We offer a wrap fee program as described in this Wrap Fee Program Brochure. A wrap fee
program is generally considered any arrangement under which clients receive investment
advisory services and the execution of client transactions for a specified fee or fees not
based upon transactions in their accounts. All our investment management clients will be
offered the wrap fee program structure that includes, as a single fee, the securities
transaction costs for trading in Client accounts along with the investment advisory fees
earned by our firm. Our firm receives a portion of the wrap fee for the services rendered.
While traditional Wrap Fee Programs are often rigid, pre-packaged investment programs,
our firm customizes its investment strategies individually for its clients. Prior to receiving
services through the Program, clients are required to enter into a written agreement with
our firm setting forth the relevant terms and conditions of the investment advisory
relationship (the “Agreement”).
OUR WRAP ADVISORY SERVICES
We manage advisory accounts on a discretionary basis. For discretionary accounts, once
we have determined a profile and investment plan with a client, we will execute the day-
to-day transactions without seeking prior client consent but within the expected
investment guidelines. We may accept accounts with certain restrictions if circumstances
warrant. We primarily allocate client assets among cash, individual stocks, bonds, exchange
traded funds (“ETFs”), mutual funds, corporate bonds, municipal bonds, U.S. Government
Treasuries and cash in accordance with their stated investment objectives. Ultimately, we
try to achieve the highest return on our client’s cash balances through relatively low-risk
and conservative investments. In most cases, at least a partial cash balance will be
maintained in a money market account so that our firm may debit advisory fees for our
services related to this service.
Portfolios will be designed to meet a particular investment goal, determined to be suitable
to the client’s circumstances. Once the appropriate portfolio has been determined,
portfolios are continuously and regularly monitored, and if necessary, rebalanced based
upon the client’s individual needs, stated goals and objectives.
During personal discussions with clients, we determine the client’s objectives, time
horizons, risk tolerance, and liquidity needs. As appropriate, we also review a client’s prior
investment history, as well as family composition and background. Based on client needs,
we develop a client’s personal profile and investment plan. We then create and manage
the client’s investments based on that policy and plan. It is the client’s obligation to notify
us immediately if circumstances have changed with respect to their goals.
Once we have determined the types of investments to be included in a client’s portfolio
and have allocated the assets, we provide ongoing investment review and management
services.
With our discretionary relationship, we will make changes to the portfolio, as we deem
appropriate, to meet client financial objectives. We trade these portfolios based on the
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combination of our market views and client objectives, using our investment process. We
tailor our advisory services to meet the needs of our clients and seek to ensure that your
portfolio is managed in a manner consistent with those needs and objectives. Clients have
the ability to leave standing instructions with us to refrain from investing in particular
industries or invest in limited amounts of securities.
In all cases, clients have a direct and beneficial interest in their securities, rather than an
undivided interest in a pool of securities. We do have limited authority to direct the
Custodian to deduct our investment advisory fees from your accounts, but only with the
appropriate written authorization from clients.
Where appropriate, we provide advice about any type of legacy position held in client
portfolios. Typically, these are assets that are ineligible to be custodied at our primary
custodian. Clients will engage us to advise on certain investment products that are not
maintained at their primary custodian, such as variable life insurance, annuity contracts,
and assets held in employer sponsored retirement plans and qualified tuition plans (i.e.,
529 plans).
You are advised and are expected to understand that our past performance is not a
guarantee of future results. Certain market and economic risks exist that adversely affect
an account’s performance. This could result in capital losses in your account.
Our firm may determine that engaging the expertise of an independent money manager is
best suited for your account. Our firm will have discretion to utilize independent third-
party investment advisers to aid in the implementation of investment strategies for your
portfolio. In certain circumstances, we may allocate a portion of a portfolio to an
independent third-party investment adviser (“Manager”) for separate account
management based upon your individual circumstances and objectives, including, but not
limited to, your account size and tax circumstances. Upon the recognition of such
situations, in coordination with you, we will hire a Manager for the management of those
assets. These advisers shall assist our Firm in managing the day-to-day investment
operations of the various allocations, shall determine the composition of the investments
comprising the allocation, shall determine what securities and other assets of the
allocation will be acquired, held, disposed of or loaned in conformity with the written
investment objectives, policies and restrictions and other statements of each client
comprising the allocation, or as instructed by our Firm.
Managers selected for your investments need to meet several quantitative and qualitative
criteria established by us. Among the criteria that may be considered are the Manager’s
experience, assets under management, performance record, client retention, the level of
client services provided, investment style, buy and sell disciplines, capitalization level, and
the general investment process.
You are advised and should understand that:
§ A Manager’s past performance is no guarantee of future results;
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§ There is a certain market and/or interest rate risk which may adversely affect any
Manager’s objectives and strategies, and could cause a loss in a Client's account(s);
and
§ Client risk parameters or comparative index selections provided to our firm are
guidelines only and there is no guarantee that they will be met or not be exceeded.
Managers may take discretionary authority to determine the securities to be purchased
and sold for the client. As stated in the Discretionary Advisory Agreement, our Firm and its
associated persons will have discretionary authority to hire and fire the Manager. Our firm
will work with the money manager to communicate any trading restrictions or standing
instructions to refrain from a particular industry requested by the Client. In all cases,
trading restrictions will depend on the money manager and their ability to accommodate
such restrictions.
All performance reporting will be the responsibility of the respective Manager. Such
performance reports will be provided directly to you and our firm upon client request.
Disclosures will indicate what firm is providing the reporting.
Our Firm has entered into agreements with various independent Managers. All third-party
Managers to whom we will refer clients will be licensed as registered investment advisors
by their resident state and any applicable jurisdictions or registered investment advisors
with the Securities and Exchange Commission. A complete description of the Manager’s
services, fee schedules and account minimums will be disclosed in the Manager’s Form
ADV or similar Disclosure Brochure.
We review the performance of our managers on at least a quarterly basis. More frequent
reviews may be triggered by changes in Manager’s management, performance or
geopolitical and macroeconomic specific events. Our Firm only enters into only a select
number of relationships with Managers. We have agreed to pay a portion of the overall
advisory fee charged to our clients to the Manager.
RELATIVE COST OF THE PROGRAM
A wrap fee program
allows our clients to pay a specified fee for investment advisory
services and the execution of transactions. Clients do not pay brokerage commissions,
markups or transaction charges for execution of transactions in addition to the advisory
fee however, most investments trade without transaction fees today, so our payment of
these and other incidental custodial related expenses should not be considered a
significant factor in determining the relative value of our wrap program.
Although neither Client nor our Firm pay a transaction charge for transactions in the
account(s), Client should be aware that our Firm pays the recommended Custodian and a
third-party platform administrator an annual administrative / asset-based pricing fee based
upon a percentage of assets under management within the Wrap Fee Program account –
this percentage is capped at 0.35% for accounts in the Platform. Our Firm currently utilizes
AE Wealth Management (AEWM). AEWM’s platform supports data reconciliation,
performance reporting, fee calculation and billing, research, client database maintenance,
performance evaluations, payable reports, web site administration, models, trading
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platforms and any transaction fees incurred at the Custodian, and other functions related
to the administrative tasks of managing client accounts. Because our Firm pays the
Custodian an annual administration / asset-based pricing fee in lieu of paying transaction
charges, there is a conflict of interest. Client understands that the cost to our Firm of the
annual administration fee may be a factor that he/she considers when deciding how much
of an annual advisory fee to assess to the account(s).
MWA charges a fee as compensation for providing Investment Management services on
your account. These services include advisory and consulting services, trade entry,
investment supervision, and other account-maintenance activities. Our recommended
custodian charges transaction costs, custodial fees, redemption fees, retirement plan and
administrative fees or commissions. See Additional Fees and Expenses below for additional
details.
The fees for portfolio management are based on an annual percentage of assets under
management and are applied to the account asset value on a pro-rata basis. Fees are billed
monthly in arrears based on the average daily balance of the account(s) under our Firm’s
management. Unless otherwise agreed upon and stated in the Investment Management
Agreement, fees are assessed on all assets under management, including securities, cash
and money market balances. When applicable and noted in the Investment Management
Agreement, legacy positions can be excluded from the fee calculation.
Our maximum annual advisory fee for accounts paying a percentage of assets under
management is 1.50% and the specific advisory fees are set forth in your Investment
Advisory Agreement. Fees may vary based on the size of the account, complexity of the
portfolio, extent of activity in the account or other reasons agreed upon by us and you as
the client. In certain circumstances, our fees may be negotiated. Our employees and
certain legacy client accounts are charged a reduced fee for our services.
Unless otherwise instructed by the client, we will aggregate asset amounts in accounts
from your same household together to determine the advisory fee for all your accounts.
We would do this, for example, where we also service accounts on behalf of your minor
children, individual and joint accounts for a spouse, and/or other types of related accounts.
This consolidation practice is designed to allow you the benefit of an increased asset total,
which could cause your account(s) to be assessed a lower advisory fee.
The independent qualified custodian holding your funds and securities will debit your
account directly for the advisory fee and pay that fee to us. You will provide written
authorization permitting the fees to be paid directly from your account held by the
qualified custodian. Further, the qualified custodian agrees to deliver an account
statement monthly directly to you indicating all the amounts deducted from the account
including our advisory fees. At our discretion, our Firm will allow advisory fees to be paid
by check as indicated in the Investment Advisory Agreement. You are encouraged to review
your account statements for accuracy.
Either MWA or you may terminate the management agreement immediately upon written
notice to the other party. The management fee will be pro-rated to the date of
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termination, for the month in which the cancellation notice was given and billed to your
account. Upon termination, you are responsible for monitoring the securities in your
account, and we will have no further obligation to act or advise with respect to those
assets. In the event of client’s death or disability, MWA will continue management of the
account until we are notified of client’s death or disability and given alternative instructions
by an authorized party.
Additional fees and expenses you may incur are brokerage commissions, principal markups
and discounts, SEC fees, mutual fund/ETF expense ratios, mutual fund 12B-1 fees, tax
withholding on certain foreign securities, postage fees, wire fees, bank charges, and other
administration fees as authorized by you. Please refer to Section 12 for information on
brokerage fees and services.
In no case are Mercurio Wealth Advisors fees based on, or related to, the performance of
your funds or investments.
OTHER TYPES OF FEES & EXPENSES
In addition to the advisory fees paid to our Firm, clients also incur certain charges imposed
by other third parties, such as custodians, trust companies, banks and other financial
institutions (collectively “Financial Institutions”). These additional charges include
custodial fees, charges imposed by a mutual fund or ETF in a client’s account, as disclosed
in the fund’s prospectus (e.g., fund management fees and other fund expenses), deferred
sales charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees,
and other fees and taxes on brokerage accounts and securities transactions.
NON-TRANSACTION FEE (NTF) MUTUAL FUNDS
When selecting investments for our clients’ portfolios we might choose mutual funds on
your account custodian’s Non-Transaction Fee (NTF) list. This means that your account
custodian will not charge a transaction fee or commission associated with the purchase or
sale of the mutual fund. The mutual fund companies that choose to participate in your
custodian’s NTF fund program pay a fee to be included in the NTF program. The fee that a
mutual fund company pays to participate in the program is ultimately borne by the owners
of the mutual fund including clients of our Firm. When we decide whether to choose a
fund from your custodian’s NTF list or not, we consider our expected holding period of the
fund, the position size and the expense ratio of the fund versus alternative funds.
Depending on our analysis and future events, NTF funds might not always be in your best
interest. Some of our Investment Adviser Representatives (“IARs”) of the Firm are licensed
Insurance agents registered with various State(s) Insurance Departments. IARs receives
compensation (commissions, trails, or other compensation from the respective insurance
products) as a result effecting insurance transaction for mutual client(s) of MWA. Refer to
Item 10 of the Part 2A Brochure for more information.
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ADMINISTRATIVE SERVICES
Through our relationship with AE Wealth Management (AEWM), our Firm utilizes AEWM’s
technology platform to support data reconciliation, performance reporting, fee calculation
and billing, research, client database maintenance, quarterly performance evaluations,
payable reports, web site administration, models, trading platforms, and other functions
related to the administrative tasks of managing client accounts. Due to this arrangement,
AEWM will have access to client information, but AEWM will not serve as an investment
advisor to our clients. MWA and AEWM are non-affiliated companies. AEWM charges our
Firm an annual fee for each account administered by AEWM. The annual fee is paid from
the portion of the management fee retained by us.