A. Firm Information
K2 Financial Inc. (“K2 Financial” or the “Advisor”) is a registered investment advisor with the U.S. Securities and
Exchange Commission (“SEC”), which is organized as a Corporation under the laws of the State of California. K2
Financial was founded in January 2019 and is owned and operated by Allison Kapadia, Travis Bettfreund, and
Kevin Kurimoto. As of the date of this filing, Travis Bettfreund is the Chief Compliance Officer of K2 Financial. This
Disclosure Brochure provides information regarding the qualifications, business practices, and the advisory
services provided by K2 Financial.
B. Advisory Services Offered
K2 Financial offers investment advisory services to individuals, high net worth individuals, trusts, estates, and
retirement plans (each referred to as a “Client”).
The Advisor serves as a fiduciary to Clients, as defined under 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. K2 Financial’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 and Investment Management Services
K2 Financial’s investment strategies are adapatable to the needs of each Client based on a deep understanding of
the Client’s long-term goals. This is achieved through regular personal Client contact and interaction while providing
discretionary and non-discretionary investment management and related advisory services. K2 Financial works
closely with each Client to identify their investment goals and objectives as well as risk tolerance and financial
situation in order to implement an appropriate portfolio strategy. The Advisor utilizes individual Mutual Funds, ETFs,
Third Party Managers, stocks, bonds, Cash, CDs, Treasuries and options contracts to meet the needs of its Clients.
The Advisor may retain certain types of investments based on a Client’s legacy portfolio construction.
K2 Financial’s investment approach is primarily long-term focused, but, occasionally, the Advisor will 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. K2 Financial 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.
K2 Financial also offers the K2 Financial Asset Management Program (“the Program”) as part of its wealth and
investment management services. Each investment strategy consists of investments specifically selected in order
to achieve that particular strategy's investment objective. The Client's assets are invested in a manner consistent
with the investment strategy chosen; however, specific Client portfolios could deviate from the Program's
investment strategies due to a number of factors, including, among others, inception date of the account, tax
considerations, liquidity needs, and other circumstances specific to the Client.
K2 Financial evaluates and selects investments for inclusion in Client portfolios only after applying its internal due
diligence process. If appropriate for a Client, K2 Financial will generally consider redistributing investment
allocations to diversify the portfolio, recommending specific positions to increase sector or asset class weightings,
employing cash positions as a possible hedge against market movement, and/or selling positions for reasons that
include, but are not limited to, harvesting capital gains or losses, overvaluation or overweighting of the position[s] in
the portfolio, changing risk tolerance of the Client, generating cash to meet Client needs, or any risk deemed
unacceptable for the Client’s risk tolerance.
K2 Financial offers in conjunction with its investment management services, cash management services through
the use of Cash and Cash Equivalents (CDs, Treasury Bills, and Money Market Mutual Funds).
At no time will K2 Financial 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 advisory agreement. Please see Item 12 – Brokerage Practices.
Financial Planning Services
K2 Financial will typically provide a variety of financial planning and consulting services to Clients. Services are
offered in several areas of a Client’s financial situation, depending on their goals and objectives.
Generally, such financial planning services involve preparing a formal financial plan or rendering a specific financial
consultation based on the Client’s financial goals and objectives. This planning or consulting encompasses one or
more areas of need, including but not limited to, investment planning, retirement planning, personal savings,
education savings, insurance needs 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 can be made that the Client start or revise their investment programs, commence or alter
retirement savings, establish education savings and/or charitable giving programs.
When appropriate, K2 Financial will refer Clients to an accountant, attorney, or other specialists, 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 typically does not provide a written summary. Plans or consultations are typically completed within six (6)
months of contract date, assuming all information and documents requested are provided promptly.
Financial planning and consulting 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 would pose a
conflict, 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 through the Advisor.
Retirement Plan Advisory Services
K2 Financial provides retirement plan advisory services on behalf of the retirement plans (each a “Plan”) and the
company (the “Plan Sponsor”). The Advisor’s retirement plan advisory services are designed to assist the Plan
Sponsor in meeting its fiduciary obligations to the Plan and its Plan Participants. Each engagement is customized
to the needs of the Plan and Plan Sponsor. Services generally include:
• Vendor Analysis
• Plan Participant Enrollment and Education Tracking
• Investment Policy Statement (“IPS”) Design and Monitoring
• Investment Oversight Services (ERISA 3(21))
• Investment Management Services (ERISA 3(38))
• Performance Reporting
• Ongoing Investment Recommendation and Assistance
• ERISA 404(c) Assistance
• Benchmarking Services
These services are provided by K2 Financial serving in the capacity as a fiduciary under the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). In accordance with ERISA Section 408(b)(2), the Plan
Sponsor is provided with a written description of K2 Financial’s fiduciary status, the specific services to be rendered
and all direct and indirect compensation the Advisor reasonably expects under the engagement.
Use of Independent Managers
At times, K2 Financial will recommend that a Client utilize one or more unaffiliated investment managers or
investment platforms (collectively “Independent Managers”) for all or a portion of a Client’s investment portfolio if
the Advisor deems such actions to the best interest of the Client. In such instances, the Client generally will be
required to authorize and enter into a separate investment management agreement with the Independent
Manager[s] that defines the terms in which the Independent Manager[s] will provide its services. The Advisor will
perform initial and ongoing oversight and due diligence over each Independent Manager to ensure the strategy
remains aligned with Clients’ investment objectives and overall best interests. The Advisor will also assist the Client
in the development of the initial policy recommendations and managing the ongoing Client relationship. The Client,
prior to entering into an agreement with an Independent Manager[s], will be provided with the Independent
Manager's Form ADV Part 2A (or a brochure that makes the appropriate disclosures). Advisor’s fees do not include
those fees that Client will be charged by an Independent Manager. Please refer to Item 5 below for additional
information regarding fees.
Cash Positions
K2 Financial continues to treat cash as an asset class. As such, unless determined to the contrary by K2 Financial,
all cash positions (money markets, etc.) shall continue to be included as part of assets under management for
purposes of calculating K2 Financial’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), K2 Financial 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, K2
Financial’s advisory fee could exceed the interest paid by the client’s money market fund.
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, K2 Financial shall generally purchase a
higher yielding money market fund available on the custodian’s platform with cash proceeds or deposits, unless K2
Financial 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.
Borrowing Against Assets/Risks
A client who has a need to borrow money could determine to do so by using:
• Margin – The account custodian or broker-dealer lends money to the client. The custodian charges the
client interest for the right to borrow money, and uses the assets in the client’s brokerage account as
collateral; and,
• Pledged Assets Loan – In consideration for a lender (i.e., a bank, etc.) to make a loan to the client, the
client pledges investment assets held at the account custodian as collateral.
These above-described collateralized loans are generally utilized because they typically provide more
favorable interest rates than standard commercial loans. These types of collateralized loans can assist with a
pending home purchase, permit the retirement of more expensive debt, or enable
borrowing in lieu of
liquidating existing account positions and incurring capital gains taxes. However, such loans are not without
potential material risk to the client’s investment assets. The lender (i.e., custodian, bank, etc.) will have
recourse against the client’s investment assets in the event of loan default or if the assets fall below a certain
level. For this reason, K2 Financial does not recommend such borrowing unless it is for specific short-term
purposes (i.e., a bridge loan to purchase a new residence). K2 Financial does not recommend such borrowing
for investment purposes (i.e., to invest borrowed funds in the market). Regardless, if the client was to
determine to utilize margin or a pledged assets loan, the following economic benefits would inure to K2
Financial:
• by taking the loan rather than liquidating assets in the client’s account, K2 Financial continues to earn a
fee on such Account assets; and,
• if the client invests any portion of the loan proceeds in an account to be managed by K2 Financial, K2
Financial will receive an advisory fee on the invested amount; and,
• if K2 Financial advisory fee is based upon the higher margined account value, K2 Financial will earn a
correspondingly higher advisory fee. This could provide K2 Financial with a disincentive to encourage the
client to discontinue the use of margin.
Please Note: The Client must accept the above risks and potential corresponding consequences associated
with the use of margin or a pledged assets loan.
Retirement Rollovers – Potential for Conflict of Interest
A client or prospective client leaving an employer typically has four options regarding an existing retirement plan
(and may engage in a combination of these options): (i) leave the money in the former employer’s plan, if permitted,
(ii) roll over the assets to the new employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an
Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the client’s
age, result in adverse tax consequences). If K2 Financial recommends that a client roll over their retirement plan
assets into an account to be managed by K2 Financial, such a recommendation creates a conflict of interest if K2
Financial will earn new (or increase its current) compensation as a result of the rollover. If K2 Financial provides a
recommendation as to whether a client should engage in a rollover or not (whether it is from an employer’s plan or
an existing IRA), K2 Financial is acting as a fiduciary within the meaning of Title I of the Employee Retirement
Income Security Act and/or the Internal Revenue Code, as applicable, which are laws governing retirement
accounts. No client is under any obligation to roll over retirement plan assets to an account managed by K2
Financial, whether it is from an employer’s plan or an existing IRA.
Socially Responsible Investing Limitations
Socially Responsible Investing involves the incorporation of Environmental, Social and Governance (“ESG”)
considerations into the investment due diligence process. ESG investing incorporates a set of criteria/factors used
in evaluating potential investments: Environmental (i.e., considers how a company safeguards the environment);
Social (i.e., the manner in which a company manages relationships with its employees, customers, and the
communities in which it operates); and Governance (i.e., company management considerations). The number of
companies that maintain an acceptable ESG mandate can be limited when compared to those that do not and
could underperform broad market indices. Investors must accept these limitations, including potential for
underperformance. Correspondingly, the number of ESG mutual funds and exchange-traded funds are limited
when compared to those that do not maintain such a mandate. As with any type of investment (including any
investment and/or investment strategies recommended and/or undertaken by K2 Financial), there can be no
assurance that investment in ESG securities or funds will be profitable or prove successful. K2 Financial does not
maintain or advocate an ESG investment strategy but will seek to employ ESG if directed by a client to do so.
Use of Mutual and Exchange Traded Funds
K2 Financial utilizes mutual funds and exchange traded funds for its client portfolios. In addition to K2 Financial’s
investment advisory fee described below, and transaction and/or custodial fees discussed above, 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).
Use of DFA Mutual Funds: K2 Financial utilizes the mutual funds issued by Dimensional Fund
Advisors (“DFA”). DFA funds are generally only available through registered investment advisers
approved by DFA. Thus, if the client was to terminate K2 Financial’s services, and transition to
another adviser who has not been approved by DFA to utilize DFA funds, restrictions regarding
additional purchases of, or reallocation among other DFA funds, will generally apply.
Portfolio Activity
K2 Financial has a fiduciary duty to provide services consistent with the client’s best interest. K2 Financial 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 or withdrawals, and/or a change in the client’s investment objective. Based upon these factors, there may
be extended periods of time when K2 Financial determines that changes to a client’s portfolio are unnecessary.
Clients remain subject to the fees described in Item 5 below during periods of portfolio inactivity. Of course, as
indicated below, there can be no assurance that investment decisions made by K2 Financial will be profitable or
equal any specific performance level(s).
Reporting Services
K2 Financial can also provide, for a separate fee, account reporting services, which can incorporate client
investment assets that are not part of the assets that K2 Financial manages (the “Excluded Assets”). Unless agreed
to otherwise, the client and/or their other advisors that maintain trading authority, and not K2 Financial, shall be
exclusively responsible for the investment performance of the Excluded Assets. Unless also agreed to otherwise,
K2 Financial does not provide investment management, monitoring or implementation services for the Excluded
Assets. If K2 Financial is asked to make a recommendation as to any Excluded Assets, the client is under
absolutely no obligation to accept the recommendation, and K2 Financial shall not be responsible for any
implementation error (timing, trading, etc.) relative to the Excluded Assets. The client can engage K2 Financial to
provide investment management services for the Excluded Assets pursuant to the terms and conditions of the
Investment Advisory Agreement between K2 Financial and the client.
• eMoney: In the event that K2 Financial provides the client with access to an unaffiliated vendor’s website
such as eMoney (change if a different vendor), and the site provides access to information and/or
concepts, including financial planning, the client, should not, in any manner whatsoever, infer that such
access is a substitute for services provided by K2 Financial. Rather, if the client utilizes any such content,
the client does so separate and independent of K2 Financial.
Other Assets
To the extent that K2 Financial provides advisory monitoring or review services for client investment assets for
which K2 Financial does not maintain custodian access or trading authority (including initial and ongoing
consideration of such assets as part of the client’s asset allocation), K2 Financial may determine to include such
assets in its advisory fee calculation per Item 5 below.
Client Obligations
In performing our services, K2 Financial 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, it remains each client’s
responsibility to promptly notify K2 Financial if there is ever any change in his/her/its financial situation or investment
objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.
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 K2 Financial) will be profitable or equal any specific performance
level(s).
Cybersecurity Risk
The information technology systems and networks that K2 Financial and its third-party service providers use to
provide services to K2 Financial’s clients employ various controls, which are designed to prevent cybersecurity
incidents stemming from intentional or unintentional actions that could cause significant interruptions in K2
Financial’s operations and result in the unauthorized acquisition or use of clients’ confidential or non-public
personal information. Clients and K2 Financial 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 K2 Financial 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 K2 Financial 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.
Disclosure Brochure
A copy of K2 Financial’s written Brochure as set forth on Part 2A of Form ADV and Form CRS (Client Relationship
Summary) shall be provided to each client prior to, or contemporaneously with, the execution of an agreement
between the client and K2 Financial.
C. Client Account Management
Prior to engaging K2 Financial 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 can include:
• Establishing an Investment Strategy – K2 Financial, in connection with the Client, will develop a strategy
that seeks to achieve the Client’s goals and objectives.
• Asset Allocation – K2 Financial 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 – K2 Financial will develop a portfolio for the Client that is intended to meet the stated
goals and objectives of the Client.
• Investment Management and Supervision – K2 Financial will provide investment management and ongoing
oversight of the Client’s investment portfolio.
• Financial Planning – K2 Financial provides ongoing financial planning services to assist Clients in meeting
their financial goals.
D. Wrap Fee Programs
K2 Financial does not manage or place Client assets into a wrap fee program.
E. Assets Under Management
As of December 31, 2022 K2 Financial manages $145,293,687 in Client assets, of which $138,507,857 are
managed on a discretionary basis and $6,785,830 on a non-discretionary basis. Clients can request more current
information at any time by contacting the Advisor.