Introduction, Firm History and Owners
Prospera Financial Services, Inc. (referred to as PFS, we/us/our throughout this document) is a corporation formed under the laws of the State of Texas
and is dually registered as an investment advisor and broker-dealer. We have been in business since 1982.
We are registered with the Securities and Exchange Commission (SEC) as an investment advisor firm and as a broker-dealer firm. In our broker-dealer
capacity, we are a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). We are
wholly owned by Prospera Financial, LLC which in turn is majority indirectly owned and operated by the following who hold the following offices in Prospera
Financial:
• David Walter Stringer, Co-CEO
• Richard Dean Pascuzzi, Senior Vice President and Secretary
• Tim Alan Edwards, Co-CEO
This Brochure is intended to provide you with information regarding our investment advisory services, fee arrangements, qualifications, and business
practices that should be considered before becoming our advisory client.
Individuals who are appropriately licensed, qualified or approved as investment advisor representatives with us will be authorized to provide investment
advisory services for us. Investment advisor representatives only provide services and charge fees based on the descriptions detailed in this document.
However, the exact services you will receive and the fees you will be charged depend on your particular investment advisor representative. Fees also
vary depending on your geographic location and/or your selected investment advisor representative. Investment advisor representatives are instructed to
consider your individual needs when recommending an advisory platform.
Most of our investment advisor representatives are approved to also provide investment advice in their separate capacity as registered representatives of
our dually registered broker-dealer and insurance advice as agents of our affiliated insurance agency Prospera Life & Annuity. When acting as a
registered representative, these representatives will charge commissions on a per-transaction basis when implementing their advice for clients, and when
acting as an insurance agent, these agents will receive insurance commission and trails when implementing recommending insurance sales for advisory
clients. These are conflicts for your Financial Advisors to make insurance or brokerage investment recommendations.
When deciding which, if any, of the advisory programs available through us is appropriate for your needs, you should bear in mind that fee-based accounts,
when compared with commission-based accounts, may result in lower costs during periods when trading activity is heavier, such as the year an account is
established. However, during periods when trading activity is lower, fee-based accounts may actually result in higher annual costs. The total cost for
transactions under a fee account versus a commission account can vary significantly and depends upon a number of factors, such as account size, amount
of turnover (number of transactions), type and quantities of securities purchased or sold, commission rates and the client’s tax situation. You should have a
conversation with your investment advisor representative and read this Brochure carefully as it explains our programs in detail.
Our investment advisor representatives and their branch offices may use marketing names or other names that are held out to the public. Such names
are known as “doing business as” or “dba” names. The purpose for using these other names is so that the investment advisor representative can create
an identifiable brand that is specific to him or her personally or to their branch office but separate from us. While we allow our investment advisor
representatives to use other names, they have been instructed to disclose on advertising and client correspondence that their advisory services and
securities are offered through us.
Advisory Services Tailored to Individual Client Needs
Services are always provided based on individual client needs. This means, for example, that you are given the ability to impose restrictions on your
accounts managed by us, including specific investment selections and sectors. Investment advisor representatives work with you on a one-on-one basis
through interviews and questionnaires to determine your investment objectives and suitability information. Prospera will provide services that reflect
prudence and diligence based on your stated investment objectives, risk tolerance, financial circumstances, and investment needs, without regard to
the financial or other interests of us, your financial advisor or any affiliate or related entities
.
Wrap-Fee Program versus Portfolio Management Program
We provide asset management services through both wrap-fee programs and traditional management programs. Under a wrap-fee program, advisory
services and transaction services are provided for one fee. This is different from traditional management programs whereby advisory services are provided
for a fee, but transaction services are billed separately on a per-transaction basis. From a management perspective, there is no fundamental difference in
the way we manage wrap-fee accounts versus traditional management accounts other than the way in which you pay for transaction services. Therefore, a
wrap program will be cheaper for you compared to a traditional management account assessing a transaction charge if the management fee offered by
your Investment Advisor Representative (IAR) is equal for both programs. It is a conflict if our IAR recommends a traditional management account
assessing a transaction fee when a comparable wrap fee advisory program is available due to the conflicts discussed herein.
Advisory Services
PFS provides its clients with investment management and/or consulting services in connection with programs we developed and through programs
sponsored by Envestnet Asset Management, Inc. (Envestnet) and Wells Fargo Advisors (Wells Fargo).
Envestnet is an SEC Registered Investment Advisor providing integrated portfolio, practice management and reporting solutions to PFS and our
investment advisor representatives.
In November 2016, First Clearing, LLC merged and consolidated its operations into Wells Fargo Advisors, LLC. The resulting firm is now known as Wells
Fargo Clearing Services, LLC (WFCS or FCC), Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. WFCS
operates its brokerage and advisory business under the trade name “Wells Fargo Advisors”. First Clearing is also a trade name used by WFCS when
carrying customer accounts and acting as custodian for funds and securities deposited through introducing firms such as PFS or as a result of
transactions it processes for customer accounts.
Programs offered by us that are not sponsored by Envestnet or Wells Fargo, include:
• Summit Advisory Program
• Summit-OP Advisory Program, and
• Prospera Financial Planning Program
These programs do not have separate disclosure brochures, because this document and the attached wrap brochure serve as their disclosure brochure.
If you open an account through a program sponsored by Wells Fargo, you will receive the applicable program disclosure brochure prepared and
distributed by Wells Fargo.
PFS generally requires using First Clearing as the qualified custodian and clearing broker-dealer for all client accounts established within the Summit
Advisory Program. The custodians for the Summit-OP Advisory Program will vary depending on the assets managed and where those assets are kept.
Recommending First Clearing is based on several factors more thoroughly discussed in the Brokerage Practices section of this Brochure.
First Clearing is the trade name used by Wells Fargo for clearing and custodial services and therefore the decision to use Wells Fargo sponsored programs
is a main factor in also recommending First Clearing and vice-versa. Programs offered by us that are sponsored by Wells Fargo include:
• Private Investment Management (“PIM")
• Asset Advisor
• Allocation Advisors
• Masters
• Diversified Managed Allocations
• Wells Fargo Compass
• Private Adviser Network
• CustomChoice
• FundSource and Pathways.
While these Wells Fargo programs are described in our wrap brochure to this disclosure, these programs are sponsored, administered, controlled, and
billed exclusively by Wells Fargo and its affiliates. PFS has described and represented these programs accurately and comprehensively to the best of its
knowledge, but Wells Fargo’s own disclosures will always be controlling and the definitive source for conflicts or features of these programs.
While you may be solicited to establish an account through any of the programs described in this document, not all programs offered are suitable for you.
Therefore, your investment advisor representative must analyze your financial situation to recommend a program or service that is suitable for you. Further,
it should be noted while you receive individualized treatment from your investment advisor representative, if you have an account managed by us (i.e. the
PFS investment advisor representative is responsible for selecting underlying portfolio holdings within client accounts) you will receive more personalized
treatment than if your account is managed by selected third-party money managers (i.e. the selected money manager is responsible for selecting
underlying portfolio holdings within client accounts).
PFS Investment Advisor Representative Managed Programs Sponsored by PFS
Each program described in this section requires that we enter into an advisory agreement together for services to be provided. Either of us may end the
agreement by providing notice to the other party. In the event you end our services (preferably in writing), we will terminate the agreement effective with
your notification. We may end our services at any time by providing you with written notice. If services are ended within five (5) business days of executing
the agreement, services will be ended without penalty. If services are ended after five (5) business days, your accounts, including qualified and/or ERISA
accounts, are charged a termination fee to close the Account.
SUMMIT ADVISORY PROGRAM
PFS sponsors the Summit program, which is a wrap-fee program and does not bill transaction costs separately from the overall management fee.
Through Summit, we provide investment supervisory and management services defined as providing continuous investment advice based on your
individual needs. Services are provided on a discretionary (Advisor Directed) or non-discretionary (Client Directed) basis. Upon execution of a Summit
Advisory Agreement, we will assist you in establishing an individual account (Account) with us (as the introducing broker-dealer) which is cleared through
WFCS. All client accounts through the Summit program must be established through WFCS, which serves as the qualified custodian-broker-dealer.
Your investment advisor representative will construct a portfolio for you consisting of, but not necessarily limited to, equity investments, fixed income, no-
load mutual funds and mutual funds traded at NAV.
In addition to the asset management fee, we offer our services on a performance-based fee arrangement to qualifying clients. Not all qualifying clients
will be charged a performance-based fee as the determination to charge a performance-based fee will be made between the client and the investment
advisor representative on a case-by-case basis.
Our performance-based fee arrangement shall comply with Section 205-3 of the Investment Advisers Act of 1940. According to Section 205-3, you must
meet the SEC’s definition of “qualified clients” to enter into a performance-based compensation agreement with us. You must meet the following conditions
to be considered a qualified client:
• Have at least $1,000,000 under management with us at the time you enter into an agreement with us; or
• Provide documentation to us so that we shall reasonably believe you have either a net worth of $2,000,000 or are a qualified purchaser under
Section 2(a)(51)(A) of the Investment Company Act.
Please refer to ITEM 6 of this Brochure for more information.
SUMMIT-OP ADVISORY PROGRAM
PFS sponsors the Summit-OP Advisory Program (Summit-OP), an investment advisory asset allocation program for assets held directly with outside
custodians. Summit-OP is not a wrap-fee program because it charges transaction costs and the outside custodian may also charge sub-account, mortality
and expense, and product rider fees as well. Only PFS investment advisor representatives serve as portfolio managers (excluding underlying sub-
account managers or other product investment management services) in Summit-OP. Therefore, participants in Summit-OP must be advisory clients of
PFS.
Through Summit-OP, we provide investment supervisory and management services defined as providing continuous investment advice based on your
individual needs. Services are provided on a discretionary (Advisor Directed) or non-discretionary (Client Directed) basis. Upon execution of a Summit-
OP Advisory Agreement, we will assist you in managing your individual account (Account) held away from our normal clearing platforms. The clearing
broker-dealer serves as the qualified custodian for Accounts through Summit-OP.
Your investment advisor representative will construct a portfolio for you based on the investment choices available to the Account from the Custodian or
plan provider. The available investments choices may be more limited than those provided to Accounts established through our other Custodian-Broker-
dealers discussed in this Brochure. We may also recommend using Sub-Advisers to manage all or a portion of your assets. Any unaffiliated Sub-
Advisers recommendation shall be made on a non-discretionary basis, shall be based on your needs and will only include Sub-Advisers registered or
exempt from registration in your home state. You will enter into an agreement directly with the unaffiliated Sub-Adviser(s). A complete description of the
third-party investment advisor’s services, fee schedules and account minimums will be disclosed in the Sub-Adviser’s Form ADV or similar Disclosure
Brochure which will be provided to you at the time an agreement for services is executed and an account is established.
Your investment advisor representative will be available to answer questions you may have regarding the portion of your account managed by the Sub-
Adviser and will act as the communication conduit between you and the Sub-Adviser. Sub-Advisers may take discretionary authority to determine the
securities purchased and sold for your account. Sub-Adviser(s) fee shall be calculated and collected separately from the Summit-OP program fees
described below.
PROSPERA FINANCIAL PLANNING PROGRAM
Upon execution of a financial planning agreement, PFS investment advisor representatives provide investment advice through the PFS Financial Planning
Program, which provides advice only with execution being a separate charge. Financial planning services may be provided in the form of written financial
plans or in the form of financial planning consultations. Services may be provided on a one-time basis or on an on-going basis as you selected and
memorialized in the agreement. Financial planning services generally cover one or more of the following six topics of concern: (1) financial situation, (2)
income taxes, (3) insurance, (4) investments, (5) retirement planning, and (6) estate planning. To determine a suitable course of action, we perform a
review of the variables that are presented. Such review may include, but would not necessarily be limited to, investment objectives, consideration of your
overall financial condition, income and tax status, personal and business assets, risk profile, and other factors unique to your particular circumstances.
When we provide written financial planning services, we review your present financial situation and provide an analysis (usually in writing) and report of
recommendations in accordance with your goals and objectives. This service may include an initial consultation and subsequent follow-up visits. If you are
contracting for consultations only, you will not be provided with a written report or plan.
Unless engaged separately to do so, we will not be responsible for implementing the plan. You have the sole responsibility for determining whether or
not to implement the recommendations made.
PFS Investment Advisor Representative Managed Programs Sponsored by Envestnet
ADVISOR AS PORTFOLIO MANAGER (APM) PROGRAM
Envestnet sponsors the Advisor as Portfolio Manager (APM) Program which allows your investment advisor representative to create, maintain and
implement custom portfolio models regarding the assets in your account. Your investment advisor representative can create specific model positions and
combine portfolio recommendations from a network of strategists and customize investment solutions. APM is a wrap-fee program so it does not bill
transaction costs separately from the overall management fee. Only investment advisor representatives of PFS serve as portfolio managers in APM.
Therefore, participants in APM must be advisory clients of PFS.
Through APM, we provide investment supervisory and management services defined as providing continuous investment advice based on your individual
needs. Services are provided on a discretionary (Advisor Directed) basis. Upon execution of a Statement of Investment Selection/PortfolioStation Terms
and Conditions Agreement, we will assist you in establishing an individual account (Account) with us (as the introducing broker-dealer) which is cleared
through First Clearing.
Your investment advisor representative will construct a portfolio for you consisting of, but not necessarily limited to, equity investments, fixed income, no-
load mutual funds, exchange traded funds and mutual funds traded at NAV. PFS will be responsible for managing all or a portion of your investable assets
held in APM. Your Investment Adviser Representative will be responsible for investment decisions and when formulating investment recommendations,
may consult with independent managers that serve in a sub-advisor capacity to provide investment recommendations and trade signals. When we hire a
sub-advisor, we rely on the sub-advisor for all or some of the following: development of model portfolios, expertise in certain strategies or disciplines,
specific recommendations of securities, and general investment advice. In some situations, a sub-advisor may be used on a limited basis and in other
situations a sub-advisor may perform more substantial services as well as tailor its advice to the needs and circumstances of specific circumstances and
objectives.
Investment advice and trade signals provided by sub-advisors are not made in consideration or knowledge of individual clients’ specific needs. Therefore,
you will not enter into an agreement directly with the sub-advisor and the sub-advisor will not be provided access to your account(s) or confidential
information. PFS is responsible for applying sub-advisor recommendations to your account(s). To do so, we are given discretionary authority to implement
securities transactions in your account(s). When we use a sub-advisor to help manage your accounts, the decision to make changes in client accounts will
typically be based on the sub-advisor’s advice. PFS and your investment advisor representative are then responsible for accepting or rejecting any advice
and recommendations provided by a sub-advisor and to make corresponding changes in your account.
PFS Investment Advisor Representative Managed Programs Sponsored by Wells Fargo
PRIVATE INVESTMENT MANAGEMENT (PIM) AND ASSET ADVISOR PROGRAMS
PFS participates in the Private Investment Management (PIM) and Asset Advisor programs sponsored by Wells Fargo. PIM and Asset Advisor are wrap-
fee programs, so they do not bill transaction costs separately from the overall management fee. Both programs allow the PFS investment advisor
representative to provide on-going supervision and management services. PIM is an Advisor Directed program whereas Asset Advisor is a Client Directed
program. All client accounts through the PIM and Asset Advisor programs must be established through First Clearing.
The description provided in this section regarding the Wells Fargo sponsored programs we manage is intended to provide you with a brief summary of
each program. Wells Fargo will provide you with a full description and disclosure document at the time you establish an account through either the PIM or
Asset Advisor programs. Please note that some restrictions Wells Fargo places on PIM accounts for its own clients are not necessarily applicable to PFS
clients, such as the ability to include certain types of securities (such as low-priced stocks or concentrated positions) in the account.
PFS MODELS PROGRAM
PFS acts as the money manager for the PFS Models program sponsored by us. The PFS Models program relies on the investment advice and trade
signals provided by sub-advisors. PFS implements trade orders, periodically updating and rebalancing the PFS Models program. Investment advisor
representatives may select the PFS Models Program in the PIM program sponsored by Wells Fargo and the Unified Managed Account program
sponsored
by Envestnet.
When we hire a sub-advisor, we rely on the sub-advisor for all or some of the following: development of model portfolios, expertise in certain strategies or
disciplines, specific recommendations of securities, and general investment advice. In some situations, a sub-advisor may be used on a limited basis and
in other situations a sub-advisor may perform more substantial services as well as tailor its advice to the needs and circumstances of specific
circumstances and objectives. Sub-advisors may also be unpaid but receiving compensation due to recommending we purchase their proprietary or
affiliated securities. This is a conflict for us to recommend these securities as clients may pay more than for similar securities, while we do not pay the sub-
advisors for these recommendations.
Investment advice and trade signals provided by sub-advisors are not made in consideration or knowledge of individual clients’ specific needs. Therefore,
you will not enter into an agreement directly with the sub-advisor and the sub-advisor will not be provided access to your account(s) or confidential
information. PFS is responsible for applying sub-advisor recommendations to your account(s). To do so, we are given discretionary authority to implement
securities transactions in your account(s). When we use a sub-advisor to help manage your accounts, the decision to make changes in client accounts will
typically be based on the sub-advisor’s advice. PFS and your investment advisor representative are then responsible for accepting or rejecting any advice
and recommendations provided by a sub-advisor and to make corresponding changes in your account. This Brochure acts as the disclosure document for
the PFS Models program.
PFS MODELS THROUGH SPONSORED INVESTMENT MANAGEMENT PLATFORMS OR INVESTMENT WRAP PROGRAMS
Investors may also gain access to our PFS Models through programs or investment platforms sponsored by unaffiliated investment advisors and/or broker-
dealers. These programs may be wrap-fee programs, lists of available investment managers, or general asset allocation programs. Through these
programs or platforms, clients must establish an account directly with the program sponsor. PFS is then available to clients for selection as an independent
signal provider. Many of the terms and conditions of these programs are determined by the program sponsor. Through these programs, PFS will be
available to clients for selection as an independent signal provider.
Clients must establish an account directly with the program sponsor. All applicable contracts and account paperwork will be completed by the client with
the assistance of the program sponsor representative. The program sponsor representative will obtain the necessary financial data from the client, assist
the client in determining suitability, and help the client to set the appropriate investment objectives.
The program sponsor representative will meet periodically to review the client’s financial situation, investment objectives, and current portfolios and then
make any necessary changes to our investment signals. The program sponsor representative is responsible for approving and implementing all trades.
PFS is not responsible for executing transactions in the client’s account. In these situations, we are simply a “signal provider”. We are not granted trading
authorization. Instead, we will provide all trade instructions to the sponsor of the program who will be responsible for executing our recommendations.
Conflicts arise in the allocation of investment opportunities among accounts that we manage or advise. We strive to allocate investment opportunities
believed to be appropriate on equitable and consistent with the best interests of all clients involved. However, there can be no assurance that a particular
investment opportunity that comes to our attention will be allocated in any particular manner.
Accounts established through a program sponsored by an unaffiliated investment advisor and/or broker-dealer will be held and cleared through a broker-
dealer selected by the program sponsor, pursuant to a relationship between the sponsor and the clearing broker-dealer. The program sponsor reserves the
right to designate alternative clearing and custody arrangements similar to those of its preferred clearing broker-dealer. Physical custody of funds and
securities is maintained by the various clearing firms, not by PFS. Clients accessing PFS Models through a Platform have the ability to impose reasonable
restrictions on their accounts within the procedures set forth by the Platform sponsor.
Third-Party Money Manager Programs – PortfolioStation Programs Sponsored by Envestnet
PFS participates in programs sponsored by Envestnet where PFS investment advisor representatives assist you in allocating your assets among one or
more third-party money managers. Through the SMA and UMA programs, Envestnet may be provided discretionary authority to select and remove
underlying third-party money managers. Under this type of arrangement, Envestnet and/or your PFS investment advisor representative do not have to
receive your authorization to add or remove a money manager. When you do not grant discretionary authorization to select and remove third-party
money managers, you must provide us and the custodian, i.e. First Clearing, with written instructions to add or change a money manager.
Envestnet retains Sub‐Managers for portfolio management services through separate agreements entered into between Envestnet and the Sub‐Manager
on terms and conditions that Envestnet deems appropriate. For certain Sub‐Managers, Envestnet entered into a licensing agreement with the Sub‐
Manager, where it would perform administrative and/or trade order implementation duties at the direction of the Sub‐Manager. In such situations, the
Sub‐Manager is a Model Provider. Many of the asset managers available in the Envestnet sponsored programs are accessed through the use of
investment models (“Third Party Models”), whereby the asset manager, acting as a “Model Provider,” constructs an asset allocation and selects the
underlying investments for each portfolio. Envestnet performs overlay management of the Third-Party Models by implementing trade orders, periodically
updating and rebalancing each Third-Party Model pursuant to the direction of the Model Provider. Envestnet may, from time to time, replace existing
Model Providers or hire others to create Third Party Models and cannot guarantee the continued availability of Third-Party Models created by particular
Model Providers.
The description provided in this section regarding the Envestnet sponsored programs we manage is intended to provide you with a brief summary of each
program. Envestnet will provide you with a full description and disclosure document at the time you establish an account through any of the programs. In
addition, you will receive a disclosure document for all third-party money managers who manage your assets. Only third-party money managers that are
registered as investment advisors or are exempt from investment advisor registration will be recommended.
SEPARATELY MANAGED ACCOUNT (SMA)
SMA is a discretionary wrap-fee program offering access to an actively managed investment portfolio chosen from a roster of independent asset managers
(each a “Sub‐Manager”) from a variety of disciplines for individually owned securities that can be tailored to fit your investing preferences. Your investment
advisor representative, through Envestnet, will help you identify individual asset managers and investment vehicles that correspond to proposed asset
classes and styles or to independently identify asset managers.
UNIFIED MANAGED ACCOUNT (UMA)
UMA is a discretionary wrap-fee program allowing for a single portfolio that accesses multiple asset managers and funds and represents various asset
classes. Envestnet’s tools allow your investment advisor representative to customize your asset allocation models or select Envestnet’s proposed asset
allocations for similar types of investors fitting your profile and investment goals. PFS and/or your investment advisor representative then further customize
the portfolio by selecting the specific underlying investment strategies or Funds in the portfolio to meet your needs. Once the content of the portfolio is
established, Envestnet provides overlay management services for UMA accounts and implements trade orders based on the directions of the investment
strategies contained in the UMA portfolio.
Third-Party Money Manager Programs – Separate Account Manager Programs Sponsored by Wells Fargo
ALLOCATION ADVISORS, MASTERS, DIVERSIFIED MANAGED ALLOCATIONS (DMA), WELLS FARGO COMPASS PROGRAMS, CUSTOMIZED
PORTFOLIOS, AND PRIVATE ADVISOR NETWORK INVESTMENT CONSULTING SERVICE (NETWORK)
PFS participates in separate account manager programs sponsored by Wells Fargo. Through these programs, PFS investment advisor representatives
assist you in allocating your assets among one or more third-party money managers.
Currently, we participate in the following Wells Fargo sponsored wrap-fee programs:
• Allocation Advisors
• Masters
• Diversified Managed Allocations (DMA)
• Wells Fargo Compass
• Customized Portfolios and
• Private Advisor Network
PFS also participates in the Private Advisor Network Investment Consulting Service (Network) platform, a program sponsored by Wells Fargo. Under the
Masters, DMA, and Network programs, PFS investment advisor representatives assist you in determining and selecting third-party money managers who
will be provided discretionary authority to select investment options to manage your assets. Under the Allocation Advisors and Compass programs, the
Wells Fargo Advisory Services Group will be provided discretionary authority as it serves as the third-party money manager.
Through the Masters and DMA programs, PFS investment advisor representatives may be provided discretionary authority to select and remove
underlying third-party money managers. Under this type of arrangement, your PFS investment advisor representative does not have to receive your
authorization to add or remove a money manager. When you do not grant discretionary authorization to select and remove third-party money managers,
you must provide us and the custodian, i.e. First Clearing, with written instructions to add or change a money manager.
Under the Customized Portfolios Program, PFS investment advisor representatives will assist you in selecting from portfolios based on the investment
strategies of our affiliate, Wells Fargo Investment Institute, who will be provided discretionary authority to handle the day-to-day investment management of
your Account in accordance with your stated investment objectives. Investment strategies include Fixed Income Portfolios and Custom Option Overlay
Portfolios. If you and your advisor select a Custom Option Overlay Portfolio, you are responsible for selecting and monitoring the non-options positions
upon which an options overlay strategy will be implemented. These custom option overlay strategies seek to provide income alternatives and/or hedge
downside risk on your selected securities.
The description provided in this section regarding the Wells Fargo sponsored programs we manage is intended to provide you with a brief summary of
each program. Wells Fargo will provide you with a full description and disclosure document at the time you establish an account through any of the
programs. In addition, you will receive a copy of all third-party money managers’ disclosure documents who manage your assets. Only third-party money
managers that are registered as investment advisors or are exempt from investment advisor registration will be recommended.
Mutual Fund Wrap-Fee Programs Sponsored by Wells Fargo
CUSTOMCHOICE, FUNDSOURCE AND PATHWAYS PROGRAMS
PFS participates in two mutual fund wrap-fee programs sponsored and administered by Wells Fargo:
• CustomChoice
• FundSource and Pathways.
CustomChoice is a non-discretionary client directed mutual fund wrap program. You must execute the CustomChoice Client Agreement to participate in
this program. Accounts through this program are managed by us on a non-discretionary basis. There are approximately 5,000 no-load, load waived, and
institutional share class mutual funds from which to choose. You must approve all implementation decisions made through this program.
FundSouce is a discretionary mutual fund wrap program based on Wells Fargo research-driven Optimal Blends or Customized Blends. You must execute
the FundSource Program Agreement to participate in this program. All assets are managed by Wells Fargo who is given discretionary authority to
implement changes within your account based on your individualized situation and based on information provided by you to our investment advisor
representative. Portfolios are comprised of mutual funds selected by Wells Fargo.
Pathways is an asset allocation option within the FundSource Program that allows you to allocate assets among mutual fund portfolios (Pathways Funds)
which are administered by Russell Investment Company (Russell). Russell will provide a selection of optimal blends of model investment portfolios or
accept instructions from you with respect to a custom blend in various funds that are operated and administered by Russell, based on its evaluation of
your financial goals, circumstances and risk tolerances. Russell is responsible for evaluating and retaining one or more investment management
organizations to manage each Pathways Fund. The portfolios are designed for a specific investor. You must execute the Pathways Program Agreement
to participate in this program.
We are not related to Russell, and Wells Fargo and Russell are not related entities. A portion of the fee charged for Pathways is paid to Russell for its
investment advisory services.
We provide you with consulting services when selecting optimal blend mutual fund portfolios constructed by Wells Fargo for the FundSource program and
by Russell for the Pathways program. You may also create your own customized mutual fund portfolio blend.
The description provided in this section regarding the Wells Fargo sponsored programs we manage is intended to provide you with a brief summary of
each program. Wells Fargo will provide you with a full description and disclosure document at the time you establish an account through any of the
programs. Pathway’s clients will also receive all necessary disclosure documents relating to Russell.
Advisory Services to Retirement Plans and Plan Participants Contracted by Plan Sponsor
PFS offers various levels of advisory and consulting services to employee benefit plans and/or to the participants of such plans (“Participants”). The
services are designed to assist plan sponsors (“Plan Sponsors”) in meeting their management and fiduciary obligations to the Participants under the
Employee Retirement Income Securities Act (“ERISA”) and the Pension Protection Act of 2006 (“PPA”). Generally, investment advice provided to Plan
Sponsors and Participants is regulated under ERISA and the PPA. We will provide a set of services to Plan Sponsors and their Participants which may
include all or some of the offerings described below. Plan Sponsors must make the ultimate decision to retain us for pension consulting and other advisory
services including services at the participant level. The Plan Sponsor is free to seek independent advice about the appropriateness of any recommended
services for the plan. The following services are provided for general informational purposes. Not all clients contracting for retirement plan services will
receive every level of service described below. The exact scope and types of services provided will be agreed upon with each client and listed in the client
agreement.
The services provided to employee benefit plans (“the Plan”) and their Plan Sponsors may include the following:
Investment Policy Statement. PFS may assist with the drafting and adoption of an Investment Policy Statement (IPS) for each Plan.
Reasonableness Opinion. PFS may provide a written opinion as to the appropriateness and reasonableness of including, or continuing to include, the
shares of the employer’s own stock as an investment option under the Plan, in respect of the IPS.
Cash Flow Analysis. PFS may assist the Plan’s oversight committees with the review of the quarterly cash flow analysis as provided by the plan provider.
Selection of Qualified Default Investment Alternative. PFS may recommend to the client an investment fund product or model portfolio meeting the
definition of a “Qualified Default Investment Alternative” (“QDIA”) in ERISA Regulation 2550.404c-5(e)(3). The QDIA shall be reflected in the IPS.
Investment Performance Monitoring or Analysis. PFS may assist the Plan’s oversight committees with the review of the quarterly investment performance
of the Plan’s investment options. Under applicable circumstances, PFS will monitor the appropriateness and continued suitability of each of the
investments with a view to complying with the “broad range” requirement under ERISA Section 404(c).
Asset Allocation Analysis. PFS may assist the Plan’s oversight committees with the review of the quarterly asset allocation analysis as provided by the
Plan provider.
Performance Reports. PFS may prepare reports evaluating the performance of the Plan’s investment manager(s) or investments, as the case may be, as
well as comparing the performance thereof to benchmarks set forth in the IPS. The information used to generate the reports will be derived from
statements provided by the client.
Education Services to Plan Committee. PFS may provide training for the members of the Plan Committee with regard to their service on the committee,
including guidance with respect to fiduciary duties.
Participant Education Services. PFS may conduct in-person, group sessions and provide printed educational materials (which may include posters, payroll
stuffers, and emails) to Participants, providing information to them about the investment options under the Plan and providing information on how to
complete plan enrollment paperwork. Services provided under an “Eligible Investment Advice Arrangement,” as defined under the PPA, shall be governed
by a separate agreement.
Expense Analysis. PFS may assist the Plan’s oversight committees with the review of the investment expense characteristics for each of the investment
options.
Investment Structural Analysis. PFS may assist the Plan’s oversight committees with the review of the Investment Structural Analysis for each of the
investment options.
Third Party Product or Service. Advisory services provided to retirement plans may be solely provided by advisory representatives, or in combination with
third parties and their retirement plan services. PFS may use the product or service offered by a third party in providing services to a client and the Plan.
Plan Search Support. PFS may manage the preparation, distribution, and evaluation of Request For Proposals, finalist interviews, and conversion support.
Additional Services. Services as agreed upon by PFS and client.
Services for Plan Participants. Plan Sponsors retain PFS and its advisory representatives to provide services to Participants pursuant to an “eligible
investment advice arrangement,” as defined under the PPA. The scope of the services and fees are established and approved in advance by the Plan
Sponsor and shall be clearly set forth in the executed agreement for services.
Advisory Representatives will meet with individual Participants to collect pertinent information regarding their financial circumstances and investment
objectives. Advisory Representatives will then deliver advice either by:
• providing direct investment advisory services to the Participant (in which case the PFS fee will not vary based on the advice given to the
Participant)
• generating portfolio recommendations for a Participant based on an unbiased computer model that has been certified and audited by an
independent third party.
Advisory Services to Retirement Plan Participants Not Contracted by Plan Sponsor
Participants also directly retain PFS and its advisory representatives to provide direct advisory services by executing a Summit-OP Advisory or Prospera
ERISA Services Agreement. The services and fees are set forth in the executed agreement and approved by participant in lieu of the plan sponsor.
Participants may elect to roll-over retirement plan assets to an individual account at PFS under the same investment advisor representative who provided
advisory services while those assets were maintained within the original qualified plan.
Advisory Services to Individual Retirement Plans
PFS provides services to individual retirement plans, and in doing so we charge reasonable compensation. PFS has identified and determined that
our material conflicts of interest are fair and reasonable and have adopted measures reasonably designed to avoid such conflicts. More
information on these mitigation measures can be found in Item 12 of this disclosure document.
Management of Client Assets
PFS manages assets on a discretionary and non-discretionary basis. As of June 30, 2023, PFS managed $7,913,077,866 in client assets of which
$4,894,351,408 was managed on a discretionary basis and $3,018,726,458 was managed on a non-discretionary basis.