A. JNBA Financial Advisors, LLC (the “Registrant”) is a limited liability company formed
in January 2021 in the state of Delaware. The Registrant succeeded JNBA Financial
Advisors, Inc. in January 2021. The Registrant is owned by Richard S. Brown through
JNBA Financial Holdings, LLC. Mr. Brown is the Registrant’s Chief Executive Officer.
B.
INVESTMENT ADVISORY SERVICES
The Registrant provides discretionary and/or non-discretionary investment advisory
services on a fee-only basis. The Registrant’s annual investment advisory fee is based
upon a percentage (%) of the market value of the client’s assets placed under the
Registrant’s management, including accrued interest on bonds and dividends payable on
mutual funds, and shall generally be between 0.65% and 1.00%. Certain dividends
payable on mutual funds will depend on the timing of information reported to the
custodian by the fund companies. Additionally, there may be deposits or withdrawals
made to the client’s account on the last billing day of the month that may not be reflected
on custodian’s month end statement.
The Registrant’s annual investment advisory fee typically includes investment advisory
services, and, to the extent specifically requested by the client, financial planning and
consulting services. In the event that the client requires extraordinary planning and/or
consultation services (to be determined in the sole discretion of the Registrant),
Registrant may determine to charge for such additional services, the dollar amount of
which shall be set forth in a separate written notice to the client.
* In limited circumstances and at the discretion of the Registrant, clients may engage the
Registrant to provide investment management services on a stand-alone basis. When
engaged in such capacity, the Registrant will not be responsible for providing financial
planning and consulting services to the client as part of the engagement.
FINANCIAL PLANNING AND CONSULTING SERVICES (STAND-ALONE)
The Registrant provides financial planning and/or consulting services (including
investment and non-investment related matters, including estate planning, insurance
planning, etc.) on a stand-alone separate fee basis. Prior to engaging the Registrant to
provide planning or consulting services, clients are generally required to enter into a
Financial Planning and Consulting 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 portion of the fee that is due from the client prior to
Registrant commencing services.
If requested by the client, Registrant may recommend the services of other professionals
for implementation purposes. The client is 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 from the
Registrant.
If the client engages any recommended unaffiliated 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 the Registrant, shall be
responsible for the quality and competency of the services provided.
It remains the client’s responsibility to promptly notify the Registrant if there is ever any
change in their financial situation or investment objectives for the purpose of reviewing,
evaluating or revising Registrant’s previous recommendations and/or services.
RETIREMENT PLAN CONSULTING
The Registrant also provides retirement plan consulting/management services, pursuant
to which it assists sponsors of self-directed retirement plans organized under the
Employee Retirement Security Act of 1974 (“ERISA”). The terms and conditions of the
engagement shall be set forth in a Retirement Plan Services Agreement between the
Registrant and the plan sponsor.
If the plan sponsor engages the Registrant in an ERISA Section 3(21) capacity, the
Registrant will assist with the selection and/or monitoring of investment options
(generally open-end mutual funds and exchange traded funds) from which plan
participants shall choose in self-directing the investments for their individual plan
retirement accounts. If the plan sponsor chooses to engage the Registrant in an ERISA
Section 3(38) capacity, Registrant may provide the same services as described above, but
may also: create specific asset allocation models that Registrant manages on a
discretionary basis, which plan participants may choose in managing their individual
retirement account; and/or modify the investment options made available to plan
participants on a discretionary basis.
FAMILY OFFICES
The Registrant provides a range of customized family office services, including investment
advice, to a few select clients. Registrant family office services may include advice and
recommendations about matters including asset allocation; portfolio construction; financial
planning - including family governance and succession planning; investment manager
selection; service provider selection; service provider fee and expense negotiation;
investment transaction verification; and consolidated asset and investment portfolio
reporting. Registrant does not provide tax, legal or accounting advice. Each of our family
office clients are supported by a team led by a designated Advisor and is supported by our
in-house investment team and other subject matter experts and consultants the Registrant
may retain to provide us with client-support services, including investment advice. As
discussed in Item 5 below, our family office clients will pay Registrant fees based upon
certain factors.
MISCELLANEOUS
Limitations of Financial Planning and Non-Investment Consulting/Implementation
Services. As indicated above, to the extent requested by a client, Registrant may provide
financial planning and related consulting services. Neither the Registrant nor its
investment adviser representatives assist clients with the implementation of any financial
plan unless they have agreed to do so in writing. The Registrant does not monitor a
client’s financial plan, and it is the client’s responsibility to revisit the financial plan with
the Registrant, if desired.
The Registrant may provide financial planning and related consulting services regarding
non-investment related matters, such as estate planning, tax planning, insurance, etc. The
Registrant does not serve as an attorney, accountant, or insurance agency, and no portion
of its services should be construed as legal or accounting services. Accordingly, the
Registrant does 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 purpose (i.e., attorneys,
accountants, insurance, etc.). Clients are reminded that they 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. 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 the Registrant, shall be responsible
for the quality and competency of the services provided.
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 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.
Use of Mutual and Exchange Traded Funds. Most mutual funds and exchange traded
funds are available directly to the public. Therefore, a prospective client can obtain many
of the funds that may be utilized by Registrant independent of engaging Registrant as an
investment advisor. However, if a prospective client determines to do so, he/she will not
receive the Registrant’s initial and ongoing investment advisory services.
In addition to Registrant’s investment advisory fee described below, and transaction
and/or custodial fees discussed above/below, 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).
Mutual and Exchange Traded Funds with Liquidity Constraints. The Registrant may
utilize mutual funds and/or exchange traded funds that provide for limited liquidity,
generally on a quarterly basis. Therefore, if we determined that the fund was no longer
performing or if you ever determined to transfer your account, the Fund could not be sold
or transferred immediately. Rather, sale or transfer would need to await the quarterly
permitted sale date. Moreover, the eventual net asset value for the fund could be
substantially different (positive or negative) than the Fund value on the date that the sale
was requested. 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 us, in writing, not
to employ any or all such strategies for the client’s account.
Pontera. The Registrant uses
Pontera, a third party platform to facilitate the management
of held away assets such as defined contribution plan participant accounts, with
discretion. Those clients who choose to engage the Registrant to service their held away
accounts will be provided a link to connect their outside accounts to the platform. Once
the client’s account(s) is connected to the platform, Registrant will review the client’s
current account allocations. Registrant will rebalance the connected outside accounts
consistent with the client’s investment goals and risk tolerance. Client account(s) will be
reviewed at least quarterly.
Cash Positions. 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.
Cash Sweep Accounts. Certain account custodians can require that cash proceeds from
account transactions or new deposits, be swept to and/or initially maintained in a
specific custodian designated sweep account. The yield on the sweep account will
generally be lower than those available for other money market accounts. When this
occurs, to help mitigate the corresponding yield dispersion Registrant shall (usually
within 30 days thereafter) generally (with exceptions) purchase a higher yielding money
market fund (or other type security) available on the custodian’s platform, 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.
The above does not apply to the cash component maintained within a Registrant 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.
The client shall remain exclusively responsible for yield dispersion/cash balance
decisions and corresponding transactions for cash balances maintained in any Registrant
unmanaged accounts.
Socially Responsible (ESG) 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 meet 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 Registrant), there can be no assurance that investment in ESG securities or
funds will be profitable, or prove successful. Registrant generally relies on the
assessments undertaken by the unaffiliated mutual fund, exchange traded fund or separate
account portfolio manager to determine that the fund’s or portfolio’s underlying company
securities meet a socially responsible mandate.
Account Aggregation Reporting Services. Registrant uses account aggregation
software, which can incorporate client investment assets that are not part of the assets that
Registrant manages (the “Excluded Assets”). Unless agreed to otherwise, in writing, the
client and/or their other advisors that maintain trading authority, and not Registrant, shall
be exclusively responsible for the investment performance of the Excluded Assets.
Unless also agreed to otherwise, in writing, Registrant does not provide investment
management, monitoring or implementation services for the Excluded Assets. The client
can engage Registrant to provide investment management services for the Excluded
Assets pursuant to the terms and conditions of the Investment Advisory Agreement
between Registrant and the client.
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, fund
manager tenure, style drift, account additions/withdrawals, and/or 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. Clients nonetheless remain subject to the fees described in Item 5 below during
periods of account inactivity.
Non-Discretionary Service Limitations. Clients that determine to engage the Registrant
on a non-discretionary investment advisory basis must be willing to accept that the
Registrant cannot effect any account transactions without obtaining prior consent to any
such transaction(s) from the client. Therefore, in the event of a market correction during
which the client is unavailable, the Registrant will be unable to effect any account
transactions (as it would for its discretionary clients) without first obtaining the client’s
consent.
Miscellaneous Investments. The Registrant does not recommend structured products or
private investment funds. However, the Registrant may, to the extent requested by the
client, review investments previously purchased by the client prior to the client’s
engagement of the Registrant, including structured products and private investment
funds. The Registrant will not include any previously purchased structured product or
private investment fund assets for the purpose of calculating its advisory fee per the fee
schedule at Item 5 below. At no time shall the Registrant accept responsibility for the
performance of any such previously purchased assets.
Business Consulting Services. The Registrant also provides non-investment related
business consulting services to individuals and entities, including professional athletes,
per the terms and conditions of a written agreement between the Registrant and the client.
The amount of the annual fee will be based on a fixed annual fee basis, the amount of
which fee shall depend upon the scope and complexity of the services to be provided.
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 professionals and is
expressly authorized to rely thereon. Moreover, each client is advised that it remains their
responsibility to promptly notify the Registrant if there is ever any change in their
financial situation or investment objectives for the purpose of reviewing, evaluating or
revising Registrant’s previous recommendations and/or services.
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 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.
Disclosure Statement. A copy of the Registrant’s written Brochure and Client
Relationship Summary, as set forth on Part 2A of Form ADV and Form CRS
respectively, shall be provided to each client prior to, or contemporaneously with, the
execution of the Investment Advisory Agreement or Financial Planning and Consulting
Agreement.
C. The Registrant shall provide investment advisory services specific to the needs of each
client. Prior to providing investment advisory services, an investment adviser
representative will ascertain each client’s investment objective(s). Thereafter, the
Registrant shall allocate and/or recommend that the client allocate investment assets
consistent with the designated investment objective(s). The client may, at any time,
impose reasonable 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 $1,504,889,369 in assets under
management on a discretionary basis and $0 in assets under management on a non-
discretionary basis.