Description of Business
D.H. Hill Advisors, Inc. (“D.H. Hill”) is a Texas state registered investment advisor firm. D.H.
Hill is a corporation that was established in the state of Texas in 1998, founded by Dan Hill with
the principal office located in Kingwood, Texas.
D.H. Hill independent representatives are located in geographically separated offices and operate
through various business names or other corporate structures held out to the public for marketing
purposes, for which wealth and investment management services are provided through D.H. Hill.
D.H. Hill does not have any ownership interest in the representative’s trade name or other
corporate structure.
General Description of the D.H. Hill Wrap Program
The D.H. Hill Connect and Select Wrap Programs, (Program) are an investment advisory
Program sponsored by D.H. Hill. The Program allows D.H. Hill and IAR to manage Client
accounts for a single fee that include portfolio management services and brokerage costs.
Program uses a variety of asset classes and investment vehicles that typically include mutual
funds, exchange traded funds (“ETFs”), equity securities, fixed income securities, other related
securities, and sub-managers. Client accounts are generally invested in strategies, with similar
accounts invested in the same securities. Accounts are also managed at a custom level, with
security selection varying from one Client to another. D.H. Hill IARs work with Clients to
understand the Client’s risk tolerance, investment objectives, and investment attribute
preferences and to determine an appropriate asset portfolio construction. D.H. Hill IARs
determine an appropriate portfolio for each of their clients.
D.H. Hill Connect Program (“Connect”) – Charles Schwab/ Fidelity
D.H. Hill sponsors and oversees the IAR as portfolio manager for Connect, where D.H. Hill
offers clients the opportunity to hire IAR to manage designated accounts on a discretionary
basis including constructing portfolio models based on client stated risk and objectives.
Investment offerings within Connect can include, but are not limited to, stocks, ETFs, mutual
funds, individual bonds, CDs, and derivatives.
D.H. Hill Select Wrap Program (“Select”) – Charles Schwab
D.H. Hill sponsors and acts as the overlay portfolio manager for Select, where D.H. Hill
offers clients the opportunity to hire D.H. Hill Investment Committee to manage designated
accounts on a discretionary basis including constructing portfolio models based on client
stated risk and objectives. Investment offerings within Select are limited to ETFs, mutual
funds, and sub-managers. IARs can recommend one or more of the Select portfolio models.
The IAR has no trading authorization.
Financial Professional
A Financial Professional is the person(s) who introduces the Client to this Program and/or the
person(s) providing investment advisory services to the Client in this Program. Financial
Professional may include: Investment Advisor Representative (“IAR”) of D.H. Hill; an IAR not
affiliated with D.H. Hill; or a solicitor of D.H. Hill. To select the appropriate investment strategy
for the client when the Financial Professional is a Solicitor of D.H. Hill: D.H. Hill will assess
Clients’ personal situation, risk profile and/or other methods to determine the best investment
model to meet investment objectives. When Clients Financial Professional is an Investment
Advisor Representative of D.H. Hill or an IAR not affiliated with D.H. Hill: To select the
appropriate investment strategy for client, the IAR will assess clients’ personal situation, risk
profile and/or other methods to determine the best
investment model to meet investment objectives.
Cost of Services
Prior to engaging D.H. Hill Advisory Services, clients are required to enter into one or more
agreements with D.H. Hill and the IAR setting terms and conditions of the engagement
including, but not limited to: describing the scope of services to be provided, termination,
confidentiality, disclosures, and client fees (collectively the “Client Agreement”).
The annual cost is negotiated with each Client and is customized depending on several factors as
discussed in the “Negotiated Costs” section below. The following Cost of Services schedules
provide information about how D.H. Hill charges for its Wrap Program.
D.H. HILL CONNECT COST OF SERVICES SCHEDULE (Annual)
Client Assets Under
Management
Financial
Professional Fee
Connect Program
Fee
Asset Based Pricing Fee
$0 - $2,000,000 1.25% 0.25% 0.10% - 0.25%
$2,000,000 - $5,000,000 1.00% 0.22% 0.10% - 0.25%
$5,000,000 - $10,000,000 0.85% 0.18% 0.10% - 0.25%
Greater than $10,000,000 Negotiable 0.15% minimum 0.10% - 0.25%
D.H. HILL SELECT COST OF SERVICES SCHEDULE (Annual)
Client Assets Under
Management
Financial
Professional Fee
Select Program Fee Asset Based Pricing Fee
$0 - $2,000,000 1.00% 0.55% 0.10%
$2,000,000 - $5,000,000 0.85% 0.50% 0.10%
$5,000,000 - $10,000,000 0.75% 0.45% 0.10%
Greater than $10,000,000 Negotiable 0.40% minimum 0.10%
Certain custodians charge a minimum annual Asset Based Pricing Fee (“ABP”) which could
make the annual ABP fee higher than the stated percentage of assets under management fee.
The D.H. Hill Select Cost of Services Schedule does not typically include costs charged by
certain managers, Sub-Managers in the D.H. Hill Select Program. These annual costs range from
0% to1% of the Client’s assets under management.
The Client’s total Cost of Services is a flat rate and not blended. The Total Fee charged as a
percentage of assets under management to a Client Account will not exceed 3.00% of the value
of the portfolio annually.
Negotiated Costs
The amount and method for calculating D.H. Hill Investment Management costs as referenced in
the Cost of Services schedule are negotiated with each Client and confirmed in the Client
Agreement, or if the schedule has changed since the initial Client Agreement the Client signed,
then through supporting documentation. While the Investment Management costs are typically
assessed as a percentage of the Client’s assets under D.H. Hill’s management, it may also be
assessed as a flat dollar amount. The Client is subject to the fee rate that is agreed to in their
Client Agreement, which may be higher or lower than the fee schedule noted above.
D.H. Hill considers a number of variables when analyzing the specific services to be provided to
the Client and when determining the appropriate cost for those services. Factors that determine
the Cost of Services include, but are not limited to:
the services expected to be performed
the Client’s wealth counseling and investment needs
the amount of investable assets
the Client’s net worth
the amount of time anticipated to be spent servicing the Client
local regional office precedence based on historical costs charged to other similar Clients
The Client’s IAR will determine the Cost of Service after carefully balancing the consultative
and the implemented portions of the Client relationship. As a result, similar Clients may be
charged different costs for similar services and the actual Cost of Services may be higher than
the rates noted in the above schedule.
The Client’s IAR reserves the right to determine whether Client accounts are "related" for
purposes of aggregation. A determination of the related accounts is part of the Cost of Services
negotiation between the Client and IAR. The Client should be aware that there may be certain
restrictions on the aggregation of investments for ERISA, trusts, and IRA Client accounts.
In those instances where the majority of a Client’s account is invested in fixed income securities,
the Client’s IAR reserves the right to offer a reduced Cost of Services.
For accounts where D.H. Hill is the investment adviser exercising discretion, the Cost of
Services schedule is typically applicable to all assets under management, including cash and cash
equivalents. The actual Cost of Services negotiated with the Client may determine that cash
and/or cash equivalents are not to be included in the total Cost of Services. When cash and cash
equivalents are not included, this creates a conflict of interest as D.H. Hill earns more fees when
those assets are invested in securities it acquires. This conflict can be addressed by the Client and
IAR pre-determining the amount of cash that will not be included with billing, or a pre-
determination by the Client and IAR that a specific cash amount will be not be subject to D.H.
Hill’s advisory services, or by billing on all assets under management.
Investment Management Costs
D.H. Hill charges its Clients an annual management Cost of Services based on an agreed upon
percentage of the Client’s assets under management. These investment management costs are
payable monthly or quarterly. The method for billing these costs may vary based custodian, local
regional offices, or IARs, historical method and is agreed upon under the terms of the Client
Agreement or supporting documentation if there were changes made after the Client signed the
Client Agreement.
D.H. Hill typically bills its investment management
costs in advanced based on the value of the
assets in the Client’s account at the end of the previous month or quarter (based on service
provider selected). In certain situations, as agreed upon in the agreement, D.H. Hill may bill
costs in arrears, based on average daily balance of the account during the prior month or quarter,
rather than in advance, or other methods.
For new accounts and for new assets added after the start of a month or quarter, accounts will
either be billed when the assets are available to be managed by D.H. Hill, or in arrears, after the
end of the month or quarter account was funded (based on service provider selected).
D.H. Hill’s annual investment management Cost of Services includes costs for the following
services: review, selection, monitoring, and replacement services for a variety of securities,
including but not limited to exchange traded funds, exchange traded notes, mutual funds,
individual securities, bonds and sub-managers, and related services.
D.H. Hill relies on a number of different resources to price securities held in Client accounts,
including multiple portfolio accounting systems (primarily Orion and Trust Company of
America), pricing services and custodians. As a result, Clients may receive different statements
displaying a different valuation of the same security, based on the source of the data.
Additionally, different Clients with the same security may pay different costs depending on the
valuation source of the securities in their specific account.
There are certain costs that Clients may incur, which are not included as part of the annual Cost
of Services for Investment Management services charged by D.H. Hill. D.H. Hill may have an
incentive to recommend its own strategies that have a manager cost associated rather than a non-
affiliated manager, or into a strategy without additional costs, since it gets paid more when
recommending its own strategies that have a supplemental cost. The amount that D.H. Hill is
paid when Clients invest in its strategies is based on an estimate of costs, which include third
party research, third-party manager expense, reporting fees, and strategy implementation and
trading costs. The supplemental cost charged for investing in certain investment strategies does
not include custody fees, as described in the next paragraph.
In addition to, and separate from, D.H. Hill’s Cost of Services and supplemental investment
manager costs, Clients may be charged the following costs from their account custodian: national
securities exchange costs, charges for transactions with respect to assets not executed through the
custodian; short term redemption costs; costs charged to shareholders of mutual funds and
exchange traded funds by the fund manager; odd-lot differentials; American Depository Receipt
costs; costs associated with exchanging currencies; or other costs required by law.
Administrative costs for retirement accounts and any platform (technology) costs are paid
directly by the Client, unless other arrangements have been made. Additionally, the Client will
be charged for non-standard service costs incurred as a result of any special requests made by the
Client, such as overnight courier or wiring costs.
Generally, D.H. Hill does not have a minimum account size. In the case of sub-managed assets, a
sub-manager may impose their own minimum account requirements. Any exceptions to account
minimums are considered accepted once the management of Client assets begins. Upon giving
notice to D.H. Hill, or by contacting their account custodian directly, Clients may make additions
to, or withdrawals from their investment management accounts. Sub-Manager reserves the right
to terminate any account falling below its stated account minimum. Account minimums are
imposed for various reasons, including, but not limited to the diminishing impact on the smaller
allocations within a broadly diversified portfolio, the impact on a smaller portfolios’
performance from transaction costs, the impact of a smaller portfolios’ transaction costs on the
total expense to manage the portfolio, limitations on securities that may be purchased for smaller
dollar amounts, amongst other reasons.
D.H. Hill’s responsibility for advising Client accounts begins at the earlier of the “Effective
Date” agreed to in the Client Agreement, or the date when the Client’s assets (cash and/or
securities) have been credited to the Client’s account at the custodian and sub-custodian, if
applicable. However, in no event shall costs begin accruing prior to the date the Client signs the
Client Agreement.
Where provided in its Client Agreements, and upon written notice, D.H. Hill reserves the right to
amend its Cost of Services schedules at any time.
Clients should be aware that the costs charged by D.H. Hill may be higher or lower than those
charged by others in the industry and that it may be possible to obtain the same or similar
services from other advisers at lower or higher rates.
Clients should also be aware that Investment Professionals (“IPs” or Solicitors) not affiliated
with D.H. Hill recommending these advisory services may receive compensation as a result of
Clients’ contracting with D.H. Hill for such services. The IP recommending services may,
therefore, have a financial incentive to recommend that a Client use D.H. Hill’s services over the
services offered by other investment advisers.
Investment Management Fee Payment
For payment to D.H. Hill for its investment management services, D.H. Hill service providers
send the custodian an invoice for monthly or quarterly cost debits. Clients will receive a monthly
or quarterly statement from the custodian showing the amount of management costs that have
been debited from their account. By signing the D.H. Hill Client Agreement, Clients are
authorizing the debit of both the initial prorate fee and on-going monthly or quarterly costs.
Mutual Fund and ETF Cost
If mutual funds are selected for inclusion in Client accounts D.H. Hill manages, those mutual
funds are either no-load funds or load-waived mutual funds. At times, mutual fund with a sales
load may be transferred to D.H. Hill as part of new assets included under D.H. Hill’s
management. When this is the case, it is D.H. Hill’s position that the mutual funds should be sold
as soon as practicable.
All mutual funds and ETFs pay management costs to their investment advisers, and certain funds
and money-market accounts have other types of costs or charges, including 12b-1, administrative
or shareholder servicing costs, early redemption, bank servicing or certain other costs, which
may be deducted from the net asset value of the funds that may be held in Client accounts on a
continuing basis. These costs are routinely charged to all fund or security shareholders or owners
and are separate from and in addition to D.H. Hill’s management Cost of Services.
Other Costs
For custodial services, D.H. Hill utilizes the services of a number of firms to meet its Clients’
needs. Custodial transaction costs (for transactions executed through the custodian’s broker-
dealer) may be paid by the Client or by D.H. Hill as negotiated and stated in the D.H. Hill Client
Agreement. Custodians charge Clients other fees, beyond transaction costs. The additional costs
charged to Clients by the custodian may include, but are not limited to, custodial and clearing
agent services for Client accounts, maintenance of portfolio accounting systems, preparation and
mailing of Client statements, account processing, systematic withdrawals, redemptions,
retirement account custodial services (except for the retirement account termination cost),
maintenance of a Client inquiry system, as well as execution of securities transactions in the
Client’s account. Additionally, a transaction cost is charged by the Securities and Exchange
Commission (SEC) to sellers of securities that are traded on stock exchanges and subsequently
assessed to Clients. These costs are from Section 31(b) of the Securities Exchange Act of 1934
and are charged to recover the costs associated with the government’s supervision and regulation
of the securities markets and securities professionals. Refer to ITEM 12: Brokerage Practices.
Separate from costs assessed by the custodian, some Clients of D.H. Hill receive reports that
display additional detailed performance information on their account(s). Such reports are
provided to offer Clients additional insight about the way their accounts are performing and are
provided in addition to the reports provided Clients through their account custodian.
Notwithstanding, the performance information provided through reports, Clients should rely on
the custodian statements for the most accurate account information. To produce these
performance reports, D.H. Hill may charge Clients. The cost covers the reporting system expense
and D.H. Hill associated administration of the system. The payment of this Reporting Cost may
be made paid by D.H. Hill or by the Client, as negotiated.
Certain states require service providers to pay a Gross Receipt Tax (GRT) for services provided
to residents of the state, including New Mexico. When D.H. Hill is required to pay a GRT, it
directly passes through such costs to Clients for whom it applies.