Townsend & Associates, Inc. doing business as Townsend is an investment advisor registered with the
United States Securities and Exchange Commission (“SEC”) and is a corporation formed under the laws of
the State of Colorado.
• Jeffery Townsend is the principal owner and CEO of Townsend & Associates, Inc.
• Townsend & Associates, Inc. has been registered as an investment advisor since April 2006.
• Townsend & Associates, Inc. has been in business since it incorporated in 1991.
General Description of Primary Advisory Services
The following are brief descriptions of Townsend’s primary advisory services. A more detailed description
of Townsend’s advisory services is provided in
Item 5 – Fees and Compensation so that clients and
prospective clients can review the description of services and description of fees in a side-by-side manner.
Financial Planning Services - Townsend provides advisory services in the form of financial planning
services. Financial planning services do not involve the active management of client accounts, but instead
focuses on a client’s overall financial situation. Financial planning can be described as helping
individuals
determine and set their
long-term financial goals, through
investments, tax planning, asset allocation, risk
management, retirement planning, and
other areas. The
role of a financial planner is to find ways to help
the client understand his/her
overall financial situation and help th
e client set financial
objectives.
Asset Management Services - Townsend provides advisory services in the form of discretionary or non-
discretionary Asset Management Services. Asset Management Services involve providing clients with
continuous and on-going supervision over client accounts. This means that Townsend will continuously
monitor a client’s account and make trades in client accounts when necessary.
To commence the investment advisory process, Townsend will ascertain each client’s investment
objective(s) and then allocate the client’s assets consistent with the client’s designated investment
objective(s). Once allocated, Townsend provides ongoing supervision of the account(s). Before engaging
Townsend to provide investment advisory services, clients are required to enter into an
Investment Advisory
Agreement with Townsend setting forth the terms and conditions of the engagement (including termination),
describing the scope of the services to be provided, and the fee that is due from the client.
Advice Regarding Certain Types of Investments
Townsend provides investment advice on the following types of investments:
• Mutual Funds
• Exchange-listed securities (i.e. stocks)
• Securities traded over-the-counter (i.e. stocks)
• Fixed income securities (i.e. bonds)
• Closed-End Funds and Exchange Traded Funds (ETFs)
• Certificates of deposit
• Municipal securities
• Variable life insurance
• Variable annuities
• United States government securities
Townsend does not provide advice on foreign issues, warrants, commercial paper, futures contracts on
tangibles and intangibles, or hedge funds and other types of private (i.e. non-registered) securities.
When providing asset management services, Townsend typically constructs each client’s account holdings
using mutual funds, ETFs, stocks, bonds, options, and variable annuities to build diversified portfolios. It is
not Townsend’s typical investment strategy to attempt to time the market but we may increase cash
holdings modestly as deemed appropriate, based on your risk tolerance and our expectations of market
behavior. We may modify our investment strategy to accommodate special situations such as low basis
stock, stock options, legacy holdings, inheritances, closely held businesses, collectibles, or special tax
situations.
(Please refer to Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss for more
information.)
Tailor Advisory Services to Individual Needs of Clients
Our advisory services are always provided based on the individual needs of each client. This means, for
example, that you are given the ability to impose restrictions on the accounts we manage for you, including
specific investment selections and sectors. We work with each client on a one-on-one basis through
interviews and questionnaires to determine the client’s investment objectives and suitability information.
Disclosure Statement
A copy of Townsend's written Brochure as set forth on Part 2A of Form ADV, in addition to our Form ADV
Part 3 (Form CRS), shall be provided to each client prior to, or contemporaneously with, the execution of
the Financial Advisory Agreement.
Wrap Fee Programs
Townsend does not participate in wrap fee programs when providing portfolio management services.
Client Assets Managed by Townsend
The amount of client assets managed by Townsend
totaled $1,116,550,512 as of December 31, 2023.
$1,115,515,395 is managed on a discretionary basis and $1,395,117 is managed on a non-discretionary
basis.
Miscellaneous Disclosures
Limitations of Financial Planning and Non-Investment Consulting/Implementation Services. To the
extent requested by the client, Townsend may provide financial planning and related consulting services
regarding non-investment related matters, such as estate planning, tax planning, insurance, etc. Neither
Townsend, nor its investment adviser representatives, assist clients with the implementation of any financial
plan, unless they have agreed to do so in writing. In addition, Townsend does not monitor a client’s financial
plan, and it is the client’s responsibility to revisit the financial plan with Townsend, if desired. Townsend
does not serve as a law firm or accounting firm, and no portion of its services should be construed as legal
or accounting services. Accordingly, Townsend does not prepare estate planning documents or tax returns.
To the extent requested by a client, Townsend may recommend the services of other professionals for
certain non-investment implementation purposes (i.e. attorneys, accountants, insurance agents, etc.),
including representatives of Townsend in their separate individual capacities as representatives of
Securities America, Inc., an SEC registered and FINRA member broker-dealer, and as licensed insurance
agents. The client is under no obligation to engage the services of any such recommended professional.
The client retains absolute discretion over all such implementation decisions and is free to accept or reject
any recommendation from Townsend and/or its representatives. Please Note: If the client engages any
unaffiliated professional, and a dispute arises thereafter relative to such engagement, the client agrees to
seek recourse exclusively from and against the engaged professional. If, and when, Townsend is involved
in a specific matter (i.e. estate planning, insurance, accounting-related engagement, etc.), it is the engaged
licensed professional (i.e. attorney, accountant, insurance agent, etc.), and not Townsend, that is
responsible for the quality and competency of the services provided. Please Also Note-Conflict of
Interest: The recommendation by Townsend’s representative that a client purchase a securities or
insurance commission product through Townsend’s representative in his/her separate and individual
capacity as a registered representative and/or as an insurance agent presents a conflict of interest, as
the receipt of commissions may provide an incentive to recommend investment or insurance products
based on commissions to be received, rather than on a particular client’s need. No client is under any
obligation to purchase any securities or insurance commission products through such a representative.
Clients are reminded that they may purchase securities and insurance products recommended by
Townsend through other, non-affiliated broker-dealers and/or insurance agencies. Townsend’s Chief
Compliance Officer, Shawn Kelly, remains available to address any questions that a client or
prospective client may have regarding the above conflict of interest.
Client Obligations. In performing its services, Townsend shall not be required to verify any information
received from the client or from the client’s other professionals, and is expressly authorized to rely thereon.
Moreover, each client is advised that it remains their responsibility to promptly notify Townsend if there is
ever any change in their financial situation or investment objectives for the purpose of reviewing, evaluating
or revising Townsend’s previous recommendations and/or services.
Cybersecurity Risk. The information technology systems and networks that Townsend and its third-party
service providers use to provide services to Registrant’s clients employ various controls, which are
designed to prevent cybersecurity incidents stemming from intentional or unintentional actions that could
cause significant interruptions in Registrant’s operations and result in the unauthorized acquisition or use
of clients’ confidential or non-public personal information. Clients and Townsend 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 processes. Although Townsend has
established its systems to reduce the risk of cybersecurity incidents. There is no guarantee that these efforts
will always be successful, especially considering that Townsend 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.
Non-Discretionary Service Limitations. Clients that determine to engage Townsend & Associates, Inc.
on a non-discretionary investment advisory basis must be willing to accept that Townsend & Associates,
Inc. cannot effect any account transactions without obtaining prior consent to any such transaction(s) from
the client. Thus, in the event of a market correction, or if Townsend wants to make a specific transaction,
and the client is unavailable, Townsend & Associates, Inc. will be unable to effect any account transactions
(as it would for its discretionary clients) without first obtaining the client’s consent.
Please Note: Retirement Rollovers-Potential for Conflict of Interest: A client or prospective client
leaving an employer typically has four options regarding an existing retirement plan (and may engage in a
combination of these options): (I) leave the money in the former employer’s plan, if permitted, (ii) roll over
the assets to the new employer’s plan, if one is available
and rollovers are permitted, (iii) roll over to an
Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the
client’s age, result in adverse tax consequences). If Townsend recommends that a client roll over their
retirement plan assets into an account to be managed by Townsend, such a recommendation creates a
conflict of interest if Townsend will earn new (or increase its current) compensation as a result of the
rollover. When acting in such capacity, Townsend serves as a fiduciary under the Employee Retirement
Income Security Act (ERISA), or the Internal Revenue Code, or both, as applicable, which are laws
governing retirement accounts . No client is under any obligation to rollover retirement plan or IRA
account assets to an account managed by Townsend. Townsend’s Chief Compliance Officer,
Shawn Kelly remains available to address any questions that a client or prospective client may have
regarding the potential for conflict of interest presented by such rollover recommendation.
Use of Mutual Funds and Exchange Traded Funds. While Townsend may recommend allocating
investment assets to mutual funds and exchange traded funds that are not available directly to the public,
Townsend may also recommend that clients allocate investment assets to publicly available mutual funds
and exchange traded funds that the client could obtain without engaging Townsend as an investment
adviser. However, if a client or prospective client determines to allocate investment assets to publicly-
available mutual funds and exchange traded funds without engaging Townsend as an investment adviser,
the client or prospective client would not receive the benefit of Townsend’s initial and ongoing investment
advisory services. Please Note: In addition to Townsend ’s investment advisory fee described below, and
transaction and/or custodial fees discussed below, clients will also incur, relative to all mutual fund and
exchange traded fund purchases, internal charges imposed at the fund level (e.g. management fees and
other fund expenses)
Custodian Charges-Additional Fees. As discussed below at Item 12, when requested to recommend a
broker-dealer/custodian for client accounts, Townsend recommends that that Charles Schwab and Co.
(“Schwab”) or Fidelity Institutional Wealth platform (hereinafter “Fidelity”) and where clearing, custody and
other brokerage services are provided by National Financial Services, LLC or Fidelity Brokerage Services
LLC, Members FINRA, NYSE, SIPC) serves as the broker-dealer/custodian for client investment advisory
accounts. Broker-dealers such as Schwab and Fidelity charge commissions and/or transaction fees for
effecting certain securities transactions for your account. Schwab and Fidelity do not charge commissions
or transaction fees for direct equity, ETF or options trades in certain accounts based upon account size and
method of statement and confirmation delivery. In situations where trades are undertaken directly by the
client with trade desk assistance, commission charges and fees may apply. 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 and Fidelity,
do not currently charge fees on certain individual equity or ETF transactions, other custodians do).
Commissions may be waived in certain accounts based upon account size and method of statement
delivery. In addition to Townsend’s investment management fee, and certain brokerage transaction fees,
clients will also incur, relative to all mutual fund and exchange traded fund purchases, charges imposed at
the fund level (e.g. management fees and other fund expenses). Please Note: there can be no assurance
that Schwab and/or Fidelity will not change their transaction fee pricing in the future. Please Also Note:
Fidelity and Schwab may also assess fees to clients who elect to receive trade confirmations and account
statements by regular mail rather than electronically. The fees charged by Schwab and Fidelity, as well as
the charges imposed at the mutual fund and exchange traded fund level, are in addition to Townsend’s
advisory fee referenced in Item 5 below.
Please Note-Use of Mutual and Exchange Traded Funds: Townsend utilizes mutual funds and exchange
traded funds for its client portfolios. In addition to Registrant’s investment advisory fee described below,
and transaction and/or custodial fees discussed above, clients will also incur, relative to all mutual fund and
exchange traded fund purchases, charges imposed at the fund level (e.g., management fees and other
fund expenses). The mutual funds and exchange traded funds utilized by Townsend are generally available
directly to the public. Thus, a client can generally obtain the funds recommended and/or utilized by
Townsend independent of engaging Townsend as an investment advisor. However, if a prospective client
does so, then he/she/they will not receive Registrant's initial and ongoing investment services.
Orion Advisor Platform. Registrant may provide its clients with access to an online platform hosted by Orion
Advisor” (“Orion”). The Orion platform allows a client to view their complete asset allocation, including those
assets that Registrant does not manage (the “Excluded Assets”). Registrant does not provide investment
management, monitoring, or implementation services for the Excluded Assets. Unless otherwise
specifically agreed to, in writing, Registrant’s service relative to the Excluded Assets is limited to reporting
only. Therefore, Registrant 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 Registrant, shall be exclusively responsible for such investment performance.
Without limiting the above, the Registrant shall not be responsible for any implementation error (timing,
trading, etc.) relative to the Excluded Assets. The client may choose to engage Registrant to manage some
or all of the Excluded Assets pursuant to the terms and conditions of an advisory agreement between
Registrant and the client.
The Orion platform 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 Registrant. Finally, Registrant 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 Orion platform without Registrant’s assistance or oversight.
Client Retirement Plan Assets. If requested to do so, Townsend shall provide investment advisory
services relative to 401(k) plan assets maintained by the client in conjunction with the retirement plan
established by the client’s employer. In such event, Townsend shall allocate (or recommend that the client
allocate) the retirement account assets among the investment options available on the 401(k) platform.
Registrant’s ability shall be limited to the allocation of the assets among the investment alternatives
available through the plan. Townsend will not receive any communications from the plan sponsor or
custodian, and it shall remain the client’s exclusive obligation to notify Townsend of any changes in
investment alternatives, restrictions, etc. pertaining to the retirement account. Unless expressly indicated
by the Townsend to the contrary, in writing, the client’s 401(k) plan assets shall be included as assets under
management for purposes of Townsend calculating its advisory fee.
Please Note: Cash Positions. Townsend continues to treat cash as an asset class. As such, unless
determined to the contrary by Townsend, all cash positions (money markets, etc.) shall continue to be
included as part of assets under management for purposes of calculating Townsend’s advisory fee. At any
specific point in time, depending upon perceived or anticipated market conditions/events (there being no
guarantee that such anticipated market conditions/events will occur), Townsend 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, Townsend’s advisory fee could
exceed the interest paid by the client’s money market fund.
Cash Sweep Accounts. Certain account custodians can require that cash proceeds from account
transactions or new deposits, be swept to and/or initially maintained in a specific custodian designated
sweep account. The yield on the sweep account will generally be lower than those available for other money
market accounts. When this occurs, to help mitigate the corresponding yield dispersion, Townsend shall
(usually within 30 days thereafter) generally (with exceptions) purchase a higher yielding money market
fund (or other type security) available on the custodian’s platform, unless the Townsend 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 access to 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
a Townsend 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.
Fee Dispersion. Registrant, in its discretion, may charge a lesser or higher investment advisory fee, charge
a flat fee, waive applicable minimum asset or minimum fee levels, waive its fee entirely, or charge a fee on
a different interval, based upon certain criteria (i.e., anticipated future earning capacity, anticipated future
additional assets, dollar amount of assets to be managed, related accounts, account composition,
complexity of the engagement, anticipated services to be rendered, grandfathered fee schedules,
employees and family members, courtesy accounts, competition, negotiations with client, etc.). Please
Note: As result of the above, similarly situated clients could pay different fees. In addition, similar advisory
services may be available from other investment advisers for similar or lower fees.
Portfolio Activity. Townsend has a fiduciary duty to provide services consistent with the client’s best
interest. As part of its investment advisory services, Townsend 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, and/or a change in the client’s investment
objective. Based upon these factors, there may be extended periods of time when Townsend determines
that changes to a client’s portfolio are neither necessary nor prudent. Of course, as indicated below, there
can be no assurance that investment decisions made by Townsend will be profitable or equal any specific
performance level(s). Clients nonetheless remain subject to the fees described in Item 5 below during
periods of account inactivity.