A. The Company
Pathworks Financial, Inc. (“Pathworks” or the “firm”), a Michigan corporation founded in
2005, has been registered with U.S. Securities and Exchange Commission (“SEC”) since
March, 2021. Pathworks was registered with the State of Michigan from January 2006 to
March, 2021. Prior to January 2023, the firm was known as Scott Smith Financial, Inc.
The principal owner of Pathworks is D. Scott Smith.
B. Advisory Services
Pathworks offers the following services to individuals, including high net worth individuals,
pension and profit sharing plans, trusts, small businesses and estates:
Asset Management Program
The Pathworks Asset Management Program is a wrap fee asset allocation program
sponsored by Pathworks (the “SAM Wrap Program”). The client retains Pathworks and an
Pathworks investment adviser representative (“Adviser Representative”) for the purpose of
opening an investment advisory account and participating in the SAM Wrap Program.
Pathworks will invest participating client assets in one or more diversified asset allocation
models primarily consisting of open-end investment companies (commonly referred to as
mutual funds) and closed-end investment companies (commonly referred to as exchange-
traded funds or ETFs in a broad range of asset classes and market sectors, including
domestic stocks, international stocks, global bonds, and alternative investments in exchange
for an all-inclusive asset-based wrap fee (“Wrap Fee”). When market circumstances warrant,
Pathworks may also invest in other types of securities.
Neither Pathworks nor any of its affiliates serve as investment adviser to any of the
investment company products included in portfolio assets. SAM Wrap Program portfolios
range from conservative to aggressive. The client’s Adviser Representative assists the client
in selecting the asset allocation model that best meets the client’s needs. Clients’ grant
Pathworks limited discretionary authority in the management of their SAM Wrap Program
portfolios and individual portfolios may or may not represent the overall objectives of the
client’s total investment assets.
The Adviser Representative will consider the client’s financial situation, goals and
investment objectives, risk tolerance, time horizon, liquidity needs, and other relevant
factors, as described by the client in selecting the client’s asset allocation model. Pathworks
does not provide tax or legal advice. The client is instructed to seek advice from a tax or legal
adviser before making an investment decision. The client should inform his or her Adviser
Representative if changes occur in investment objectives or financial situation.
All clients participating in SAM Wrap Program are provided with and urged to review the
Pathworks Wrap Fee Program Brochure.
Investment Management Services
Pathworks, through its Adviser Representatives, offers investment management services
based on the individual objectives of each specific client portfolio. Pathworks offers clients
ongoing investment management services determined through individual investment goals,
time horizons, objectives and risk tolerance. Investment strategies, investment selection,
assets allocation, portfolio monitoring and the overall investment program will be based on
the above factors. Investment management services include, among other things, basic
financial planning consisting of giving advice regarding asset allocation and the selection of
investments. Pathworks provides investment management on a discretionary basis only.
Clients will be required to give Pathworks authority to manage the client's assets in
accordance with what Pathworks deems to be in the client's best interest based on the
client’s investment objectives and guidelines. Clients will retain individual ownership of all
securities in their account.
As part of this service, each client portfolio is tailored to their particular investment needs
and circumstances. This includes allocating assets based on the client’s investment needs
and a risk strategy (from conservative to aggressive), which is selected in conjunction with
the client and incorporated into the account agreement. The available risk strategies
correlate to asset allocation models developed by Pathworks based on target allocations for
various asset classes and sub-classes. Pathworks selects investments for the client’s account
that are consistent with the selected risk strategy and that pass a series of quantitative and
qualitative filters. Depending on the specific engagement, the types of securities that the a
client’s particular Adviser Representative may purchase and sell including, but are not
limited to, mutual funds, ETFs, equities, and fixed income securities.
Financial Planning Services
If a client desires to obtain financial planning apart from the basic planning services
provided as part of portfolio management services, Pathworks also provides financial
planning services as a stand-alone service. Clients will receive a written financial plan,
providing the client with a detailed outline designed to achieve their stated financial goals
and objectives.
In general the plan will address any or all of the following:
• Personal: Family records, budgeting, personal liability, estate information and
financial goals.
• Tax and Cash Flow: Income tax spending analysis and planning for past and future
years.
• Death and Disability: Cash needs at death, income needs of surviving dependents,
and estate planning.
• Retirement: Strategies and investment plans to help client achieve their retirement
goals.
• Investments: Analysis of investment alternatives and their effect on a client’s
portfolio.
Information on clients will be gathered by in-depth personal interviews and a review of
personal financial information. Gathering data concerning current financial status, future
requirements, risk appetite and goals is essential. Based upon this thorough review, a
written plan is prepared for the client and it is recommended that the client review this plan
with tax accountants, attorneys and other professional service providers.
Should a client choose to implement the financial planning recommendations made by
Pathworks, Pathworks may recommend its own services or that of other professionals (i.e.,
attorney, accountant, insurance agent, and/or stockbroker). Clients are advised that a
conflict of interest exists if Pathworks recommends its own services. The client is under no
obligation to act upon any of the recommendations made by Pathworks under a financial
planning engagement and/or engage the services of any such recommended professional,
including Pathworks or its Adviser Representatives. The client retains absolute discretion
over all such implementation decisions and is free to accept or reject any recommendation
made by Pathworks or its Adviser Representatives. Pathworks shall cooperate with any
attorney, accountant, broker or other adviser chosen by the client with regard to
implementation of any such recommendations.
Retirement Plan Services
Pathworks-RP provides both fiduciary and non-fiduciary services as a consultant to plan
sponsors, named fiduciaries, plan trustees, and plan committees relative to employee benefit
plans, including, but not limited to, 401(k) plans, 403(B) plans, defined benefit plans, profit-
sharing plans, money purchase pension plans and similar plans offered by sponsoring
entities to their employees (the “Plan”). In providing services to a plan and/or its
participants, Pathworks acts as a non-discretionary fiduciary of the Plan as defined in
Section 3(21) under ERISA.
As part of these services, Pathworks will typically advise the plan fiduciaries on matters
related to the Plan. These consulting services, some of which are discussed below, may be
provided separately or in combination with one another, and may involve the coordination of
multiple vendors and/or third party advisors to the Plan, depending on the needs of the
sponsor. The specific details of any engagement to provide consulting services are agreed
upon in writing prior to commencement of the engagement and are subject to the terms of
the written investment consulting and advisory agreement. Pathworks may consult on a
variety of Plan matters, including, but not limited to:
• Plan governance issues, policies and procedures, board resolutions and the
development or review of an Investment Policy Statement.
• Plan service provider reviews, evaluations and searches.
• Investment options: searches, recommendations, monitoring and review
• Employee education by providing general information on the funds available under
the plan and other general investment information aimed at helping participants
make better choices for themselves from among the alternatives available under the
plan.
• Fee benchmarking;
• Fiduciary file development and record keeping.
Pathworks may also provide other information aimed at assisting Plan sponsors or trustees
in fulfilling their obligations to the plan. For example: information on pending or recent
legislative changes that may impact the Plan, Plan participants and beneficiaries.
Strategic Cash Management
The Strategic Cash Management service is designed to provide businesses and individuals
with a greater return on their cash reserves through an actively managed strategy that uses,
either independently or in combination, treasuries, corporate bonds, corporate notes,
certificates of deposit and money market funds.
C. Client Tailored Services and Client Imposed Restrictions
Pathworks’ investment management services are tailored to meet the specific needs of each
client. In order to provide appropriately individualized services, Pathworks’ Adviser
Representatives will work with the client to obtain information regarding the client’s
financial circumstances, investment objectives, overall financial condition, income and tax
status, personal and business assets, risk profile and other information regarding the client’s
financial and investment needs.
At least annually, an Adviser Representative will review with clients their financial
circumstances, investment objectives and risk profile. In order for Pathworks to provide
effective investment advisory services, it is critical that clients provide accurate and complete
information to Pathworks and inform Pathworks anytime such information needs to be
updated or anytime there is a change in their financial circumstances, investment objectives
and/or risk profile.
Generally, clients are permitted to impose reasonable restrictions on investing in certain
securities or types of securities in their advisory accounts, provided, however, that some
restrictions may not be accommodated when utilizing Exchange Traded Funds, mutual funds
or with respect to certain third-party investment managers. In addition, a restriction request
may not be honored if it is fundamentally inconsistent with Pathworks’ investment
philosophy, runs counter to the client’s stated investment objectives, or would prevent
Pathworks from properly servicing client accounts.
D. Wrap Fee Programs
As detailed in the section above and in Pathworks’ Wrap Fee Program Brochure, Pathworks
offers the SAM Wrap Program. Clients in the SAM Wrap Program pay a single annualized
fee, based upon a percentage of the market value of all SAM Wrap Program assets, for
participation in the SAM Wrap Program. The SAM Wrap Program may cost clients more or
less than purchasing such services separately. The wrap fee includes the Pathworks
management fee, trading costs, and annual custodial fees if any. Transaction fees relating to
the execution of securities transactions within the client’s account are paid by Pathworks.
Clients that participate in the SAM Wrap Program will be given the Pathworks Wrap Fee
Brochure as part of their initial meeting with Pathworks if the Adviser Representative
determines that the SAM Wrap Program is the best fit for their needs.
E. Assets Under Management
As of December 31, 2022, Pathworks has the following assets under management:
Total Assets Under Management Discretionary Assets Non-Discretionary Assets
$155,940,090.00 $107,972,459.00 $47,967,631.00