A. Portfolio Strategies, Inc. is a corporation formed on December 14, 1982, in the State of
Washington. The Registrant became registered as an Investment Adviser Firm in March
1983. The Registrant is owned, in equal part, by John Williamson and David Jajewski.
David Jajewski is the Registrant’s Chief Executive Officer and Managing Partner.
B. As discussed below, the Registrant offers to its clients (individuals, business entities,
investment companies, pension and profit sharing plans, trusts, estates, charitable
organizations, etc.) investment advisory services. The Registrant does not hold itself out
as providing financial planning, estate planning, or insurance planning services.
INVESTMENT ADVISORY SERVICES
The client can determine to engage the Registrant to provide discretionary investment
advisory services on a fee basis. The Registrant’s annual investment advisory fee is based
upon a percentage (%) of the market value of the assets placed under the Registrant’s
management, generally between 0.80% and 2.50%. The Registrant does not determine the
percentage advisory fee payable except to the extent that the current maximum annual
advisory fee is 2.50%. The referring broker-dealer and/or investment adviser determines
whether the client will pay the maximum or some lesser fee percentage. The client remains
free to negotiate the advisory fee with the referring broker-dealer and/or investment
adviser. The Registrant shall pay a portion of the advisory fee to the referring broker-dealer
and/or investment adviser. See further discussion below regarding fees.
Registrant manages investment advisory accounts not involving Investment Supervisory
Services. Each investment program managed by the Registrant has been devised to meet a
particular investment strategy applicable to an individual client’s investment objective(s).
Each investment program is continuously managed based on the program’s strategy, rather
than based upon each client's individual needs. However, each client will have the
opportunity to place reasonable restrictions on the types of investments to be held in
his/her/their/its account. Before engaging Registrant to provide investment advisory
services, clients are required to enter into an Investment Advisory Agreement with
Registrant setting forth the terms and conditions of the engagement (including termination),
describing the scope of the services to be provided, and the fee that is due from the client.
Registrant offers investment programs using the following model portfolios: Index Plus,
All Seasons, L/O Opportunity, Quantitative Income, Equity Alternative, Inflexion Points,
Inflexion Points Nitro, Tactical High Yield, Ultra Select, Tactical Equity, Tactical Equity
Moderate, Tactical Evolution, PSI Equity Advantage, Aggressive Growth, Absolute
Return, PSI Liberty Tactical Income Solutions, PSI Liberty Tactical Growth Solutions, PSI
Liberty Opportunity, PSI Liberty Smart, PSI Liberty Capstone and PSI Liberty Spectrum,
each of which programs is more comprehensively discussed in the Registrant’s program
brochures which are provided to all prospective clients. Some program strategies are also
available within specific variable annuities and 401(k) programs obtained through various
insurance companies and custodians. Because of trading restrictions and fund limitations
imposed by certain custodians, some programs (Index Plus) may be substantially modified
to meet these more stringent requirements, which may affect performance results. The
modifications are solely a function of the custodian designated by the client, of which the
client is made aware prior to participating in a particular program.
The Registrant does not determine or recommend the custodian; the Registrant is custodian
neutral. The Registrant currently maintains relationships with Axos Clearing and Charles
Schwab and Co, Inc. (“Schwab”). The choice of custodian is the decision of the client in
conjunction with the client’s chosen referring broker-dealer/ investment adviser. The
Registrant has no economic incentive relative to the client’s choice of custodian. The
Registrant can manage the assets in the same manner at any such custodian. Fees will differ
depending upon the custodian chosen. Higher custodian fees will adversely impact account
performance. The client should address custodian choice with the referring broker-dealer/
investment adviser. See disclosure below
Registrant’s investment programs do not follow a buy-and-hold strategy but trade in-and-
out of positions on a frequent basis (which could be two to three times a week). The
strategies used by Registrant can incorporate the purchase of inverse index mutual funds
and other mutual funds that invest in leveraged instruments, such as futures contracts and
options on securities, both on a long and short basis. Because of this leverage, the value of
an individual program may fluctuate substantially from day to day. However, Registrant's
goal in the use of these funds is to mitigate market exposure, thereby attempting to decrease
overall program downside risk.
MISCELLANEOUS
No Financial Planning or Non-Investment Consulting/Implementation Services. The
Registrant does not provide financial planning and related consulting services regarding
non-investment related matters, such as estate planning, tax planning, insurance, etc. Please
Note: Registrant does not serve as an attorney, accountant, or insurance agency, and no
portion of our services should be construed as legal, accounting, or insurance
implementation services. Accordingly, we do not prepare estate planning documents, tax
returns or sell insurance products. To the extent requested by a client, we may recommend
the services of other professionals for certain non-investment implementation purposes (i.e.
attorneys, accountants, insurance, etc.). including representatives of Registrant in their
separate individual capacities as registered representatives of GWN Securities, an SEC
registered and FINRA member broker-dealer, or as licensed insurance agents You are
under no obligation to engage the services of any such recommended professional. The
client retains absolute discretion over all such implementation decisions and is free to
accept or reject any recommendation made by Registrant or its representatives. Please
Note: If the client engages any unaffiliated recommended professional, and a dispute arises
thereafter relative to such engagement, the client agrees to seek recourse exclusively from
and against the engaged professional. At all times, the engaged licensed professional(s)
(i.e. attorney, accountant, insurance agent, etc.), and not Registrant, shall be responsible for
the quality and competency of the services provided. Please Also Note-Conflict of
Interest: The recommendation by Registrant that a client purchase a securities or insurance
commission product through one of Registrant’s representatives in their separate and
individual capacity as a registered representative of GWN Securities, and/or as an insurance
agent, presents a conflict of interest, as the receipt of commissions may provide an
incentive to recommend investment or insurance products based on commissions to be
received, rather than on a particular client’s need. No client is under any obligation to
purchase any securities or insurance commission products through such a representative.
Clients are reminded that they may purchase securities and insurance products
recommended by Registrant through other non- affiliated broker-dealers and/or insurance
agencies.
Retirement Rollovers - 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 Registrant recommends that a client roll over their retirement plan
assets into an account to be managed by Registrant, such a recommendation creates a
conflict of interest if Registrant will earn new (or increase its current) compensation as a
result of the rollover. If Registrant 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),
Registrant 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 Registrant, whether it is from an employer’s
plan or an existing IRA. The Registrant’s Chief Compliance Officer, David Jajewski,
remains available to address any questions that a client or prospective client may have
regarding the conflict of interest presented by such rollover recommendation. Please
Note: Generally, the Registrant does not recommend rollovers. Rather, the rollover
recommendation, if made, is made by the client’s introducing broker-dealer or investment
adviser. In such event, the introducing broker-dealer or investment adviser shall have the
responsibility for compliance with the above disclosure obligation and the fiduciary
requirements applicable to recommending rollovers. The Registrant shall confirm, in
writing, with the client’s introducing investment professional (i.e., the professional that
maintains the day-to-day relationship with the client), that the introducing professional has
undertaken a review of the client’s current retirement plan, and has determined that a
rollover is in the best interest of the client.
12b-1 Compensation. Certain affiliated and unaffiliated mutual funds pay marketing,
distribution, and/or shareholder servicing fees, commonly known as 12b-1 fees. Although
Registrant will first seek to invest a client in mutual fund share classes that do not pay 12b-
1 fees, if such share class is unavailable on a particular mutual fund, Registrant may invest
clients in shares classes of the same fund which pay 12b-1 compensation. Where the client
is invested in fund(s) that pay 12b-1 fees, the 12b-1 compensation will be collected directly
by the account custodian and no portion shall be retained by Registrant. Fund share classes
that pay 12b-1 compensation generally have higher internal expense ratios, which
adversely impacts performance. The Registrant’s Chief Compliance Officer, David
Jajewski, remains available to address any questions that a client or prospective client
may have regarding the above arrangement.
Please Note: Inverse/Enhanced Market Strategies. The Registrant may utilize long and
inverse mutual funds and/or exchange traded funds that are designed to perform in either
an: (1) inverse relationship to certain market indices (at a rate of 1 or more times the inverse
[opposite] result of the corresponding index) as an investment strategy and/or for the
purpose of hedging against downside market risk; and (2) enhanced relationship to certain
market indices (at a rate of 1 or more times the actual result of the corresponding index) as
an investment strategy and/or for the purpose of increasing gains in an advancing market.
There can be no assurance that any such strategy will prove profitable or successful. In
light of these enhanced risks/rewards, a client may direct the Registrant, in writing, not to
employ any or all such strategies for his/her/their/its accounts.
Mutual Fund/Exchange Traded Fund Fees. While the Registrant may recommend
allocating investment assets to mutual funds that are not available directly to the public, the
Registrant may also recommend that clients allocate investment assets to publicly available
mutual funds and exchange traded funds that the client could obtain without engaging
Registrant as an investment adviser. However, if a client or prospective client determines
to allocate investment assets to publicly available mutual funds and exchange traded funds
without engaging Registrant as an investment adviser, the client or prospective client would
not receive the benefit of Registrant’s initial and ongoing investment advisory services. In
addition to Registrant’s investment management fee, brokerage commissions, and/or
transaction fees, the client will also incur, relative to all mutual fund and exchange traded
funds, charges imposed at the fund level (e.g., management fees and other fund expenses).
Commission/Transaction Fees. Broker-dealers/custodians that execute investment
transactions generally charge brokerage commissions, transaction fees, and/or custodial
fees for effecting securities transactions. These charges, as well as the charges imposed at
the mutual fund and exchange traded fund level, are in addition to Registrant’s advisory
fee referenced in Item 5 below.
Custodian Charges-Additional
Fees. As discussed below at Item 12 below, when
requested to recommend a broker-dealer/custodian for client accounts, Registrant generally
recommends that Axos Clearing (“Axos”) or Schwab serve as the broker-dealer/custodian
for client investment management assets. Broker-dealers such as Axos and Schwab charge
brokerage commissions, transaction, and/or other type fees for effecting certain types of
securities transactions. The fees shall differ depending upon the broker-dealer/custodian.
These fees/charges are in addition to Registrant’s investment advisory fee at Item 5 below.
Registrant does not receive any portion of these fees/charges. See additional disclosure at
Item 5 below. ANY QUESTIONS: Registrant’s Chief Compliance Officer, David
Jajewski, remains available to address any questions that a client or prospective client
may have regarding the above.
Please Note: As set forth below at Item 5, transaction fees for clients of Registrant are
generally assessed as an annual asset-based fee, rather than on a transaction-by-transaction
basis.
Research Services. The Registrant engages unaffiliated investment providers to provide
research services and/or investment signals to assist the Registrant with management of
one or more if its investment strategies.
Cybersecurity Risk. The information technology systems and networks that Registrant
and its third-party service providers use to provide services to Registrant’s clients employ
various controls, which are designed to prevent cybersecurity incidents stemming from
intentional or unintentional actions that could cause significant interruptions in Registrant’s
operations and result in the unauthorized acquisition or use of clients’ confidential or non-
public personal information. Clients and Registrant 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 Registrant has established its procedures to reduce the
risk of cybersecurity incidents, there is no guarantee that these efforts will always be
successful, especially considering that Registrant 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.
Cash Sweep Accounts.
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, Registrant shall generally
purchase a higher yielding money market fund available on the custodian’s platform with
cash proceeds or deposits, unless Registrant 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, the size of the
cash balance, 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.
Please Note: The above does not apply to the cash component maintained within the
Registrant’s actively managed investment strategy (the cash balances for which shall generally
remain in the custodian designated cash sweep account), an indication from the client of a
need for access to such cash, assets allocated to an unaffiliated investment manager, and cash
balances maintained for fee billing purposes. Please Also Note: The client shall remain
exclusively responsible for yield dispersion/cash balance decisions and corresponding
transactions for cash balances maintained in any of the Registrant’s unmanaged accounts.
Asset-Based Pricing Arrangements and Limitations. Registrant may recommend that
clients enter into an “Asset-Based” pricing agreement with the account broker-
dealer/custodian. Under an asset- based pricing arrangement, the amount that a client will pay
the custodian for account commission/transaction fees is based upon a percentage (%) of the
market value of the account, generally expressed in basis points and/or a percentage. One
basis point is equal to one one-hundredth of one percent (1/100th of 1.00%, or 0.01% (0.0001).
This differs from transaction-based pricing, which assesses a separate commission/transaction
fee against the account for each account transaction. Account investment decisions are driven
by security selection and anticipated market conditions and not the amount of transaction fees
payable by you to the account custodian. Under either the asset-based or transaction-based
pricing scenario, the fees charged by the respective broker-dealer/custodian are separate from,
and in addition to, the advisory fee payable by the client to Registrant per Item 5 below.
Registrant does not receive any portion of the asset- based transaction fees payable by the
client to the account custodian. The client is under no obligation to enter into an asset-based
arrangement, and, if the client does so, the client can request at any time to switch from asset-
based pricing to transactions- based pricing, However, there can be no assurance that the
volume of transactions will be consistent from year-to-year given changes in market events
and security selection. Thus, given the variances in trading volume, any decision by the client
to switch to transaction- based pricing could prove to be economically disadvantageous.
Data Aggregation Platforms. Registrant may provide its clients with access to an online
platform hosted by Orion, Envestnet, or other providers (the “Platforms”). The Platforms
allow a client to view their complete asset allocation, including those assets that Registrant
does not manage (the “Excluded Assets”). Registrant does not provide investment
management, monitoring, or implementation services for the Excluded Assets. Therefore,
Registrant shall not be responsible for the investment performance of the Excluded Assets.
Rather, the client and/or their advisor(s) that maintain management authority for the
Excluded Assets, and not Registrant, shall be exclusively responsible for such investment
performance. The client may choose to engage Registrant to manage some or all of the
Excluded Assets pursuant to the terms and conditions of the IAA between Registrant and
the client. The Platforms also provide access to other types of information, including
financial planning concepts, which should not, in any manner whatsoever, be construed as
services, advice, or recommendations provided by Registrant. Finally, Registrant shall not
be held responsible for any adverse results a client may experience if the client engages in
financial planning or other functions available on the Platforms without Registrant’s
assistance or oversight.
Use of Unaffiliated Broker-Dealers and Investment Advisers. The Registrant primarily
manages accounts referred to it by unaffiliated broker-dealers and investment advisers,
pursuant to which the Registrant generally pays a portion of its management fee to the
referring broker-dealer or investment adviser in accordance with the parameters of SEC
Rule 206(4)-3. The referring broker-dealers and investment advisers maintain both
the initial and ongoing day-to-day relationship with the client, including initial and
ongoing determination of client suitability for the Registrant’s designated strategies.
The Registrant does not maintain physical possession of client funds or securities. Accounts
are primarily maintained at the custodian designated by the referring broker-
dealer/investment adviser. Other than the advisory fees earned by the Registrant from the
referred account, the Registrant does not derive any economic benefit from the referring
investment adviser or broker-dealer. See Items 13A and 14B below.
Model Provider. In the event that an unaffiliated registered investment adviser firm desires
to utilize Registrant’s models and/or strategies on the Envestnet and/or FTJ FundChoice
platforms, the Firm will receive a platform fee payable by the investor. The platform fee
payable to the Firm is separate, and in addition to, any advisory fee payable to the
underlying investment manager. Thus, in addition to the platform fee payable to the Firm,
the investor will also incur an investment management fee payable to the unaffiliated
investment manager for the selected strategy. If the Adviser, on behalf of its investor client,
determines to utilize one of the Firm’s models, the Firm, in lieu of an investment
management fee payable directly to the Firm by the investor, shall receive only its
management fee In addition to platform and management fees, the investor will also incur
custodial fees, no portion of which shall be received by the Firm. The unaffiliated
investment adviser maintains both the initial and ongoing day-to-day relationship
with the client, including initial and ongoing determination of client suitability for the
Firm’s models. The Firm does not have any relationship with the adviser’s clients
Portfolio Activity. Registrant has a fiduciary duty to provide services consistent with the
client’s best interest. As part of its investment advisory services, Registrant 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, mutual fund
manager tenure, market conditions, style drift, and/or if the Registrant is informed of a
change in the client’s investment objective. Based upon these factors, there may be
extended periods of time when Registrant determines that changes to a client’s portfolio
are neither necessary nor prudent. Of course, as indicated below, there can be no assurance
that investment decisions made by Registrant will be profitable or equal any specific
performance level(s). Clients nonetheless remain subject to the fees described in Item 5
below during periods of account inactivity.
Please Note: Cash Positions. The Registrant continues to treat cash as an asset class. As
such, unless determined to the contrary by Registrant, all cash positions (money markets,
etc.) shall continue to be included as part of assets under management for purposes of
calculating Registrant’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), Registrant 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, Registrant’s
advisory fee could exceed the interest paid by the client’s money market fund. ANY
QUESTIONS: Registrant’s Chief Compliance Officer, David Jajewski, remains
available to address any questions that a client or prospective may have regarding the
above fee billing practice.
Client Obligations. In performing its services, Registrant shall not be required to verify
any information received from the client or from the client’s other designated professionals,
and is expressly authorized to rely thereon. Moreover, each client is advised that it remains
their responsibility to promptly notify Registrant if there is ever any change in their
financial situation or investment objectives for the purpose of reviewing/evaluating/
revising Registrant’s previous recommendations and/or services.
Disclosure Statement. A copy of the Registrant’s written Brochure as set forth on Part 2
of Form ADV, along with the Form CRS Relationship Summary, shall be provided to each
client prior to, or contemporaneously with, the execution of the IAA.
C. The Registrant shall provide investment advisory services specific to needs of each client.
Prior to providing investment advisory services, an investment adviser representative will
discuss with each client, his/her/their/its particular investment objective(s). The Registrant
shall allocate each client’s investment assets consistent with his/her/their/its designated
investment objective(s). Client may, at any time, impose restrictions, in writing, on the
Registrant’s services.
D. The Registrant does not participate in a wrap fee program.
E. As of December 31, 2023, the Registrant had $59,547,202 in assets under management
on a discretionary basis.