Donald W. Nicholson & Associates, Ltd. (“Donald W. Nicholson & Associates” or “the firm”) was
founded by Donald W. Nicholson in 1987. In 1988, the company registered as an investment adviser.
The owner of the firm is Donald W. Nicholson, President, and the firm’s main office is located in
Wilmington, Delaware. Don W. Nicholson currently serves on the Public Policy Committee for the
National Association of Personal Financial Advisors, which focuses on public policy and advocacy
efforts on behalf of the Fee-only planning community.
The firm offers the following investment advisory services to its clients: non-discretionary Asset
Management Services, Financial Planning Services and Retirement Plan Consulting Services. For any
of these services, clients are asked to sign an Engagement Letter, which defines the specific advisory
services for which the client has engaged Donald W. Nicholson & Associates.
Asset Management Services
Under the Asset Management Services offered to clients, Donald W. Nicholson & Associates provides
individualized investment advice to clients based upon the client's specific needs. Through personal
consultations, the firm gathers specific financial data to develop a client’s personalized profile, which
includes a client’s investment objectives, current financial position, risk profile, investment time
horizon, tax situation and liquidity needs. The firm reviews the client's personalized profile and based
upon this review, determines an appropriate asset allocation for the client that takes into account the
client's liquidity needs, portfolio goals, tax objectives and risk tolerance. Donald W. Nicholson &
Associates then recommends specific investments to implement the client's recommended asset
allocation, incorporating a client’s existing holdings where appropriate. The firm typically
recommends use of no-load mutual fund investments to implement asset allocation
recommendations, but may also recommend use of other securities or non- securities products as
appropriate.
As part of the Asset Management Services, the firm provides ongoing continuous monitoring of the
client’s portfolio. The firm will review, at least monthly, the performance of the portfolio and its
assets to ensure the portfolio continues to meet the client’s objectives. The firm may periodically
recommend changes in the portfolio when the performance of the assets, or objectives of the portfolio,
are not being met. At least annually, the account shall be reviewed with the client in order to evaluate
if any rebalancing of assets is necessary. The firm offers this on-going Asset Management Services to
clients on a non-discretionary basis.
Institutional Intelligent PortfoliosTM
Donald W. Nicholson & Associates also provide some portfolio management services through
Institutional Intelligent Portfolios™, an automated, online investment management platform for use
by independent investment advisors and sponsored by Schwab Wealth Investment Advisory, Inc.
(the “IIP Program” and “SWIA,” respectively). Through the IIP Program, we offer clients a range of
investment strategies we have constructed and manage, each consisting of a portfolio of actively
managed and passive index mutual funds and exchange traded funds (“ETFs”), as well as a cash
allocation. The client’s portfolio is held in a brokerage account opened by the client at SWIA’s affiliate,
Charles Schwab & Co., Inc. We are independent of and not owned by, affiliated with, or sponsored or
supervised by SWIA, Charles Schwab & Co., Inc., or their affiliates (together, “Schwab”). The IIP
Program is described in the Schwab Wealth Investment Advisory, Inc. Institutional Intelligent
Portfolios™ Disclosure Brochure (the “IIP Program Disclosure Brochure”), which is delivered to
clients by SWIA during the online enrollment process.
We, and not Schwab, are your investment advisor and primary point of contact with respect to the
IIP Program. We are solely responsible, and Schwab is not responsible, for determining the
appropriateness of the IIP Program for you, choosing a suitable investment strategy and portfolio for
your investment needs and goals, and managing that portfolio on an ongoing basis. SWIA’s role is
limited to delivering the IIP Program Disclosure Brochure to clients and administering the IIP
Program so that it operates as described in the IIP Program Disclosure Brochure.
We have contracted with SWIA to provide us with the technology platform and related trading and
account management services for the IIP Program. This platform enables us to make the IIP Program
available to clients online and includes a system that automates certain key parts of our investment
process (the “IIP System”). The IIP System includes an online questionnaire that helps us determine
your investment objectives and risk tolerance and select an appropriate investment strategy and
portfolio. Clients should note that we will recommend a portfolio via the IIP System in response to
your answers to the online questionnaire. You may then indicate an interest in a portfolio that is one
level less or more conservative or aggressive than the recommended portfolio, but we make the final
decision and select a portfolio based on all the information we have about the you. The IIP System
also includes an automated investment engine through which we manage your portfolio on an
ongoing basis through automatic rebalancing and tax-loss harvesting (if you are eligible and elect to
activate this feature).
We do not receive a portion of a wrap fee for our services to clients through the IIP Program. Under
a wrap fee program, the client generally receives investment advisory services, the execution of
securities brokerage transactions, custody, and reporting services for a single specified fee. Clients
do not pay fees to SWIA in connection with the IIP Program, but we charge clients a fee for our
services as described below under Item 5 Fees and Compensation. Our own advisory fees are not set
or supervised by Schwab. Clients do not pay brokerage commissions or any other fees to Charles
Schwab & Co., Inc. as part of the IIP Program. Schwab does receive other revenues in connection with
the IIP Program, as described in the IIP Program Disclosure Brochure. Bundling asset management
fees, brokerage commissions, transaction fees, and custody fees through participation in a wrap fee
program may cost the client more or less than purchasing such services separately.
We do not pay SWIA fees for its services in the IIP Program so long as we maintain $100 million in
client assets in accounts at Charles Schwab & Co., Inc., that are not enrolled in the IIP Program. If we
do not meet this condition, then we pay SWIA an annual fee of 0.10% (10 basis points) on the value
of our clients’ assets in the Program. This fee arrangement gives us an incentive to recommend or
require that our clients with accounts not enrolled in the IIP Program be maintained with Charles
Schwab & Co., Inc.
Retirement Plan Consulting Services
Donald W. Nicholson & Associates also provides retirement plan consulting services, where it provides
general investment advice and consulting services to sponsors of self-directed retirement plans. In
addition, to the extent requested by the plan sponsor, the firm shall also provide participant education
designed to educate participants to enable them to select an appropriate investment strategy for their
retirement plan accounts.
Prior to engaging the firm, the plan sponsor will be required to enter into a Retirement Plan Consulting
Agreement with Donald W. Nicholson & Associates setting forth the terms and conditions of the
engagement, describing the scope of the services to be provided, the fee arrangement, and the portion
of the fee that is due from the client prior to the firm commencing services. The firm’s fee will be based
on a percentage (%) of the assets within the plan.
Personal Financial Planning Services
The firm also offers Personal Financial Planning to clients. The firm offers a Comprehensive Review or
a Limited Review. These financial planning services may or may not include investment advice. The fee
for Personal Financial Planning services covers the preparation and presentation of a written financial
plan (the “Plan”). Dependent upon the scope of the services to be performed by the firm, the
preparation of the Plan involves cooperating with and guiding such clients in gathering, compiling,
preparing, and analyzing personal financial data.
Our past experience shows that the success of a financial plan lies in the implementation of
recommendations. Once the firm presents the Plan to the client, the firm may also recommend
financial products or networking with other professionals to implement recommendations made in
the Plan. The firm may engage other consultants as may be needed in the preparation of either a
Comprehensive or Limited Financial Plan.
Comprehensive Review: The comprehensive review will include a review of all seven of the
following services:
1. Personal Budgeting
2. Net Worth Analysis
3. Insurance Management
4. Investment Planning
5. Tax Management
6. Estate Management
7. Business Planning
The firm will analyze and make recommendations of the client's present financial situation based on
these seven comprehensive factors. Personal conferences will be scheduled as needed, and a
comprehensive written report, which presents client objectives and a series of specific
recommendations for their fulfillment, will be provided.
Limited Review: The firm’s primary approach is to address the client's financial planning needs in an
in-depth, comprehensive manner, as described above. However, the firm will provide consultations
and/or recommendations relative to a specific analysis, if requested by a client.
Specific analyses offered by the firm from which the client may choose include:
1. Personal Budgeting
2. Net Worth Analysis
3. Insurance Management
4. Investment Planning
5. Tax Management
6. Estate Management
7. Business Planning
General Information Related to Investment Recommendations
Donald W. Nicholson & Associates does not limit its investment recommendations to any specific type
of product or security. A client’s individual needs and objectives are analyzed to determine appropriate
investments and products for the client. Since different types of investments typically involve different
types of risk, the firm conducts a risk analysis of the client and his/her overall portfolio, before
recommending a certain investment. In general, the firm utilizes no-load mutual funds to implement
asset allocation strategies or financial plan recommendations. The firm may also recommend equity
investments in individual stocks, mutual funds, and exchange traded funds. Donald W. Nicholson &
Associates also provides recommendations on fixed income investments, including individual bond
positions, bond mutual funds, certificates of deposit, and fixed income exchange traded funds. In
addition, the firm provides advice related to variable and fixed insurance products, and may also
provide advice on limited partnership investments. In some cases, the firm also provides advice related
to other non-securities topics. In limited cases, the firm may recommend the purchase or sale of options
contracts.
As a service of its comprehensive approach to financial planning, Donald W. Nicholson & Associates
may refer clients to other professionals from whom clients may receive specific necessary services.
For example, the firm may refer clients to certain attorneys or CPAs if legal or accounting services are
needed. In these cases, Donald W. Nicholson & Associates is not affiliated with these other services
providers, nor compensated for the referrals. If the client engages any professional (i.e. attorney,
accountant, insurance agent, etc.), recommended or otherwise, and a dispute arises thereafter relative
to such engagement, the client agrees to seek recourse exclusively from the engaged professional. At
all times, the engaged licensed professional(s), and not Donald W. Nicholson & Associates, shall be
responsible for the quality and competency of the services provided. Clients may choose to work with
these professionals at their sole discretion. In certain instances, and in its sole discretion, the firm may
agree to pay for these other services rendered by other professionals.
Conflict of Interest: Mr. Nicholson serves on the Public Policy Committee of NAPFA. As a member of
the committee, he may be called to review and comment on public policy issues effecting fee-only
investment advisers such as Donald W. Nicholson & Associates.
Non-Discretionary Service Limitations. Clients that determine to engage Donald W. Nicholson &
Associates on a non-discretionary investment advisory basis must be willing to accept that Donald
W. Nicholson & Associates cannot effect any account transactions without obtaining prior verbal
consent to any such transaction(s) from the client. Donald W. Nicholson & Associates will be unable
to effect any account transactions (as it would for its discretionary clients) without first obtaining
the client’s verbal consent. For instance, although the firm does not recommend market timing as
an investment strategy, in the event of a market correction event where the firm cannot reach the
client, a client may suffer investment losses or miss out on investment gains.
Retirement Rollovers – Potential 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 Donald W. Nicholson
& Associates recommends that a client roll over their retirement plan assets into an account to be
managed by Donald W. Nicholson & Associates, such a recommendation creates a conflict of interest
if Donald W. Nicholson & Associates will earn a new (or increase its current) advisory fee as a result
of the rollover. If Donald W. Nicholson & Associates 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),
Donald W. Nicholson & Associates 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 Donald W. Nicholson & Associates, whether it is from an
employer’s plan or an existing IRA. Donald W. Nicholson & Associates’ Chief Compliance Officer,
Donald W. Nicholson, Sr., remains available to address any questions that a client or prospective
client may have regarding the conflict of interest presented by such a rollover recommendation.
Portfolio Activity. Donald W. Nicholson & Associates has a fiduciary duty to provide services
consistent with the client’s best interest. As part of its investment advisory services, Donald W.
Nicholson & Associates 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, the client’s financial
circumstances, and changes in the client’s investment objectives. Based upon these and other
factors, there may be extended periods of time when Donald W. Nicholson & Associates 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. Notwithstanding,
there can be no assurance that investment decisions made by Donald W. Nicholson & Associates will
be profitable or equal any specific performance level(s).
Cash Positions. Donald W. Nicholson & Associates continues to treat cash as an asset class. As such,
unless determined to the contrary by Donald W. Nicholson & Associates, all cash positions (money
markets, etc.) shall continue to be included as part of assets under management for purposes of
calculating Donald W. Nicholson & Associates 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), Donald W. Nicholson & Associates 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, Donald
W. Nicholson & Associates’ advisory fee could exceed the interest paid by the client’s money market
fund. ANY QUESTIONS: Donald W. Nicholson & Associates’ Chief Compliance Officer, Donald W.
Nicholson, Sr., remains available to address any questions that a client or prospective may have
regarding the above fee billing practice.
Account Aggregation Platforms. Donald W. Nicholson & Associates may provide its clients with
access to one or more online account aggregation platforms (the “Platforms”). The Platforms allows
a client to view their complete asset allocation, including those assets that Donald W. Nicholson &
Associates does not manage (the “Excluded Assets”). Donald W. Nicholson & Associates does not
provide investment management, monitoring, or implementation services for the Excluded Assets.
Unless otherwise specifically agreed to, in writing, Donald W. Nicholson & Associates’ service
relative to the Excluded Assets is limited to reporting only. Therefore, Donald W. Nicholson &
Associates 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 Donald W. Nicholson & Associates, shall be exclusively responsible for such investment
performance. Without limiting the above, the Donald W. Nicholson & Associates shall not be
responsible for any implementation error (timing, trading, etc.) relative to the Excluded Assets. The
client may choose to engage Donald W. Nicholson & Associates to manage some or all of the Excluded
Assets pursuant to the terms and conditions of an Investment Advisory Agreement between Donald
W. Nicholson & Associates and the client. The Platforms may also provides access to other types of
information and applications including financial planning concepts and functionality, which should
not, in any manner whatsoever, be construed as services, advice, or recommendations provided by
Donald W. Nicholson & Associates. Finally, Donald W. Nicholson & Associates 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 Donald W. Nicholson & Associates’ assistance
or oversight.
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, Donald W. Nicholson & Associates shall generally purchase a
higher yielding money market fund available on the custodian’s platform with cash proceeds or
deposits, unless Donald W. Nicholson & Associates 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 Donald W.
Nicholson & Associates’ 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 Firm’s unmanaged accounts.
Use of Mutual Funds and ETFs. While Donald W. Nicholson & Associates may recommend allocating
investment assets to mutual funds that are not publicly available, Donald W. Nicholson & Associates
may also recommend that clients allocate investment assets to publicly available mutual funds and
ETFs that the client could obtain without engaging Donald W. Nicholson & Associates as an
investment adviser. However, if a client or prospective client determines to allocate investment
assets to publicly available mutual funds or ETFs without engaging Donald W. Nicholson &
Associates as an investment adviser, the client or prospective client would not receive the benefit of
Donald W. Nicholson & Associates’ initial and ongoing investment advisory services. Other mutual
funds, such as those issued by Dimensional Fund Advisors (“DFA”), are generally only available
through registered investment advisers. Donald W. Nicholson & Associates may allocate client
investment assets to DFA mutual funds. Therefore, upon the termination of Donald W. Nicholson &
Associates’ services to a client, restrictions regarding transferability and/or additional purchases of,
or reallocation among DFA funds will apply. Donald W. Nicholson & Associates’ Chief Compliance
Officer, Donald W. Nicholson, Sr., remains available to address any questions that a client or
prospective client may have regarding the above.
Other Assets. To the extent that Donald W. Nicholson & Associates provides advisory monitoring or
review services for client investment assets for which the Registrant does not maintain custodian
access or trading authority (including initial and ongoing consideration of such assets as part of the
client’s asset allocation), Donald W. Nicholson & Associates may determine to include such assets in
its advisory fee calculation per Item 5 below.
Cybersecurity Risk. The information technology systems and networks that Donald W. Nicholson &
Associates and its third-party service providers use to provide services to its clients employ various
controls, which are designed to prevent cybersecurity incidents stemming from intentional or
unintentional actions that could cause significant interruptions in our operations and result in the
unauthorized acquisition or use of clients’ confidential or non-public personal information. Clients
and Donald W. Nicholson & Associates 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 Donald W. Nicholson &
Associates 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.
Custodian Charges-Additional Fees. As discussed below at Item 12 below, when requested to
recommend a broker-dealer/custodian for client accounts, Donald W. Nicholson & Associates
generally recommends that Schwab serve as the broker-dealer/custodian for client investment
management assets. Broker-dealers such as Schwab charge brokerage commissions, transaction,
and/or other type fees for effecting certain types of securities transactions (i.e., including
transaction fees for certain mutual funds, and mark-ups and mark-downs charged for fixed income
transactions, etc.). The types of securities for which transaction fees, commissions, and/or other
type fees (as well as the amount of those fees) shall differ depending upon the broker-
dealer/custodian (while certain custodians, including Schwab, do not currently charge fees on
individual equity transactions, others do). When beneficial to the client, individual fixed-income
and/or equity transactions may be effected through broker-dealers with whom Donald W.
Nicholson & Associates and/or the client have entered into arrangements for prime brokerage
clearing services, including effecting certain client transactions through other SEC registered and
FINRA member broker-dealers (in which event, the client generally will incur both the transaction
fee charged by the executing broker-dealer and a “trade-away” fee charged by Schwab). These
fees/charges are in addition to Donald W. Nicholson & Associates’ investment advisory fee at Item
5 below. Donald W. Nicholson & Associates does not receive any portion of these fees/charges.
Client Obligations. In performing our services, Donald W. Nicholson & Associates 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. Clients are responsible for promptly notifying Donald
W. Nicholson & Associates if there is ever any change in their financial situation or investment
objectives so that Donald W. Nicholson & Associates can review, and if necessary, revise its previous
recommendations or services.
Donald W. Nicholson & Associates shall provide investment advisory services specific to the needs
of each client. Prior to providing investment advisory services, a Donald W. Nicholson & Associates
representative will ascertain each client’s investment objective(s). Thereafter, Donald W. Nicholson
& Associates 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 our services.
Donald W. Nicholson & Associates does not participate in a wrap fee program.
Disclosure Brochure. A copy of Donald W. Nicholson & Associates’ written Brochure as set forth on
Part 2A of Form ADV, along with Donald W. Nicholson & Associates’ Form CRS (Relationship
Summary) shall be provided to each client prior to, or contemporaneously with, the execution of
the Investment Advisory Agreement or Financial Planning and Consulting Agreement.
Assets Under Management
As of March 29, 2023, Donald W. Nicholson & Associates provided investment advisory services to
$178,257,195 of assets under management on a non-discretionary basis.