the purpose
of managing charitable donations contributed by or on behalf of donor clients. The DAF allows the Advisor to
actively manage assets that have been donated while charging an investment management fee. The Advisor
operates as an advisory manager on the platform. The American Endowment Foundation is an independent
company and unaffiliated with the Advisor.
Non-Purpose Loans and Lines of Credit – If deemed in a Client’s best interest, the Advisor may introduce
certain Clients to non-purpose loan programs (“Lending Program”) made available through The Bank of New
York Mellon Corporation (“BNY Mellon”) or Pershing, LLC. In such instances, the Client’s assets in their
account[s] at the Custodian will be utilized as collateral for the non-purpose loan. The recommendation of a
Lending Program presents a conflict of interest as the Advisor will continue to receive investment advisory fees
for managing the collateralized assets in the Client’s account[s]. Clients are not obligated to engage the Advisor
for the Lending Program. For additional information related to the risks involved with non-purpose loans and
lines of credit, please see Item 8 - Methods of Analysis, Investment Strategies, and Risk of Loss.
Financial Planning Services – Palo Alto will typically provide a variety of financial planning services to individuals
and families as a component of its wealth management services or pursuant to a written financial planning
agreement. Services are offered in several areas of a Client’s financial situation, depending on their goals and
objectives.
Generally, such financial planning services will involve preparing a financial plan or rendering a financial
consultation based on the Client’s financial goals and objectives. This planning or consulting may encompass
one or more areas of need, including but not limited to investment planning, retirement planning, personal
savings, education savings, and other areas of a Client’s financial situation.
A financial plan developed for, or financial consultation rendered to the Client will usually include general
recommendations for a course of activity or specific actions to be taken by the Client. For example,
recommendations may be made that the Client start or revise their investment programs, commence or alter
retirement savings, establish education savings and/or charitable giving programs.
Palo Alto may also refer Clients to an accountant, attorney, or another specialist, as appropriate for their unique
situation. For certain financial planning engagements, the Advisor will provide a written summary of the Client’s
financial situation, observations, and recommendations. For consulting or ad-hoc engagements, the Advisor
may not provide a written summary. Plans or consultations are typically completed within six months of the
contract date, assuming all information and documents requested are provided promptly.
Financial planning recommendations pose a conflict between the interests of the Advisor and the interests of the
Client. For example, the Advisor has an incentive to recommend that Clients engage the Advisor for investment
management services or to increase the level of investment assets with the Advisor, as it would increase the
advisory fees paid to the Advisor. Clients are not obligated to implement any recommendations made by the
Advisor or maintain an ongoing relationship with the Advisor. If the Client elects to act on any of the
recommendations made by the Advisor, the Client is under no obligation to implement the transaction[s] through
the Advisor.
C. Client Account Management
Prior to engaging Palo Alto to provide investment advisory services, each Client is required to enter into one or
more agreements with the Advisor that define the terms, conditions, authority, and responsibilities of the Advisor
and the Client. These services may include:
• Establishing an Investment Strategy – Palo Alto, in connection with the Client, will develop a strategy
that seeks to achieve the Client’s investment goals and objectives.
• Asset Allocation – Palo Alto will develop a strategic asset allocation that is targeted to meet the
investment objectives, time horizon, financial situation, and tolerance for risk for each Client.
• Portfolio Construction – Palo Alto will develop a portfolio for the Client that is intended to meet the stated
goals and objectives of the Client.
• Investment Management and Supervision – Palo Alto will provide investment management and ongoing
oversight of the Client’s investment portfolio.
D. Wrap Fee Programs
Palo Alto does not manage or place Client assets into a wrap fee program. Investment management services
are provided directly by Palo Alto.
E. Assets Under Management
As of December 31, 2023, Palo Alto manages $592,872,610 in Client assets, $480,764,505 of which are managed
on a discretionary basis and $112,108,105 on a non-discretionary basis. Clients may request more current
information at any time by contacting the Advisor.