Introduction to Sowa Financial Group, Inc.
Sowa Financial Group, Inc., a Rhode Island corporation formed in 2000 ("SFG"), is a federally registered
investment adviser, providing various investment supervisory services to a variety of clients, specifically
individuals and high net worth individuals, trusts, estates and charitable organizations, corporations, and
other business entities. Registration with any state or federal regulator does not imply a certain level of
skill or training and does not imply any endorsement by a state or federal regulatory authority.
I. SFG’s Principal Owner and Advisory Team.
SFG requires all of SFG investment adviser representatives (“SFG Advisers)” to have an appropriate
employment history in the area of business or finance that would indicate an ability to render investment
advice and/or account management. SFG generally expects its SFG Advisers to have obtained (1) a FINRA
Regulation General Securities (Series 7) or equivalent license; and/ or (2) a Series 65 (state investment adviser
representative) license; and/or (3) a Series 66 (state investment adviser representative / agent); and/or (4)
have achieved such professional designation recognized under the regulations of the Rhode Island
Department of Business Regulations, including CERTIFIED FINANCIAL PLANNERTM* designation; or (4)
otherwise qualify for registration as an investment adviser representative under the laws and regulations of
the State of Rhode Island. Predecessor licenses may be substituted where applicable.
SFG was founded by Donald Sowa and is principally owned by Donna Sowa Allard and Daniel Sowa.
II. Services Overview
SFG complies with applicable regulatory requirements and obligations to ensure that clients of SFG
receive individualized treatment based on their identified objectives and financial situations. SFG
provides the following services:
Investment Advisory Services, and
Financial Planning Services
Each of these services is more fully described immediately below.
A. INVESTMENT ADVISORY SERVICES
Regular Review SFG provides its advisory clients continuous investment advisory services described
below based upon client-identified objectives and constraints as well as perceived material changes in
market conditions and performance criteria of client’s portfolio. Clients selecting SFG’s investment
advisory services: (a) grant SFG discretionary authority over the account based on the information
regarding client’s financial situation, investment objectives and other information provided by the client
to SFG, from time to time; (b) may be subject to certain stated minimum portfolio amounts (See Item 7
below); and (c) may be charged different fees based on whether they are new or existing client, and/or as
may be agreed with clients, and/or based on the relative complexity of the services, charge fees different
from (but in no event higher than those stated) those outlined herein. (See Item 5 below). These
distinctions are described below in Item 13.
1.Variations Advisory recommendations and/or strategies may or may not vary among
clients, notwithstanding similar investment objectives, risk tolerances and/or other factors. No assurance
can be given about the ultimate results or success of any investment or insurance recommendation or
strategy. The client is encouraged to review all investment-related topics, together with SFG’s
recommendations, with counsel, accountants and/or other advisers before implementing any SFG
recommendation.
Service Components Clients choosing the Investment Advisory Service option receive the following
advisory services: Portfolio Design or Review; periodic portfolio reviews; periodic reports and the SFG
Newsletters. This Investment Advisory Service is designed for the client who desires regular and
continuous supervisory oversight of their portfolio.
(a) Portfolio Design or Review The Portfolio Design/Review process involves the gathering of
information during meetings (generally one or two face to face meetings) and/or correspondence with clients
from which the SFG Adviser obtains information relative to the client’s investment objectives, risk tolerance,
assets and the like before any recommendation is made or investment strategy is determined. If the client
decides to obtain services from SFG, client selects the desired service options and compensation method,
opens accounts and arranges for the transfer of assets to a qualified custodian, typically National Financial
Services, LLC. (NFS). Potential recommendations and strategies for the Portfolio Design are generally made
during the second or third meeting after the SFG Adviser has an opportunity to review the client's information
and formulate a recommendation and proposed strategy. The intent is to tailor recommendations and
strategies to address client-identified objectives and incorporated client-specified restrictions. As a general
guide, client objectives may align with one of the following descriptions:
Income with Limited Growth - This objective is the most conservative and focuses on the
preservation of the initial investment and the generation of current income. A portfolio
designed to address this objective will typically reflect that a majority of the assets are
invested in fixed income/bonds/cash with up to 25% in equities/ stocks/alternative
investments. It is anticipated that such a portfolio may fluctuate less than the overall
market.
Income with Moderate Growth – This objective generally focuses on increasing capital
sufficient to offset inflation over time while also generating current income. This portfolio
designed will typically invest the majority of assets in fixed income / bonds / cash
equivalents with up to 45% in equities / stocks / alternative investments. Generating income
is the primary goal of this portfolio, with growth as a secondary goal. It is anticipated that
such a portfolio may fluctuate slightly less than the overall market.
Growth and Income - This objective targets a balanced asset allocation consisting of
equities/stock and fixed-income/bonds consistent with the overall market. A portfolio
designed to address this objective seeks to provide growth as the primary objective with
income as a secondary objective, with an allocation of up to 70% in equities/stocks and the
remainder in fixed income/bonds/cash. It is anticipated that such a portfolio may
demonstrate similar fluctuation characteristics as the overall market.
Primarily Growth - This objective targets long-term capital appreciation with little focus on
the generation of current income. Depending on individual circumstances, a portfolio
designed to address this objective is invested in a diversified portfolio of equity-oriented
investments with growth as a primary goal. Such a portfolio will typically invest up to 85%
of its assets in equities/stocks/alternative investments, with the remainder in fixed-
income/bonds/cash. It is anticipated that such a portfolio may fluctuate more than the overall
market.
Growth - This objective seeks maximum growth potential with little-to-no focus on
generating current income. This long-term oriented portfolio is typically invested almost
entirely in equities/stocks/alternative investments, with the remainder, if any, in fixed
income/bonds/cash. This portfolio design offers the highest level of both risk and potential
return. In addition to holding mutual funds whose objective is aggressive growth, this
portfolio may also hold certain sector- type equities as well as individual securities. It is
anticipated that such a portfolio may exhibit significant volatility during periods of market
fluctuation.
2.Discretion / Non-Discretion SFG offers clients Investment Advisory services under which
clients authorize and grant SFG discretionary authority over their accounts as further described in Item 16
below.
3.Trade Execution through Commonwealth
(a)Implementation Upon development and implementation of an investment strategy for the
account, SFG Advisers shall affect the purchase or sale of securities in his/her capacity as registered
representative of Commonwealth through Commonwealth. SFG Advisers who are also registered
representatives of Commonwealth are subject to both contractual and regulatory requirements to execute
all securities trades through Commonwealth. See Item 12 below.
(b)Custody SFG does not take custody of client funds and securities (aside from custody
related to the drafting of advisory fees from client accounts or Standing Letters of Authority on file, as
further described in Item 15). Custody and clearing services for accounts are provided with NFS, an
affiliate of Fidelity Management Trust Company, Inc., as further described in Item 15.
B. FINANCIAL PLANNING SERVICES
1.General In addition to, or instead of, Investment Advisory Services above, clients may,
choose SFG’s Financial Planning Services. Financial Planning Services are offered to clients as a stand-
alone, non-discretionary service, on a non-continuous or continuous basis as agreed upon by the client and
the advisor.
2.Planning Service Where clients elect SFG’s Financial Planning Service, such service
results in the presentation to the client of a written and/or electronic version of the financial plan as of a
date certain (“Plan”) designed according to the client's input as of a specified date and dated instructions
(it may range from an analysis of the client's complete financial picture to recommendations pertaining to
a specific issue about which the client requires financial planning advice).
In general, the Financial Planning Service and the Plan identify client’s needs and goals taking into account
client’s then identified investment objectives for the short and long term, client’s then identified risk
tolerance, client’s assets and liabilities, and other information client believes might be helpful or pertinent
to the SFG Adviser in constructing the Plan. The SFG Adviser takes the information supplied by client and
performs a financial analysis to determine the components of the Plan and the basis for the SFG Adviser’s
recommendations. Finally, the SFG Adviser provides the client with recommendations designed to meet
client’s short and/or long term and/or other stated objectives, risk tolerance and investment criteria. Specific
investment recommendations are not made in this process; rather, a client is presented with general advice
as to potential sector and asset class allocation.
3.Financial Plan Review At client's request, an SFG Adviser will update and/or review an
existing Plan to determine whether it continues to meet the client’s objectives, changed or otherwise. For
the Financial Plan Review, the same financial planning criteria set forth above are utilized.
4.Implementation Once the SFG Adviser has completed the Financial Plan, a client is under
no obligation to obtain additional services from SFG. The client may elect to take no action in respect of the
Plan or may elect to take the Plan to whomever client chooses for additional action, including investment
purchases, if any. If client determines to have SFG Advisers in their capacities as Commonwealth registered
representatives implement the recommendations and/or have SFG actively manage or review a portfolio,
client makes a portfolio services election pursuant to Item 4.A. immediately above and thereby becomes an
Investment Advisory Services client.
C. Commonwealth Financial Program Offerings
Commonwealth Financial Network (“Commonwealth”) makes available certain asset management
programs to SFG as part of its contract with Commonwealth for platform services. These asset management
programs are described below. In such cases where we offer Commonwealth’s asset management programs
to you, SFG remains responsible for the suitability and appropriateness of the investment advisory services
provided. This arrangement does not create an advisory relationship between Commonwealth and SFG or
Commonwealth and you. It is our responsibility to comply with all laws, rules, and regulations governing
the provision of investment advice to you, including, but not limited to, the Investment Advisers Act of
1940 (“Advisers Act”), as amended, and the rules promulgated thereunder, as well as all applicable state
statutes, rules, and regulations that apply to our business. SFG is responsible for the accuracy of all records
that reflect your financial condition, risk tolerance, and investment objectives of your account(s); that the
orders that we place with or through Commonwealth on your behalf are suitable for you and consistent
with our fiduciary duty to you; and that the investment advice and advisory services provided to you in
general are and remain appropriate for you. Commonwealth will provide, or cause to be provided, to
client’s trade confirmations and custodial account statements. Commonwealth will provide or will
otherwise make available to the advisor duplicate trade confirmations and Client custodial account
statements.
SFG has entered into an agreement to offer clients access to certain programs offered by Commonwealth
Financial Network (“Commonwealth”), an SEC-registered investment adviser. Specifically,
Commonwealth’s PPS Select Account Program and retirement Plan Consulting Program may be offered.
1. PPS Select: The PPS Select Program offers a variety of model portfolios from which investors
may choose. The PPS Select model portfolios are created and managed on a discretionary basis by
Commonwealth’s Investment Management and Research team. The advisor will help the client
determine which PPS Select models are best suited for the client based on his or her risk profile,
investment objectives, and preferences, leaving the actual trading decisions to the
Investment
Management and Research team. PPS Select offers a variety of model portfolios with varying
investment product types, including mutual fund and ETF portfolios, equity portfolios, fixed income
portfolios, and variable annuity subaccount portfolios.
2. Retirement Plan Consulting: We provide a fee-for-service consulting program whereby our
advisors offer onetime or ongoing advisory services to qualified retirement plans. Through the
Retirement Plan Consulting Program, advisors assist plan sponsors with their fiduciary duties and
provide individualized advice based upon the needs of the plan and/or plan participants regarding
investment management matters, such as:
Investment policy statement support
Plan menu design and monitoring
Service provider support
Participant advice programs
III. IRA Rollover Considerations
As part of our financial planning and advisory services, we may provide you with recommendations and
advice concerning your employer retirement plan or other qualified retirement account. When appropriate,
we may recommend that you withdraw the assets from your employer’s retirement plan or other qualified
retirement account and roll the assets over to an individual retirement account (“IRA”) to be managed by
our firm or a Third-Party Manager that we recommend. If you elect to roll the assets to an IRA under our
management, we will charge you an asset-based fee as described in Item 5. This practice presents a conflict
of interest because our Advisory Representative has an incentive to recommend a rollover to you for the
purpose of generating fee-based compensation rather than solely based on your needs. You are under no
obligation, contractually or otherwise, to complete the rollover. Furthermore, if you do complete the
rollover, you are under no obligation to have your IRA assets managed under our program or a Third-
Party Managed Program. You have the right to decide whether to complete the rollover and the right to
consult with other financial professionals.
Some employers permit former employees to keep their retirement assets in their company plan. Also,
current employees can sometimes move assets out of their company plan before they retire or change jobs.
In determining whether to complete the rollover to an IRA, and to the extent the following options are
available, you should consider the costs and benefits of each.
An employee will typically have four options:
1. Leave the funds in your employer’s (former employer’s) plan.
2. Roll over the funds to a new employer’s retirement plan.
3. Cash out and take a taxable distribution from the plan.
4. Roll the funds into an IRA rollover account.
Each of these options has advantages and disadvantages. Before making a change, we encourage you to
speak with your financial advisor, CPA and/or tax attorney.
Before rolling over your retirement funds to an IRA for us to manage or to a Third-Party Managed
Program, carefully consider the following (NOTE: This list is not exhaustive):
1. Determine whether the investment options in your employer’s retirement plan address your
needs or whether other types of investments are needed.
a. Employer retirement plans generally have a more limited investment menu than IRAs.
b. Employer retirement plans may have unique investment options not available to the public,
such as employer securities or previously closed funds.
2. Your current plan may have lower fees than our fee and/or the Third-Party Manager’s fee
combined.
1. If you are interested in investing only in mutual funds, you should understand the cost structure
of the share classes available in your employer’s retirement plan and how the costs of those
share classes compare with those available in an IRA.
3. You should understand the various products and services available through an IRA provider and
their costs.
4. It is likely you will not be charged a management fee and will not receive ongoing asset
management services unless you elect to have such services. If your plan offers management
services, the fee associated with the service may be more or less than our fee and/or the Third-
Party Manager’s fee combined.
5. The Third-Party Manager’s or our management strategy may have higher risk than the options
provided to you in your plan.
6. Your current plan may offer financial advice, guidance, management and/or portfolio options at
no additional cost.
7. If you keep your assets titled in a 401(k) or retirement account, you could potentially delay your
required minimum distribution beyond age 73.
8. Your 401(k) may offer more liability protection than a rollover IRA; each state varies. Generally,
Federal law protects assets in qualified plans from creditors. Since 2005, IRA assets have been
generally protected from creditors in bankruptcies; however, there can be exceptions. Consult
an attorney if you are concerned about protecting your retirement plan assets from creditors.
9. You may be able to take out a loan on your 401(k), but not from an IRA.
10. IRA assets can be accessed any time; however, distributions are subject to ordinary income tax
and may also be subject to a 10% early distribution penalty unless they qualify for an exception
such as disability, higher education expenses or a home purchase.
11. If you own company stock in your plan, you may be able to liquidate those shares at a lower
capital gains tax rate.
12. Your plan may allow you to hire us or another firm as the manager and keep the assets titled
in the plan name.
It is important that you understand your options, their features, and their differences, and decide whether
a rollover is best for you. If you have questions, contact us at our main number listed on the cover page of
this brochure.
In addition to complying with applicable SEC rules, SFG is subject to certain rules and regulations adopted
by the U.S. Department of Labor when we provide nondiscretionary investment advice to retirement plan
participants and IRA owners. When these DOL rules apply, our advisors and SFG are “fiduciaries”, for
purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and the Internal
Revenue Code of 1986 (“the Code”), as amended. Therefore, SFG and our advisors may not receive
payments that create conflicts of interest when providing fiduciary investment advice to plan sponsors, plan
participants, and IRA owners, unless we comply with a prohibited transaction exemption (“PTE”).
Beginning December 20, 2021, SFG and our advisors will comply with ERISA and the Code by using PTE
2020-02. As fiduciaries under ERISA and the Code, we render advice that is in plan participants’ and IRA
customers’ best interest. SFG’s and our advisors’ status as an ERISA/Code fiduciary is limited to
ERISA/Code covered nondiscretionary advice and recommendations regarding rolling over a retirement
account and does not extend to all situations.
IV. Client Investment Restrictions
Clients reserve the right to impose restrictions on certain securities or types of securities that they do not
wish to be included in their investment portfolio. In the event that restrictions are imposed by the client, the
advisor shall include the request in the client file and clearly notate the alert section of the CRM client profile
to ensure the restriction is honored. Clients must provide and regularly update accurate and complete
information identifying client’s investment objectives, risk tolerance and investment restrictions, if any, and
other like information, when selecting Investment Advisory Services. Each Investment Advisory Service
account is reviewed on a periodic basis by the client’s SFG Adviser to determine if the investments are in
line with client’s identified objectives and that investment guidelines and account restrictions are being
followed.
V. Wrap Fee Programs
SFG offers investment advisory services through the wrap fee program sponsored by Commonwealth,
namely the Preferred Portfolio Services Select wrap fee program (“PPS Select Program”), which generally
offers model portfolio allocations for investments in mutual funds and exchange traded funds. Clients
selecting this service shall be provided with Commonwealth’s ADV and Regulation BI disclosures for the
PPS Select Program, and the clients shall enter into a Program Client Agreement with Commonwealth as
the wrap fee program sponsor and portfolio manager.
For clients utilizing the PPS Select Program, SFG will, based on an assessment of the client’s financial needs
and objectives, select the model portfolio or portfolios to be utilized by the client within the Select program.
Portfolio management is provided by Commonwealths’ Asset Management team. SFG will provide ongoing
oversight of the portfolio, including, but not limited to, determining if the selected model portfolio(s) remain
appropriate over time in light of the client’s investment objectives, and make changes to the portfolio
selections as may be necessary.
VI. Assets Under Management As of December 31, 2023, SFG has the following assets
under management:
Non-Discretionary Discretionary TOTAL
Assets: $0 $352,181,717.68 $352,181,717.68
VII. Program Choice Conflicts of Interest
Clients should be aware that the compensation to SFG and your advisor will differ according to the specific
advisory programs or services provided. This compensation to SFG and your advisor may be more than
the amounts we would otherwise receive if you participated in another program or paid for investment
advice, brokerage, or other relevant services separately. Lower fees for comparable services may be
available through our firm or from other sources. SFG and your advisor have a financial incentive to
recommend advisory programs or services that provide us higher compensation over other comparable
programs or services available from our firm or elsewhere that may cost you less. For example, the costs
you will incur to have your account managed by our firm may be more than what other similar firms may
charge. It’s important to understand all the associated costs and benefits the program and services you
select so you can decide which programs and services are best suited for your unique financial goals,
investment objective, and time horizon. We encourage you to review our Form CRS and to discuss your
options with your advisor.
In addition, Commonwealth offers our firm and our advisors one or more forms of financial benefits based
on our total assets under management held at Commonwealth or in Commonwealth’s PPS Program
accounts, as well as financial assistance for transitioning from another firm to Commonwealth. The types
of financial benefits that your advisor may receive from Commonwealth include, but are not limited to,
forgivable or unforgivable loans, enhanced payouts, and discounts or waivers on transaction, platform,
and account fees; technology fees; research package fees; financial planning software fees; administrative
fees; brokerage account fees; account transfer fees; licensing and insurance costs; and the cost of attending
conferences and events. The enhanced payouts, discounts, and other forms of financial benefits that your
advisor may have the opportunity to receive from Commonwealth provide a financial incentive for our
firm and your advisor to select Commonwealth as broker/dealer for your accounts over other
broker/dealers from which they may not receive similar financial benefits. Please see items 12 and 14 of
this Brochure for more detailed information about these types of conflicts and our relationship with
Commonwealth.
Commonwealth charges our advisors an administrative fee at the same time clients are charged asset-
based fees for their managed accounts. The administrative fee is charged to and paid by the advisor rather
than the advisor’s clients and is calculated as a percentage of the total managed account assets, including
cash and money market positions, held by the advisor’s clients. The administrative fee is used to offset
Commonwealth’s maintenance costs associated with account reporting and reconciliation.
In the same manner as many advisors offer asset management fee discounts to their larger clients,
Commonwealth offers those advisors to whom it charges administrative fees discounts based on their total
assets under management. As these advisors grow their business, Commonwealth’s economies of scale are
shared with those advisors by reducing the percentage amount of administrative fees that would otherwise be
charged to the advisors. The advisors receive discounts on the administrative fee when they reach specified
asset levels, starting at $10 million. As the amount of the advisors’ client assets grows above certain levels,
the advisors receive larger percentage discounts to the administrative fees. Some advisors have negotiated
a flat administrative fee with Commonwealth. Others may have negotiated a specific payout for a period
of time as part of their agreement to join the firm.
Additionally, advisors with AUM of at least $25 million qualify for an increased payout percentage on
their clients’ management fees, starting at 90.00% and rising to a maximum of 99.00% as their AUM
grows.
These discounts in administrative fees and higher payouts for reaching various AUM levels present a
conflict of interest because they provide a financial incentive for advisors who receive the discounts to
recommend PPS programs or other managed or wrap account programs over other available programs that
do not offer such discounts or higher payouts to the advisors. On the other hand, because Commonwealth
does not assess administrative fees to advisors when they use certain other third party managed account
programs depending upon the costs and fees of a particular third-party program, advisors may have a
financial incentive to use one or more third party programs, which also creates a conflict of interest.