Investment Advisory Services
Each client has a designated investment adviser
representative (“investment adviser representative “ or
“IAR”), who is an advisory representative of Herbert
J. Sims Capital Management, Inc. (“HJSCM”). The
IAR is generally also a registered broker-dealer
representative of Herbert J. Sims & Co. Inc. (“HJ
SIMS”). Clients who wish to participate in the HJSCM
Managed Portfolio Program (“MPP” or the
“Program”) will enter into an investment management
agreement with HJSCM. HJSCM has retained a third-
party service provider, Envestnet Asset Management,
Inc. and/or its affiliates (collectively, “Envestnet”), for
various administrative, investment advisory and/or
other services available on Envestnet’s Platform.
Clients inform their investment adviser representatives
of the investment objectives, risk tolerance, and
investment time horizon, and any investment policies,
guidelines, or reasonable restrictions applicable to the
assets they designate for investment through the
Program. Investment adviser representative will assist
with the selection of portfolio manager models, the
selection of investment strategies, and the allocation of
assets among managers or strategies. The client will
make all decisions regarding the specific third-party
managed account service and/or strategies that are
selected in the advisory account. HJSCM will have
trading discretion over certain client accounts’s
investment but HJSCM has no discretion to move
funds. The client will receive the disclosure brochure of
each portfolio manager selected. Clients should read
these programs carefully before deciding whether to
invest through a particular program or select a
particular portfolio manager and strategy.
Execution of Trades
Clients generally authorize and direct HJSCM or
selected model/strategy managers to execute trades for
accounts in MPP through Pershing, LLC (“Pershing”),
a broker-dealer not affiliated with HJSCM.
Custody
An unaffiliated entity acts as custodian for MPP
accounts. The custodian is named in the client’s Client
Service Agreement (“CSA”). In most cases Pershing,
LLC (“Pershing”) will act as custodian for all
accounts.
Fees and Compensation
The MPP is a "wrap fee" advisory program. A "Wrap
Fee" (also called in this brochure an “Advisory Fee”.
The terms are used interchangeably here.) typically
covers the cost of our investment advisory services,
most execution charges through the custodian,
custodian fees, platform administration, reporting
services, investment manager fees. HJSCM will
charge the advisory fee 90 days in advance based on
the clients' asset under management as of the last
business day of each quarter. . The Advisory Fee rate
charged each quarter will be based on the net value of
the assets in the Account on the last business day of
the prior quarter, then multiplied by the annual
Advisory Fee rate set forth in the Client Service
Agreement and divided by number four (4) or ¼ of the
annual fee. If assets transfer in during a current
business quarter, then the number of remaining
calendar days in the then current quarter will be used
to divide the quarterly fee amount. Accounts in the
same household may be aggregated for the purposes of
determining the applicable Advisory Fee rate, subject
to HJSCM’s policies and procedures and applicable
law. The Advisory Fee rate will be blended, i.e., as the
value of the assets reaches various thresholds, the
assets above each threshold will be charged
successively lower advisory fee rates. The value of the
assets will be based on information provided by the
custodian of the assets, as applicable. HJSCM is
entitled to rely on the financial and other information
that the client, and custodian, or any other third-party
provides to HJSCM. HJSCM does not independently
verify this information nor does HJSCM guarantee the
accuracy or validity of such information.
The maximum Advisory Fee rates for the Programs
are subject to negotiation.
The maximum annual HJSCM Advisory Fees are:
HJSCM Managed Portfolio Program (“MPP”)
Value of Account
Assets
Maximum
Advisory Fee
$50,000 – $500,000 2.50%
$500,001 –
$1,000,000
2.00%
$1,000,001 –
$2,500,000
1.75%
$2,500,001 –
$5,000,000
1.50%
Over $5,000,001 1.25%
These Advisory Fees (also called Wrap Fees) are
generally subject to negotiation and typically range
from 1.25% to 2.50% of the initial value of the assets
in the account per year, depending on the size of the
account or household and services covered. Except as
described herein, the annualized wrap Fee is not
intended to cover all expenses associated with the
Account, including custodial fees and fees payable to
a Sub-Advisor, Co-Adviser, or Third Party Sleeve
Strategy or Model Manager. In the event the Adviser
retains the services of a Sleeve Strategy or Model
Manager, or Sub-Advisor, the applicable fees for the
Sleeve Strategy or Model Manager will be disclosed
on the “Sleeve/Model Manager Addendum” and
forwarded to the client prior to investing the clients’
funds in the Sleeve Strategy or Model.
The Advisory Fee does not include fees or expenses
associated with the underlying investment vehicles
(such as redemption fees or expense ratios).
In addition to the Advisory Fee and regardless of the
actual quarterly Advisory Fee rate or the value of the
assets in the account, Envestnet charges a flat annual
operational fee of $25 based on services provided.
The Wrap Fee will be calculated as a blended fee
using two or more of the rate tiers set forth above. The
blended rate is calculated by charging a lower rate on
the assets above the designated tiers. These fees are
generally subject to negotiation and typically range
from 1.25% to 2.50% of the value of the assets in the
account per year, depending on the size of the account
and the services covered.
The imposition of the minimum fee may cause the
effective Wrap Fee rate (expressed as a percentage) to
be greater than the fee rates specified in the client’s
program agreement. The value of the assets will be
based on information provided by Pershing, LLC (the
custodian of the assets). HJSCM is entitled to rely on
the financial and other information that the
client, any
custodian, or any other third party provides to HJSCM.
HJSCM does not independently verify this
information nor does HJSCM guarantee the accuracy
or validity of such information. Clients generally
instruct the custodian to take instructions from
HJSCM to debit the fee from one of client’s accounts.
Either party at any time upon written notice may
terminate the Program agreement and a pro rata
portion of any Wrap Fee paid by the client in advance
will be remitted to the client based on the number of
days left in the quarter following receipt of the notice
of termination by HJSCM.
The Wrap Fee covers the advisory services provided
by the investment adviser representative, program
administrative services provided by HJSCM or
Envestnet, execution of transactions through Pershing
LLC, and custodial services (unless otherwise agreed
between the custodian and the client). HJSCM also
shares a portion of the Wrap Fee with the HJSCM
investment adviser representative. Envestnet will also
receive a portion of the Wrap Fee for the
administration of the Platform and other services it
provides.
The investment strategy may cost a client more or less
than purchasing such service separately depending on
the model manager or strategies selected, the
frequency of trading in the Program accounts,
commissions charged at other broker-dealers for
similar products, fees charged for like services by
other advisers and broker- dealers and other factors.
The Wrap Fee does not cover:
• Brokerage commissions or other charges
resulting from transactions not effected
through Pershing, LLC
• Any additional custodial services contracted
for directly by the client with the custodian;
• Certain costs or charges that may be imparted
by the custodian, including costs associated
with exchanging foreign currencies, odd-lot
differentials, IRA fees, transfer taxes,
exchange fees, wire transfer fees, postage
fees, and other fees or taxes required by law.
In addition to the Wrap Fee, each mutual fund or
exchange-traded fund (ETF) and/or Model in which a
client may invest also bears its own investment
advisory fees and other expenses. Mutual funds may
be available directly from the funds pursuant to the
terms of their prospectuses and without paying the
Wrap Fee and ETFs may be available outside of the
Program without paying the Wrap Fee, subject to
applicable commissions and/or transaction charges.
Further, to the extent that cash used for investment
through the Program comes from redemptions of the
client’s mutual fund or other investments outside of
the Program, there may be tax consequences or
additional cost from sales charges previously paid and
redemption fees incurred. Such redemption fees would
be in addition to the Wrap Fee on those assets.
Additional expenses associated with the specific
underlying investment funds such as, redemption fees
may apply. Certain mutual funds used in the Program
may charge a redemption fee if shares are redeemed
within a specified period of time. Clients may incur
redemption fees in the event that a sell is executed or
model update is implemented. Redemption fees vary
by fund and are described in each fund’s prospectus.
In MPP accounts, HJ SIMS and/or the custodian will
receive payments from certain mutual funds
(including money market funds) pursuant to a 12(b)-1
distribution plan or other such plan as compensation
for distribution or administrative services and are
distributed from the fund’s total assets. These fee
arrangements will be disclosed upon request of a client
and are available in the applicable fund’s prospectus.
The investment adviser representative will not receive
a portion of these fees in his or her capacity as a
registered broker-dealer representative of HJ SIMS.
Any such receipt of 12(b)-1 fee compensation will
pass directly back to the Client and his/her account(s),
thus, avoiding a conflict of interest. If cash is swept
into a money market fund, HJ SIMS receives
compensation based on the value of assets in these
funds and the short-term rates environment. Thus,
HJSCM and the HJSCM investment adviser
representative have an incentive to recommend that
the client select a money market fund as a sweep
vehicle that pays more compensation to HJ SIMS than
other funds.
In addition, HJSCM investment adviser
representatives may recommend securities for MPP
accounts in initial public offerings (“new issues”) and
secondary offerings. If HJ SIMS acts as an underwriter
or manager for such offerings, or is a part of the selling
group, it will receive compensation equal to either all
or a portion of “gross spread” (the difference between
the price the client pays for the security and the price
at which HJ SIMS purchased the securities). The
advisory fee is not reduced to offset this compensation.
The amount of the gross spread is described in the
relevant prospectus, offering circular or official
statement.
Most HJSCM investment adviser representatives are
also registered broker-dealer representatives of HJ
SIMS. HJ SIMS will receive a portion of payments
received from a closed-end mutual fund or in
connection with an initial public offering, a secondary
offering, and/or a private placement with these
HJSCM investment adviser representatives’
recommendations. These investment adviser
representatives, when acting as broker-dealer
registered representative with HJ SIMS, may also
receive compensation outside of the advisory program
under MPP, such as placement or commission fees, in
connection with the sale of an investment product.
Therefore, the HJSCM investment adviser
representatives have an incentive to recommend
certain investments over others. In addition, the
HJSCM investment adviser representatives have an
incentive to recommend securities where HJ SIMS
acts as underwriter or manager or is part of the selling
group.
The investment adviser representative recommending
the Program to the client may receive more or less
compensation than if the client participated in other
advisory programs offered by HJSCM or paid
separately for investment advice, brokerage, and other
services. Thus, the investment adviser representative
may have a financial incentive to recommend the
Program over other programs or services.