Madrona Financial Services, LLC (“Madrona”) is an SEC-registered investment adviser with its
principal place of business located in Washington. We began conducting business in 1999.
Brian Evans is Madrona’s majority member, as well as its Manager and Chief Compliance Officer.
Madrona offers the following advisory services to our clients:
INVESTMENT SUPERVISORY SERVICES ("ISS")
MODEL PORTFOLIO MANAGEMENT
Our firm provides portfolio management services to clients using model asset allocation
portfolios. Each model portfolio is designed to meet a particular investment goal, primarily
through the selection of exchange traded funds (ETFs).
Conservative: This target asset mix may be appropriate for individuals who seek to minimize
fluctuations in market value by taking an income-oriented approach with some potential for
capital appreciation, accepting lower returns in exchange for price stability.
Moderate: This target asset mix may be appropriate for individuals who seek potential for
capital appreciation and some growth and can withstand moderate fluctuations in market value.
This portfolio should provide a well-balanced diversification.
Growth: This target asset mix may be appropriate for individuals who have a preference for
growth and can withstand significant fluctuations in market value, especially over the short term.
This model is designed for longer-term investors.
Aggressive: This target asset mix may be appropriate for individuals who seek aggressive
growth and can tolerate wide fluctuations in market values, especially over the short term. This
portfolio is for long-term investors with many years before they intend to withdraw income.
We manage these advisory accounts on a discretionary basis. Account supervision is guided
by the client's stated objectives (i.e., maximum capital appreciation, growth, income, or growth
and income), as well as tax considerations.
Through personal discussions with the client in which the client's goals and objectives are
established, we determine if the model portfolio is suitable to the client's circumstances. Once
we determine the suitability of the portfolio, the portfolio is managed based on the portfolio's
goal, rather than on each client's individual needs. Clients, nevertheless, have the opportunity
to place reasonable restrictions on the types of investments to be held in their account.
Clients retain individual ownership of all securities.
We do not limit our investment advice to specific types of securities. Because some types of
investments involve certain additional degrees of risk, they will only be
implemented/recommended when consistent with the client's stated investment objectives,
tolerance for risk, liquidity and suitability.
To ensure that our initial determination of an appropriate portfolio remains suitable and that the
account continues to be managed in a manner consistent with the client's financial
circumstances, we will:
1. Regularly contact clients to confirm whether there have been any changes in the client's
financial situation or investment objectives;
2. be reasonably available to consult with the client; and
3. maintain client suitability information in each client's file.
PENSION AND PROFIT-SHARING PLAN CONSULTING SERVICES
We also provide several advisory services separately or in combination. While the primary clients
for these services will be pension, profit-sharing and 401(k) plans, we offer these services, where
appropriate, to individuals and trusts, estates and charitable organizations. Pension and Profit-
Sharing Plan Consulting Services are comprised of three distinct services. Clients may choose
to use any or all of these services.
Investment Policy Statement (“IPS”) Preparation:
We may meet with the client (in person or over the telephone) to determine an appropriate
investment strategy that reflects the plan sponsor's stated investment objectives for
management of the overall plan. Our firm may then prepare a written IPS detailing those needs
and goals, including an encompassing policy under which these goals are to be achieved. The
IPS would also list the criteria for selection of investment vehicles as well as the procedures and
timing interval for monitoring of investment performance.
Selection of Investment Vehicles:
We assist plan sponsors in constructing appropriate asset allocation models. We will then review
various mutual funds and/or exchange-traded funds (both index and managed) to determine
which investments are appropriate to implement the client's IPS. The number of investments to
be recommended will be determined by the client, based on the IPS.
Employee Communications:
For pension, profit-sharing and 401(k) plan clients with individual plan participants exercising
control over assets in their own account (''self-directed plans''), we also provide quarterly
educational support and may provide investment workshops designed for the plan participants
when the plan sponsor engages our firm to provide these services. The nature of the topics to
be covered will be determined by us and the client under the guidelines established in ERISA
Section 404(c). The educational support and investment workshops will NOT provide plan
participants with individualized, tailored investment advice or individualized, tailored asset
allocation recommendations.
FINANCIAL PLANNING
For investors with at least $500,000 in investable assets, we commonly provide free financial
planning services. We hope this will be the first step in a longer-term investment management
relationship. We also make financial planning services available to clients as a stand-alone
service for a fee. We enter into an Engagement Letter, rather than an advisory agreement, with
clients to whom we provide free planning. The Engagement Letter describes the planning
services provided, as well as limitations on the free services.
For investors with less than $500,000 in investable assets, our typical financial planning fee is
$2,500 but that fee can be negotiated. Clients are not required to obtain a financial plan from us.
Financial planning is a comprehensive evaluation of a client’s current and future financial state
by using currently known variables to predict future cash flows, asset values and withdrawal
plans. Through the financial planning process, all questions, information and analysis are
considered as they impact and are impacted by the entire financial and life situation of the client.
Clients purchasing this service receive a written report which provides the client with a detailed
financial plan designed to assist the client to achieve his or her financial goals and objectives.
In general, the financial plan can address any or all of the following areas:
▪ PERSONAL: We can review budgeting, personal liability, estate information and financial
goals.
▪ TAX AND CASH FLOW: We can analyze the client’s income tax and spending and
planning for past, current and future years; then illustrate the impact of various
investments on the client's current income tax and future tax liability.
▪ INVESTMENTS: We can analyze investment alternatives and their effect on the client's
portfolio.
▪ INSURANCE: We can review existing policies to address proper coverage for life, long-
term care and liability.
▪ RETIREMENT: We can analyze current strategies and investment plans to help the client
achieve his or her retirement goals.
▪ DEATH AND DISABILITY: We can review the client’s cash needs at death, income needs
of surviving dependents, estate planning and long-term care.
▪ ESTATE: We can assist the client in assessing and developing long-term strategies,
including as appropriate, living trusts, wills, review estate tax, powers of attorney, asset
protection plans and nursing homes.
We typically gather required information through in-depth personal interviews. Information
gathered includes the client's current financial status, tax status, future goals, return objectives
and attitudes towards risk. We carefully review documents supplied
by the client, including a
questionnaire we supply, and prepare a written report. Should the client choose to implement
the recommendations contained in the plan, we suggest the client work closely with his/her
attorney, accountant, insurance agent, and/or stockbroker.
If clients choose to implement the plan through Madrona, we will enter into a new investment
advisory agreement.
We also provide general non-securities advice on topics that may include tax and budgetary
planning, estate planning and business planning.
Typically, the financial plan is presented to the client within three months of the contract date,
provided that all information needed to prepare the financial plan has been promptly provided.
Financial Planning recommendations are not limited to any specific product or service offered
by a broker-dealer or insurance company. All recommendations are of a generic nature.
CONSULTING SERVICES
Clients can also receive investment advice on a more focused basis, in tandem with other
services. This may include advice on only an isolated area(s) of concern such as estate planning,
retirement planning, or any other specific topic. We also provide specific consultation and
administrative services regarding investment and financial concerns of the client.
Consulting recommendations are not limited to any specific product or service offered by a
broker-dealer or insurance company. All recommendations are of a generic nature. Our affiliate
Madrona Advisory Group, LLC, provides succession-related consulting, as opposed to
investment and financial planning-related consulting. Please see Item 10 for additional
information.
MADRONA “ROOTED WEALTH”
For investors with more than $500,000 in investable assets, we offer the following additional
services. We refer to this as our “Rooted Wealth” services, and is made available to clients who
select Madrona as the primary investment adviser for their investable assets, or who purchase
an insurance product (e.g., an annuity or life insurance policy) through our insurance affiliate. The
following services are made available in the Rooted Wealth services for no additional charge,
and include some services that may be provided to us by our CPA affiliate, Bauer Evans. Clients
with less than $500,000 in investable assets may request these services pursuant to a separate
service agreement and the payment of additional fees.
▪
Reviewing and prioritizing client goals and objectives
▪
Developing a risk assessment and asset management strategy
▪
Reviewing client’s current investment portfolio
▪
Identifying tax planning strategies to optimize financial position
▪
Developing an action plan to implement the agreed-upon recommendations
Assisting client with the implementation of the recommendations
Making requested adjustments to the original financial projection
Consulting related to:
o making financial decisions
o assessing tax consequences of future transactions
o comparing and explaining alternative investments or financial products
o reviewing estate planning documents which may include checking for proper
beneficiary designations and/or a basic assessment of existing estate
documents
o assessing life insurance needs
Referral to other professionals, as required, to assist with implementation of the
action plan
The services above will be performed based on the information the client provides. We will not
verify the accuracy or completeness of the information provided to us or otherwise gather
evidence for the purpose of performing the services.
We do not prepare tax returns, business financial statements, or business valuations. We may
refer you to a related party, Bauer Evans, Inc. P.S. to have these services performed as part of
a separate engagement. Fees associated with those services would be communicated by Bauer
Evans.
We do not draft legal documents or provide legal advice. We may refer clients to an attorney for
these services or to review questions that we believe extend beyond our expertise. Clients should
consult an attorney for all legal advice.
We do not analyze or provide recommendations related to personal insurance, such as home
and auto insurance. For questions related to this, we recommend clients consult with their
personal insurance agent.
SUB-ADVISORY SERVICES TO OTHER INVESTMENT ADVISERS
We maintain various agreements with unaffiliated investment advisers to provide sub-advisory
services related to DST and other real-estate-focused investments. These services are provided
directly to the adviser, not to the clients of that adviser. On occasion, and at the request of the
adviser, we will consult directly with adviser’s client on technical DST questions. The adviser will
remain responsible for our fees and for overseeing the application of our recommendations to the
adviser’s client’s personal circumstances. Our services include any of the following, with the
actual services identified in the agreement between Madrona and the other adviser:
▪ Providing education on real estate topics
▪ Providing recommendations for initial and rollover DST allocations
▪ Marketing consulting
▪ Providing consulting services related to DST sales
▪ Analysis of “sell versus hold” decisions for current DST holdings being sold to REITs
▪ Consulting regarding public and private REITs
▪ Analysis of real estate cash flow from rental properties
▪ Administrative assistance, including fee billing and disbursal on behalf of the other adviser,
and preparation of DST paperwork for end-client signatures
▪ Providing income tax advice, through our affiliate Bauer Evans, relating to real estate sales
and step-up in basis
▪ Providing consulting services related to reporting of DST transactions on income tax
returns, again through our affiliate Bauer Evans. This service expressly excludes tax
preparation services
Our fees are negotiated with the adviser but are typically 50% of the advisory fees that adviser is
earning on DSTs or similar real investments. In all cases the fee is due to Madrona from the
third-party adviser, not from that adviser’s end-client. Where Madrona is contracted to provide
administrative assistance with fee billing, after deducting fees due to the other adviser(s) from
client accounts, we retain our own sub-advisory fees and pay the balance. If amounts charged
are not sufficient to cover our fees, we will seek to obtain remaining amounts due from the other
advisers, not from the underlying client accounts. Where Bauer Evans is providing accounting
or tax services, Bauer Evans will be paid an additional fee, in addition to the advisory fees paid
to Madrona.
We have an agreement in place with an unaffiliated adviser to refer other advisers to us that
might be interested in DST sub-advisory services. See Item 14 for additional information on this
referral relationship.
Important Information for Retirement Investors
When we recommend that you rollover retirement assets or transfer existing retirement assets
(such as a 401(k) or an IRA) to our management, we have a conflict of interest. This is because
we will generally earn additional revenue when we manage more assets. In making the
recommendation, however, we do so only after determining that the recommendation is in your
best interest. Further, in making any recommendation to transfer or rollover retirement assets,
we do so as a “fiduciary,” as that term is defined in ERISA or the Internal Revenue Code, or both.
We also acknowledge we are a fiduciary under ERISA or the Internal Revenue Code with respect
to our ongoing investment advisory recommendations and discretionary asset management
services, as described in the advisory agreement we execute with you. To the extent we provide
non-fiduciary services to you, those will be described in the advisory agreement.
AMOUNT OF MANAGED ASSETS
As of 12/31/2023, we were actively managing approximately $393 million of clients' assets, all on
a discretionary basis.
We also had assets under advisement, including illiquid DSTs and non-traded REITS, of
approximately $301 million.