MLP3, LLC, which operates under the name Masters Legacy Planning (the “Registrant”) is a limited
liability company formed in the State of New Jersey. The Registrant became registered as an
Investment Adviser Firm on July 25, 2018. Effective January 1st, 2023, the voting shares of the
Registrant are owned by the TSCAPS Irrevocable Trust Dated June 16, 2017. Todd Chamberlain is
the Registrant’s Manager.
“We”, “us” and “our” refer to MLP3
•
“Advisor” refers to persons who provide investment recommendations or advice on
behalf of MLP3
•
“You”, “yours” and “client” refer to clients of MLP3 and its advisors
B. As discussed below, the Registrant offers to its clients (individuals, business entities, trusts,
estates and charitable organizations, etc.) investment advisory services, and, to the extent
specifically requested by a client, financial planning and related consulting services.
INVESTMENT MANAGEMENT SERVICES
The Registrant provides discretionary investment advisory services on a fee basis. The
Registrant’s annual investment advisory fee is based upon a percentage (%) of the market
value of the assets placed under the Registrant’s management, generally negotiable to an
annual maximum fee of 1.25%. Before engaging the Registrant to provide investment
advisory services, clients are required to enter into an Investment Advisory Agreement with
Registrant setting forth the terms and conditions of the engagement (including termination),
describing the scope of the services to be provided, and the fee that is due from the client.
Registrant provides investment advisory services specific to the needs of each client. Before
providing investment advisory services, an investment adviser representative will ascertain
each client’s investment objectives and develop an asset allocation based on a defined
investment policy statement that focuses on client’s investment objectives, time horizon, and
risk tolerance. Once client investment assets are allocated, the Registrant provides ongoing
monitoring and review of account performance and asset allocation as compared to client-
designated investment objectives and may execute or recommend execution of account
transactions as a result of those reviews.
Registrant's annual investment advisory fee shall include investment advisory services, and,
to the extent specifically requested by the client, financial planning and consulting services.
In the event that the client requires extraordinary planning and/or consultation services (to be
determined in the sole discretion of the Registrant), the Registrant may determine to charge
for such additional services, the dollar amount of which shall be set forth in a separate
agreement with the client.
FINANCIAL PLANNING AND CONSULTING SERVICES (STAND-ALONE)
To the extent specifically requested by a client, the Registrant may determine to provide
financial planning and/or consulting services (including investment and non-investment
related matters, including estate planning, insurance planning, etc.) on a stand-alone separate
fee basis. Registrant’s planning and consulting fees are negotiable, but generally range from
$2,500 to $10,000 on a fixed fee basis, depending upon the level and scope of the service(s)
required and the professional(s) rendering the service(s). In connection with its financial
planning offering, Registrant is also able to utilize the program infrastructure provided by
Commonwealth Financial Network (“Commonwealth”), a SEC-registered investment adviser
and broker-dealer. Prior to engaging the Registrant to provide planning or consulting services,
clients are required to enter into a Financial Planning and Consulting Agreement (or a Wealth
Management Consulting Agreement if using Commonwealth’s offering) with Registrant
setting forth the terms and conditions of the engagement (including termination), describing
the scope of the services to be provided, and the portion of the fee that is due from the client
prior to Registrant commencing services.
If requested by the client, Registrant may recommend the services of other professionals for
implementation purposes, including one of the Registrant’s representatives as a licensed
insurance agent. (See disclosure at Item 10.C below). The client is under no obligation to
engage the services of any such recommended professionals. The client retains absolute
discretion over all such implementation decisions and is free to accept or reject any
recommendation from the Registrant. Please Note: If the client engages any such
recommended professional, and a dispute arises thereafter relative to such engagement, the
client agrees to seek recourse exclusively from and against the engaged professional. If, and
when, the Registrant is involved in a specific matter (i.e. estate planning, insurance,
accounting-related engagement, etc.), it is the engaged licensed professionals (i.e. attorney,
accountant, etc.), and not the Registrant, that is responsible for the quality and competency of
the services provided.
Please Also Note: It remains the client’s responsibility to promptly notify the Registrant if
there is ever any change in their financial situation or investment objectives for the purpose
of reviewing, evaluating or revising Registrant’s previous recommendations and/or services.
The Registrant provides a variety of financial planning and consulting services to individuals,
families and other clients regarding the management of their financial resources based upon
an analysis of the client’s current situation, goals, and objectives. Generally, such financial
planning services will involve preparing a financial plan or rendering a financial consultation
for clients based on the client’s financial goals and objectives. This planning or consulting
engagement will generally encompass one or more of the following areas: Investment
Planning, Estate Planning, Charitable Planning, Education Planning, Corporate and Personal
Tax Planning, Cost Segregation Study, Corporate Structure, Real Estate Analysis, Mortgage/
Debt Analysis, Insurance Analysis, Lines of Credit Evaluation, Business and Personal
Financial Planning.
The Registrant’s written financial plans or financial consultations rendered to clients usually
include general recommendations for a course of activity or specific actions to be taken by the
clients. For example, recommendations may be made that the clients begin or revise
investment programs, create or revise wills or trusts, obtain or revise insurance coverage,
commence or alter retirement savings, or establish education or charitable giving programs. It
should also be noted that the Registrant may refer clients to an accountant, attorney or other
specialist, as necessary for non-advisory related services. For written financial planning
engagements, the Registrant provides its clients with a written summary of their financial
situation, observations, and recommendations. Plans or consultations are typically completed
within six (6) months of the client signing a contract with us, assuming that all the information
and documents requested from the client are provided to us promptly. Implementation of the
recommendations will be at the discretion of the client.
PORTFOLIO MANAGEMENT SERVICES
To facilitate our portfolio management services, Registrant has entered into an agreement with
Commonwealth to offer clients of the Registrant access to Commonwealth’s PPS Custom
Account Program and the PPS Direct Account Program.
PPS Custom: The PPS Custom Program enables MLP3 to assist the client in developing a
personalized investment portfolio using one or more investment types, including, but not
limited to, stocks, bonds, mutual funds, exchange-traded funds (“ETFs”), UITs, variable and
fixed-indexed annuities, and alternative investments.
PPS Direct: The PPS Direct Program offers advisors’ clients access to a variety of model
portfolios involving a range of risk levels from which they may choose. Generally, apart from
the PPS Direct Third-Party Fund Strategist Program and the PPS Direct Mutual Fund/ETF
Program, the PPS Direct portfolios are not managed by Commonwealth or the client’s
financial advisor. Rather, PPS Direct model portfolios are managed by one or more third-party
portfolio managers on a discretionary basis. PPS Direct portfolios may consist of mutual funds
or ETFs, or they may be made up of individual equities, fixed income securities, or other types
of investments. There are four types of PPS Direct Program accounts, which are broadly
described as follows:
• PPS Direct Mutual Fund/ETF: As the name suggests, these accounts will be allocated
among mutual funds or ETFs.
•
PPS Direct Separately Managed Account (“SMA”): This separately managed account
strategy invests in individual securities (e.g., stocks and bonds).
•
PPS Direct Third-Party Fund Strategist (“Strategist”): Third-party investment
advisers provide asset allocation model strategies comprising mutual funds and ETFs.
•
PPS Direct Unified Managed Account (“UMA”): This is best described as multiple
SMAs in a single account.
In the case of the PPS Custom Account Program, the Registrant will assist clients in the
development of personalized asset allocation programs. In the case of the PPS Direct Account
Program, Registrant offers the services of approved money management firms referred to as
“Sub-Advisors” to assist in managing Client portfolios. Clients of Registrant who participate
in one or more of Commonwealth’s PPS Programs will receive Commonwealth’s Form ADV
Part 2 in addition to the Form ADV Part 2 for Registrant. Clients should refer to
Commonwealth’s Form ADV Part 2 for detailed information about Commonwealth and
Commonwealth’s PPS Programs. More information about Registrant’s relationship with
Commonwealth is provided in Item 12 of this Brochure.
RETIREMENT PLAN CONSULTING
Utilizing program infrastructure provided by Commonwealth, Registrant offers non-
discretionary advisory services to 401k and other qualified retirement plans (“Plans”) for
businesses, which may include, depending on the needs of the Plan client, recommending
investment options for Plans to offer to participants, ongoing monitoring of a Plan’s
investment options, assisting plan fiduciaries in creating and/or updating the Plan’s written
investment policy statements, working with Plan service providers, and providing general
investment education and advice to Plan participants.
Variable Annuity Sub-Account Management
The Registrant offers management of no-load fee-based RIA Variable Annuities (owned by
the client) which allows Registrant to manage client assets in the investment sub-accounts on
a discretionary basis. Registrant, through its representatives, manages variable annuity sub-
accounts in accordance with strategies similar to its other models. Registrant’s representatives
may provide guidance to the client with respect to the selection of an appropriate variable
annuity. The insurance company that issues the variable annuity, or its outside custodian, will
maintain custody of the client’s funds and securities at all times. The type of discretionary
authority authorized by the client will be reflected in the Registrant’s Client Agreement. The
representative’s authority is limited to exchanges among the variable annuity investment sub-
accounts. At no time will the representative have authority to withdraw funds and/or securities
from the client’s variable annuity account. The Client Agreement will specifically state which
variable annuity policies are being managed. Registrant’s representative will not receive
commission compensation with respect to Client’s purchase of the variable annuity product.
Registrant, however, will charge a separate management fee with respect to the variable
annuity assets.
Non-Discretionary Investment Advisory Services
When serving in a non-discretionary investment advisory capacity for a Plan, the Registrants
status is defined by Section 3(21) of the Employee Retirement Income Security Act of 1974.
In this capacity, Registrant assumes no fiduciary responsibility for the completion of an
investment policy statement, or any aspect of the definition, selection, maintenance or
replacement of any Plan investment options. In this non-discretionary role, Registrant provides
information to the Plan Sponsor/Trustees regarding investment option style parameters and
performance reporting. The Plan Sponsor/Trustees exercise full authority over the selection of
Plan investment options and may, or may not, utilize the information provided by Registrant
as part of their decision-making process.
Other Services for Employee Benefit Plans
As part of providing the non-discretionary investment services to Plans, Registrant may provide
certain information and services to the Plan and the Plan Sponsor/Trustees. These other services
are designed to assist the Plan Sponsor/Trustees in meeting their management and fiduciary
obligations to the Plan. The other services may consist of the following:
•
Assist with Platform Provider Search and Plan Set-Up;
•
Plan Review;
•
Quarterly investment monitoring;
• Fiduciary compliance;
• Participant communication and education;
• Plan Fee and Cost Review;
Acting as Third Party Service Provider Liaison;
Wrap Fee Programs
Commonwealth’s PPS Direct program is considered a “wrap fee” program in which the client
pays specified fees for portfolio management services and trade execution. Wrap fee programs
differ from other programs in that the asset-based fee structure for wrap programs is intended
to be largely all inclusive, whereas non-wrap fee programs typically assess trade-by-trade
execution costs that are in addition to the asset-based fees.
The PPS Direct program available through Commonwealth is managed in accordance with
the investment methodology and philosophy used by the respective third-party portfolio
manager, investment adviser, or strategist.
Please Note: In these type of engagements, the unaffiliated investment advisers that
engage Registrant's services shall maintain both the initial and ongoing day-to-day
relationship with the underlying investor, including initial and ongoing determination of
the of the investor’s suitability for Registrant's designated investment strategies. In
addition, since the custodian/broker-dealer is determined by the unaffiliated program/
platform sponsor, Registrant will be unable to negotiate commissions and/or transaction
costs, and/or seek better execution. As a result, the investor may pay higher commissions
or other transaction costs or greater spreads, or receive less favorable net prices, on
transactions for the account than would otherwise be the case through alternative clearing
arrangements recommended by Registrant. Higher transaction costs adversely impact
account performance.
For the investment advisory services provided to you by our Commonwealth and your advisor,
Commonwealth and your advisor receive a portion of the wrap fees you pay when you
participate in any wrap fee program through Commonwealth.
For more information relating to Commonwealth’s wrap fee program, please see Appendix 1
of Commonwealth’s brochure.
Investment recommendations and advice offered by MLP3, and its advisors do not constitute
legal, tax, or accounting advice. Clients should coordinate and discuss the impact of the
financial advice they receive from their advisor with their attorney and accountant. Clients
should also inform their advisor promptly of any changes in their financial situation,
investment goals, needs, or objectives. Failure to notify the advisor of any material changes
could result in investment advice not meeting the changing needs of the client.
Program Choices and Conflicts of Interest
The Registrant offers multiple advisory programs as outlined above. The specific advisory
program(s) selected by the client may cost the client more or less than purchasing program
services separately. Factors that bear upon the cost of a particular advisory program in relation
to the cost of the same services purchased separately include, but may not be limited to, the
type and size of the account; the historical or expected size or number of trades for the account;
the types of securities and strategies involved; the amount of fees, commissions, and other
charges that apply at the account or transaction level; and the number and range of
supplementary advisory and client-related services provided to the account. Lower fees for
comparable services may be available from other sources.
Clients should be aware that the compensation to the Registrant and your advisor will differ
according to the specific advisory program chosen. This compensation to the Registrant and
your advisor may be more than the amounts we would otherwise receive if you participated
in another program or paid for investment advice, brokerage, and/or other relevant services
separately. As a result of the differences in fee schedules and other sources of compensation
that exist among the various advisory programs and services offered by the Registrant and
your advisor, Registrant and your advisor have a financial incentive to recommend a particular
program or service over other programs or services.
As discussed in more detail in Item 10 (Financial Industry Activities and Affiliations),
Registrant has chosen to partner with Commonwealth Financial Network to provide certain
services, including but not limited to fee billing and account performance reporting, to
Registrant and our clients. For the services it provides, Commonwealth charges financial
advisors an administrative fee at the same time clients are charged asset-based fees. The
administrative fee is charged to and paid by the financial advisor rather than the advisor’s
clients and is calculated as a percentage of the total account assets, including cash and money
market positions, held by the advisor’s clients. The administrative fee covers
Commonwealth’s maintenance costs associated with performance reporting, account
reconciliation, auditing, and quarterly statements. In the same manner as many advisors offer
asset management fee discounts to their larger clients, Commonwealth offers its advisors
administrative fee discounts based on their total assets under management. As advisors grow
their fee-based business on which Commonwealth provides administrative services,
Commonwealth’s economies of scale are shared with its advisors by reducing the percentage
amount of administrative fees that would otherwise be charged to the advisors
These discounts in administrative fees for reaching various AUM levels present a conflict of
interest because they provide a financial incentive for your advisor to recommend either their
own asset management programs or Commonwealth’s PPS programs over other available
managed or wrap account programs that do not offer such discounts or higher payouts to your
advisor. On the other hand, because Commonwealth does not assess administrative fees to
advisors when they use certain other third party managed account programs depending upon
the costs and fees of a particular third party program, advisors may have a financial incentive
to use one or more third party programs, which also creates a conflict of interest.
In addition, Commonwealth offers our firm and our advisors one or more forms of financial
benefits based on our total assets under management held at Commonwealth or in
Commonwealth’s PPS Program accounts, as well as financial assistance for transitioning from
another firm to Commonwealth. The types of financial benefits that your advisor may receive
from Commonwealth include, but are not limited to, forgivable or unforgivable loans,
enhanced payouts, and discounts or waivers on transaction, platform, and account fees;
technology fees; research package fees; financial planning software fees; administrative fees;
brokerage account fees; account transfer fees; licensing and insurance costs; and the cost of
attending conferences and events. The enhanced payouts, discounts, and other forms of
financial benefits that your advisor may have the opportunity to receive from Commonwealth
provide a financial incentive for our firm and your advisor to select Commonwealth as
broker/dealer for your accounts over other broker/dealers from which they may not receive
similar financial benefits. Please see items 12 and 14 of this Brochure for more detailed
information about these types of conflicts and our relationship with Commonwealth.
BOOKKEEPING AND ACCOUNTING SERVICE
In connection with Registrant’s goal of providing substantial value to clients in specific areas,
Registrant provides certain bill payment services and other administrative support. The client
is under no obligation to engage Registrant in this service.
TAX COORDINATION SERVICE
The Registrant coordinates certain tax preparation activity with an unaffiliated outside
accounting firm. Income tax coordination services are typically offered to Registrant’s
advisory clients but may be extended to other non-advisory customers as well. Fees for income
tax coordination services will generally range from $500 to $5,000, depending on the
complexity of the client's situation. Registrant’s clients may be offered a discount on their tax
coordination service fees. Tax coordination service fees are separate and are NOT included as
part of any investment advisory agreement. Registrant may decline to coordinate any income
tax return due to the complexity and scope involved. Fees are normally assessed based on the
forms associated with the client’s return. As such, the more forms in a return, the higher the
associated fee. There is no requirement that any advisory clients have their income tax returns
coordinated by the Registrant. Fees for services rendered are due after the consultations are
completed.
MISCELLANEOUS
Limitations of Financial Planning and Non-Investment Consulting/Implementation
Services. As indicated above, to the extent requested by a client, Registrant may provide
financial planning and related consulting services regarding non-investment related matters,
such as estate planning,
tax planning, insurance, etc. Registrant may provide financial
planning services inclusive of its advisory fee set forth at Item 5 below (exceptions could
occur based upon assets under management, special projects, stand-alone planning
engagements, etc. for which Firm may charge a separate or additional fee). Please Note.
Registrant believes that it is important for the client to address financial planning issues on an
ongoing basis. Registrant’s advisory fee, as set forth at Item 5 below, will remain the same
regardless of whether or not the client determines to address financial planning issues with
Registrant. Registrant does not serve as an attorney or accountant, and no portion of its
services should be construed as legal or accounting services. Neither the Registrant nor its
investment adviser representatives assist clients with the implementation of any financial plan,
unless they have agreed to do so in writing. Accordingly, Registrant does not prepare estate
planning documents or any other legal documents. To the extent requested by a client,
Registrant may recommend the services of other professionals for certain non-investment
implementation purpose (i.e. attorneys, accountants, insurance agents, etc.), including
representatives of Registrant as licensed insurance agents. The client is under no obligation to
engage the services of any such recommended professional. The client retains absolute
discretion over all such implementation decisions and is free to accept or reject any
recommendation from Registrant and/or its representatives. Please Note: If the client engages
any recommended unaffiliated professional, and a dispute arises thereafter relative to such
engagement, the client agrees to seek recourse exclusively from and against the engaged
professional. Please Also Note-Conflict of Interest: The recommendation by Registrant’s
representative that a client purchase an insurance commission product through Registrant’s
representative in his separate and individual capacity as an insurance agent presents a conflict
of interest, as the receipt of commissions or fees to be received by an affiliate provides an
incentive to recommend products and/or services based on commissions to be received, rather
than on a particular client’s need. No client is under any obligation to purchase insurance
commission products through such a representative. Clients are reminded that they may
purchase insurance products recommended by Registrant through other non-affiliated
providers. Registrant’s Chief Compliance Officer, Rachel Housel, remains available to
address any questions that a client or prospective client may have regarding the above
conflict of interest.
IRA Rollover Considerations
As part of our financial planning and advisory services, we may provide you with
recommendations and advice concerning your employer retirement plan or other qualified
retirement account. When appropriate, we may recommend that you withdraw the assets from
your employer’s retirement plan or other qualified retirement account and roll the assets over
to an individual retirement account (“IRA”) to be managed by our firm. If you elect to roll the
assets to an IRA under our management, we will charge you an asset-based fee as described
in Item 5. This practice presents a conflict of interest because our Advisory Representative
has an incentive to recommend a rollover to you for the purpose of generating fee-based
compensation rather than solely based on your needs. You are under no obligation,
contractually or otherwise, to complete the rollover. Furthermore, if you do complete the
rollover, you are under no obligation to have your IRA assets managed under our program.
You have the right to decide whether to complete the rollover and the right to consult with
other financial professionals.
Some employers permit former employees to keep their retirement assets in their company
plan. Also, current employees can sometimes move assets out of their company plan before
they retire or change jobs. In determining whether to complete the rollover to an IRA, and to
the extent the following options are available, you should consider the costs and benefits of
each.
The Registrant’s Chief Compliance Officer, Rachel Housel, remains available
to address any questions that a client or prospective client may have
regarding the conflict of interest presented by such rollover recommendation.
An employee will typically have four options:
1. Leave the funds in your employer’s (former employer’s) plan.
2. Roll over the funds to a new employer’s retirement plan.
3. Cash out and take a taxable distribution from the plan.
4. Roll the funds into an IRA rollover account.
Each of these options has advantages and disadvantages. Before making a change, we
encourage you to speak with your financial advisor, CPA and/or tax attorney.
Before rolling over your retirement funds to an IRA for us to manage, carefully consider the
following. NOTE: This list is not exhaustive.
1. Determine whether the investment options in your employer’s retirement plan
address your needs or whether other types of investments are needed.
a.Employer retirement plans generally have a more limited investment menu than
IRAs.
b. Employer retirement plans may have unique investment options not available to the
public, such as employer securities or previously closed funds.
2. Your current plan may have lower fees than our fee and/or the Third-Party Manager’s
fee combined.
a. If you are interested in investing only in mutual funds, you should understand the
cost structure of the share classes available in your employer’s retirement plan and
how the costs of those share classes compare with those available in an IRA.
3. You should understand the various products and services available through an IRA
provider and their costs.
4. It is likely you will not be charged a management fee and will not receive ongoing
asset management services unless you elect to have such services. If your plan offers
management services, the fee associated with the service may be more or less than
our fee.
5. Our management strategy may have higher risk than the options provided to you in
your plan.
6. Your current plan may offer financial advice, guidance, management and/or portfolio
options at no additional cost.
7. If you keep your assets titled in a 401(k) or retirement account, you could potentially
delay your required minimum distribution beyond age 73.
8. Your 401(k) may offer more liability protection than a rollover IRA; each state
varies. Generally, Federal law protects assets in qualified plans from creditors. Since
2005, IRA assets have been generally protected from creditors in bankruptcies;
however, there can be exceptions. Consult an attorney if you are concerned about
protecting your retirement plan assets from creditors.
9. You may be able to take out a loan on your 401(k), but not from an IRA.
10. IRA assets can be accessed any time; however, distributions are subject to ordinary
income tax and may also be subject to a 10% early distribution penalty unless they
qualify for an exception such as disability, higher education expenses or a home
purchase.
11. If you own company stock in your plan, you may be able to liquidate those shares at
a lower capital gains tax rate.
12. Your plan may allow you to hire us or another firm as the manager and keep the
assets titled in the plan name.
It is important that you understand your options, their features, and their differences, and
decide whether a rollover is best for you. If you have questions, contact us at our main number
listed on the cover page of this brochure.
In addition to complying with applicable SEC rules, MLP3 is subject to certain rules and
regulations adopted by the U.S. Department of Labor when we provide nondiscretionary
investment advice to retirement plan participants and IRA owners. When these DOL rules
apply, our advisors and MLP3 are “fiduciaries,” for purposes of the Employee Retirement
Income Security Act of 1974 (“ERISA”), as amended, and the Internal Revenue Code of 1986
(“the Code”), as amended. Therefore, MLP3 and our advisors may not receive payments that
create conflicts of interest when providing fiduciary investment advice to plan sponsors, plan
participants, and IRA owners, unless we comply with a prohibited transaction exemption
(“PTE”). Beginning December 20, 2021, MLP3 and our advisors will comply with ERISA
and the Code by using PTE 2020-02. As fiduciaries under ERISA and the Code, we render
advice that is in plan participants’ and IRA customers’ best interest. MLP3’s and our advisors’
status as an ERISA/Code fiduciary is limited to ERISA/Code covered nondiscretionary advice
and recommendations regarding rolling over a retirement account and does not extend to all
situations.
Individualized Services and Client-Imposed Restrictions
The investment advisory services provided by our advisors depend largely on the personal
information the client provides to the advisor. In order for our advisors to provide appropriate
investment advice to, or, in the case of discretionary accounts, make tailored investment
decisions for, the client, it is very important that clients provide accurate and complete
responses to their advisor’s questions about their financial condition, needs, goals, and
objectives and notify the advisor of any reasonable restrictions they wish to apply to the
securities or types of securities to be bought, sold, or held in their managed account. It is also
important that clients promptly inform their advisor of any changes in their financial
condition, investment objectives, personal circumstances, or reasonable investment
restrictions pertaining to the management of their account, if any, that may affect their overall
investment goals and strategies or the investment advice provided or investment decisions
made by their advisor.
In general, the client’s advisor is responsible for delivering investment advisory services to
clients, and clients generally deal with matters relating to their accounts by contacting their
advisor directly. Of course, clients may contact MLP3 directly with questions about the
advisory services offered by our firm.
Use of Mutual and Exchange Traded Funds
Most mutual funds and exchange-traded funds are available directly to the public. Thus,
a prospective client can obtain many of the funds that may be utilized by Registrant
independent of engaging Registrant as an investment advisor. However, if a prospective
client determines to do so, he/she will not receive the Registrant’s initial and ongoing
investment advisory services. Please Note: In addition to Registrant’s investment
advisory fee described below, and transaction and/or custodial fees discussed below,
clients will also incur, relative to all mutual fund and exchange traded fund purchases,
charges imposed at the fund level (e.g. management fees and other fund expenses).
American Funds Model Portfolios
Registrant also offers an American Funds Model Portfolio program in connection with the
Capital Group/ American Funds, an unaffiliated SEC registered investment adviser. This
service is a turnkey mutual fund wrap program offered in association with
Commonwealth’s Preferred Portfolio Services Direct Mutual Fund platform. In
connection with this program, the Registrant assists participating clients by matching their
risk tolerance, time horizon and investment objectives with the appropriate American
Funds model portfolios. Model portfolios are then managed by Capital Group/American
Funds in conjunction with Commonwealth investment management teams. Capital Group/
American Funds and Commonwealth also provide ongoing monitoring and portfolio
rebalancing services. Additional information regarding fees is set forth at Item 5.A below.
Portfolio Activity
Registrant has a fiduciary duty to provide services consistent with the client’s best interest.
As part of its investment advisory services, Registrant will review client portfolios on an
ongoing basis to determine if any changes are necessary based upon various factors,
including, but not limited to, investment performance, market conditions, fund manager
tenure, style drift, account additions/withdrawals, and/or a change in the client’s
investment objective. Based upon these factors, there may be extended periods of time
when Registrant determines that changes to a client’s portfolio are neither necessary nor
prudent. Of course, as indicated below, there can be no assurance that investment
decisions made by Registrant will be profitable or equal any specific performance level(s).
Clients nonetheless remain subject to the fees described in Item 5 below during periods
of account inactivity.
Please Note: Cash Positions. Registrant continues to treat cash as an asset class. As such,
unless determined to the contrary by Registrant, all cash positions (money markets, etc.)
shall continue to be included as part of assets under management for purposes of
calculating Registrant’s advisory fee. At any specific point in time, depending upon
perceived or anticipated market conditions/events (there being no guarantee that such
anticipated market conditions/events will occur), Registrant may maintain cash positions
for defensive purposes. In addition, while assets are maintained in cash, such amounts
could miss market advances. Depending upon current yields, at any point in time,
Registrant’s advisory fee could exceed the interest paid by the client’s money market fund.
ANY QUESTIONS: The Registrant’s Chief Compliance Officer, Rachel Housel,
remains available to address any questions that a client or prospective may have
regarding the above fee billing practice.
Cash Sweep Accounts
Account custodians generally require that cash proceeds from account transactions or cash
deposits be swept into and/or initially maintained in the custodian’s sweep account. The
yield on the sweep account is generally lower than those available in money market
accounts. To help mitigate this issue, Registrant shall generally purchase a higher yielding
money market fund available on the custodian’s platform with cash proceeds or deposits,
unless Registrant reasonably anticipates that it will utilize the cash proceeds during the
subsequent 30-day period to purchase additional investments for the client’s account.
Exceptions and/or modifications can and will occur with respect to all or a portion of the
cash balances for various reasons, including, but not limited to, the amount of dispersion
between the sweep account and a money market fund, an indication from the client of an
imminent need for such cash, or the client has a demonstrated history of writing checks
from the account
Cybersecurity Risk
The information technology systems and networks that Registrant and its third-party
service providers use to provide services to Registrant’s clients employ various controls,
which are designed to prevent cybersecurity incidents stemming from intentional or
unintentional actions that could cause significant interruptions in Registrant’s operations
and result in the unauthorized acquisition or use of clients’ confidential or non-public
personal information. Clients and Registrant are nonetheless subject to the risk of
cybersecurity incidents that could ultimately cause them to incur losses, including for
example: financial losses, cost and reputational damage to respond to regulatory
obligations, other costs associated with corrective measures, and loss from damage or
interruption to systems. Although Registrant has established its systems to reduce the risk
of cybersecurity incidents from coming to fruition, there is no guarantee that these efforts
will always be successful, especially considering that Registrant does not directly control
the cybersecurity measures and policies employed by third-party service providers.
Clients could incur similar adverse consequences resulting from cybersecurity incidents
that more directly affect issuers of securities in which those clients invest, broker-dealers,
qualified custodians, governmental and other regulatory authorities, exchange and other
financial market operators, or other financial institutions.
Custodian Charges-Additional Fees
As discussed below at Item 12, when requested to recommend a broker-dealer/custodian
for client accounts, Registrant generally recommends that Commonwealth and National
Financial Services, LLC (”NFS”) serve as the broker-dealer and custodian for client
investment management assets. Broker-dealers such as Commonwealth charge transaction
fees for effecting securities transactions, including commissions for individual equities,
bonds, ETFs and mutual funds In addition to Registrant’s investment advisory fee
referenced in Item 5 below, the client will also incur transaction fees to purchase securities
for the client’s account (i.e., mutual funds, exchange traded funds, and individual equity
and fixed income securities purchased by Registrant). While certain custodians, including
NFS, generally (with the potential exception for large orders) do not currently charge fees
on individual equity transactions (including ETFs), others do. Please Note: there can be
no assurance that NFS will not change their transaction fee pricing in the future. Please
Also Note: NFS may also assess fees to clients who elect to receive trade confirmations
and account statements by regular mail rather than electronically. When evaluating the
use of, or recommending, Commonwealth and or National Financial Services, LLC as a
broker-dealer/custodian, the Registrant considers several factors, including the quality of
services provided and order execution capability.
Service Agreement
The Registrant has entered into a Service Agreement with Commonwealth. As part of this
Service Agreement, Commonwealth provides services which may include, but are not
limited to:
• opening, maintenance and general administration of investment advisory
client accounts
• access to a trading platform through which Registrant may purchase and sell
securities for client accounts
• providing custodial reports for client accounts no less frequently than
quarterly
•
access to Commonwealth’s reporting system, which among other items,
allows the Registrant to aggregate and report on a client’s non-managed
assets
This service provided by Commonwealth also includes periodic comprehensive reporting
services, which can incorporate all of the client’s investment assets, including those
investment assets that are not part of the assets managed by Registrant (the “Excluded
Assets”). The client and/or his/her/its other advisors that maintain trading authority,
and not Registrant, shall be exclusively responsible for the investment performance
of the Excluded Assets. Unless otherwise specifically agreed to, in writing, Registrant’s
service relative to the Excluded Assets is limited to reporting only. The sole exception to
the above shall be if Registrant is specifically engaged to monitor and/or allocate the assets
within the client’s 401(k) account maintained away at the custodian directed by the
client’s employer. As such, except with respect to the client’s 401(k) account (if
applicable), Registrant does not maintain any trading authority for the Excluded Assets.
Rather, the client and/or the client’s designated other investment professional(s) maintain
supervision, monitoring and trading authority for the Excluded Assets. If Registrant is
asked to make a recommendation as to any Excluded Assets, the client is under absolutely
no obligation to accept the recommendation, and Registrant shall not be responsible for
any implementation error (timing, trading, etc.) relative to the Excluded Assets. In the
event the client desires that Registrant provide investment management services for the
Excluded Assets, the client may engage Registrant to do so pursuant to the terms and
conditions of the Investment Advisory Agreement between Registrant and the client.
Investment Risk. Different types of investments involve varying degrees of risk, and it
should not be assumed that future performance of any specific investment or investment
strategy (including the investments and/or investment strategies recommended or
undertaken by Registrant) will be profitable or equal any specific performance level(s).
Client Obligations. In performing its services, Registrant shall not be required to verify
any information received from the client or from the client’s other professionals and is
expressly authorized to rely thereon. Moreover, each client is advised that it remains their
responsibility to promptly notify the Registrant if there is ever any change in their
financial situation or investment objectives for the purpose of reviewing, evaluating, or
revising Registrant’s previous recommendations and/or services.
Disclosure Statement. A copy of the Registrant’s written Brochure as set forth on Part
2A of Form ADV, along with our Form CRS, shall be provided to each client prior to, or
contemporaneously with, the execution of the Investment Advisory Agreement or
Financial Planning and Consulting Agreement.
The Registrant shall provide investment advisory services specific to the needs of each
client. Prior to providing investment advisory services, an investment adviser
representative will ascertain each client’s investment objective(s). Thereafter, the
Registrant shall allocate and/or recommend that the client allocate investment assets
consistent with the designated investment objective(s). The client may, at any time,
impose reasonable restrictions, in writing, on the Registrant’s services.
Assets Under Management.
As of December 31, 2023, the Registrant had
$214,427,429 in assets under management
on a discretionary basis.