A. Sterling Investment Advisors, Ltd. (the “Registrant”) is a corporation formed on March
13, 2000, in the Commonwealth of Pennsylvania. The Registrant became registered as an
Investment Adviser Firm in May 2006. The Registrant is owned by Timothy Flatley and
Sean Flatley. Timothy Flatley is also the Registrant’s President.
B.
INVESTMENT ADVISORY SERVICES
The Registrant provides discretionary investment advisory services on a fee basis.
Registrant's annual investment advisory fee shall include investment advisory services,
and, to the extent specifically requested by the client, financial planning and consulting
services. In the event that the client requires extraordinary planning and/or consultation
services (to be determined in the sole discretion of Registrant), Registrant may determine
to charge for such additional services, the dollar amount of which shall be set forth in a
separate written notice to the client.
To commence the investment advisory process, Registrant will ascertain each client’s
financial goals and investment objective(s) and then allocate the client’s assets consistent
with the client’s designated investment objective(s). Through personal discussions in
which goals and objectives based on a client’s particular circumstances are established,
the Registrant develops each client’s personal investment policy and creates and manages
a portfolio, which may include the individual’s personal 401k assets, based on that
investment policy. Once allocated, Registrant provides ongoing supervision of the
account(s). Before engaging Registrant to provide investment advisory services, clients
are required to enter into an Investment Advisory Agreement with Registrant 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.
RETIREMENT PLAN CONSULTING
Registrant may also provide investment advisory and consulting services to participant
directed retirement plans per the terms and conditions of a Retirement Plan Services
Agreement between Registrant and the plan. For such engagements, Registrant shall
assist the Plan sponsor with the selection of an investment platform from which Plan
participants shall make their respective investment choices (which may include
investment strategies devised and managed by Registrant), and, to the extent engaged to
do so, may also provide corresponding education to assist the participants with their
decision-making process.
Trustee Directed Plans. Registrant may be engaged to provide discretionary investment
advisory services to ERISA retirement plans, whereby the Firm shall manage Plan assets
consistent with the investment objective designated by the Plan trustees. In such
engagements, Registrant will serve as an investment fiduciary as that term is defined
under The Employee Retirement Income Security Act of 1974 (“ERISA”). Registrant
will generally provide services on an “assets under management” fee basis per the terms
and conditions of an Investment Advisory Agreement between the Plan and the Firm.
Participant Directed Retirement Plans. Registrant may also provide investment
advisory and consulting services to participant directed retirement plans per the terms and
conditions of a Retirement Plan Services Agreement between Registrant and the plan. For
such engagements, Registrant shall assist the Plan sponsor with the selection of an
investment platform from which Plan participants shall make their respective investment
choices (which may include investment strategies devised and managed by Registrant),
and, to the extent engaged to do so, may also provide corresponding education to assist
the participants with their decision making process.
FINANCIAL PLANNING AND CONSULTING SERVICES (STAND-ALONE)
The Registrant provides financial planning and/or consulting services (including
investment and non-investment related matters, including personal planning, tax and cash
flow planning, insurance planning, retirement planning etc.) on a stand-alone separate fee
basis. Prior to engaging the Registrant to provide planning or consulting services, clients
are generally required to enter into a Financial Planning and Consulting Agreement with
Registrant setting forth the terms and conditions of the engagement (including
termination), setting forth the terms and conditions of the engagement, describing the
scope of the services to be provided, and the fees that are due from the client.
It remains the client’s responsibility to promptly notify the Registrant if there is ever any
change in their financial situation or investment objectives for the purpose of the
Registrant revising its previous recommendations.
MISCELLANEOUS
Limitations of Financial Planning and Non-Investment Consulting/Implementation
Services. To the extent requested by the client, Registrant will generally provide financial
planning and related consulting services regarding non-investment related matters, such
as tax and estate planning, insurance, etc. Registrant will generally provide such
consulting services inclusive of its advisory fee set forth at Item 5 below (exceptions
could occur based upon assets under management, special projects, stand-alone planning
engagements, etc. for which Firm may charge a separate or additional fee).
Registrant believes that it is important for the client to address financial planning issues
on an ongoing basis. Registrant’s advisory fee, as set forth at Item 5 below, will remain
the same regardless of whether or not the client determines to address financial planning
issues with Registrant.
Furthermore, although the Registrant may provide recommendations regarding non-
investment related matters, such as estate planning, tax planning, and insurance, etc. the
Registrant does not serve as a law firm, accounting firm, or insurance agency, and no
portion of Registrant’s services should be construed as legal, accounting, or insurance
implementation services. Accordingly, the Registrant does not prepare estate planning
documents or other legal documents, tax returns, or sell insurance products.
To the extent requested by a client, Registrant may recommend the services of other
professionals for certain non-investment implementation purposes (i.e., attorneys,
accountants, insurance agents, etc.), including representatives of the Registrant in their
separate and individual registered/licensed capacities as registered representatives of
Purshe Kaplan Sterling Investments, an SEC-registered and FINRA member broker-
dealer (“PKS”) as discussed in Items 5.E. and 10.C. below, as well as licensed insurance
agents as discussed in Item 10.C. below. 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 Registrant and/or its representatives.
If the client engages any such recommended unaffiliated professional, and a dispute
arises thereafter relative to such engagement, the client agrees to seek recourse
exclusively from and against the engaged unaffiliated professional. At all times, the
engaged licensed professional(s) (i.e., attorney, accountant, insurance agent, etc.), and not
the Registrant, shall be responsible for the quality and competency of the services
provided.
Independent Managers. Registrant may recommend that the client allocate a portion of
a client’s investment assets among unaffiliated independent investment managers
(“Independent Manager(s)”) in accordance with the client’s designated investment
objective(s). In such situations, the Independent Manager(s) will have day-to-day
responsibility for the active discretionary management of the allocated assets. Registrant
will continue to render investment supervisory services to the client relative to the
ongoing monitoring and review of account performance, asset allocation, and client
investment objectives. The Registrant generally considers the following factors when
recommending Independent Manager(s): the client’s designated investment objective(s),
management style, performance, reputation, financial strength, reporting, pricing, and
research. The investment management fees charged by the designated Independent
Manager(s) are exclusive of, and in addition to, Registrant’s ongoing investment advisory
fee, subject to the terms and conditions of a separate agreement between the client and
the Independent Manager(s). Registrant’s advisory fee is set forth in the fee schedule at
Item 5 below.
Account Aggregation Platforms. Registrant may provide its clients with access to
online platforms hosted by “eMoney Advisor” (“eMoney”) and/or ByAllAccounts, Inc.
(collectively, the “Platforms”). The Platforms can incorporate client investment assets
that are not part of the assets that Registrant manages (the “Excluded Assets”). Unless
agreed to otherwise, in writing, the client and/or their other advisors that maintain trading
authority, and not Registrant, shall be exclusively responsible for the investment
performance of the Excluded Assets. Unless also agreed to otherwise, in writing,
Registrant does not provide investment management, monitoring or implementation
services for the Excluded Assets. The client can engage the Registrant to provide
investment management services for the Excluded Assets pursuant to the terms and
conditions of the Investment Advisory Agreement between Registrant and the client.
The Platforms also provides access to other types of information, including financial
planning concepts, 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 Platforms without
Registrant’s assistance or oversight.
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 Registrant recommends that a client roll over
their retirement plan assets into an account to be managed by Registrant, such a
recommendation creates a conflict of interest if Registrant will earn new (or increase its
current) compensation as a result of the rollover. If Registrant 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), Registrant 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
Registrant, whether it is from an employer’s plan or an existing IRA.
Use of Mutual Funds and Exchange Traded Funds. Registrant 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 below,
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).
Unaffiliated Private Investment Funds. Registrant also provides investment advice
regarding private investment funds. Registrant, on a non-discretionary basis, may
recommend that certain qualified clients consider an investment in private investment
funds, the description of which (the terms, conditions, risks, conflicts and fees, including
incentive compensation) is set forth in the fund’s offering documents. Registrant’s role
relative to unaffiliated private investment funds shall be limited to its initial and ongoing
due diligence and investment monitoring services. If a client determines to become an
unaffiliated private fund investor, the amount of assets invested in the fund(s) shall
be
included as part of “assets under management” for purposes of Registrant calculating its
investment advisory fee. Registrant’s fee shall be in addition to the fund’s fees.
Registrant’s clients are under absolutely no obligation to consider or make an investment
in any private investment fund(s).
Private investment funds generally involve various risk factors, including, but not limited
to, potential for complete loss of principal, liquidity constraints and lack of transparency,
a complete discussion of which is set forth in each fund’s offering documents, which will
be provided to each client for review and consideration. Unlike liquid investments that a
client may own, private investment funds do not provide daily liquidity or pricing. Each
prospective client investor will be required to complete a Subscription Agreement,
pursuant to which the client shall establish that he/she is qualified for investment in the
fund, and acknowledges and accepts the various risk factors that are associated with such
an investment.
Valuation. In the event that Registrant references private investment funds owned by the
client on any supplemental account reports prepared by Registrant, the value(s) for all
private investment funds owned by the client shall reflect the most recent valuation
provided by the fund sponsor. However, if subsequent to purchase, the fund has not
provided an updated valuation, the valuation shall reflect the initial purchase price. If
subsequent to purchase, the fund provides an updated valuation, then the statement will
reflect that updated value. The updated value will continue to be reflected on the report
until the fund provides a further updated value.
As result of the valuation process, if the valuation reflects initial purchase price or an
updated value subsequent to purchase price, the current value(s) of an investor’s fund
holding(s) could be significantly more or less than the value reflected on the report.
Unless otherwise indicated, Registrant shall calculate its fee based upon the latest value
provided by the fund sponsor.
Socially Responsible (ESG) Investing Limitations. Socially Responsible Investing
involves the incorporation of Environmental, Social and Governance (“ESG”)
considerations into the investment due diligence process. ESG investing incorporates a
set of criteria/factors used in evaluating potential investments: Environmental (i.e.,
considers how a company safeguards the environment); Social (i.e., the manner in which
a company manages relationships with its employees, customers, and the communities
in which it operates); and Governance (i.e., company management considerations). The
number of companies that meet an acceptable ESG mandate can be limited when
compared to those that do not and could underperform broad market indices. Investors
must accept these limitations, including potential for underperformance.
Correspondingly, the number of ESG mutual funds and exchange-traded funds are
limited when compared to those that do not maintain such a mandate. As with any type of
investment (including any investment and/or investment strategies recommended and/or
undertaken by Registrant), there can be no assurance that investment in ESG securities or
funds will be profitable or prove successful. Registrant does not maintain or advocate an
ESG investment strategy but will seek to employ ESG if directed by a client to do so. If
implemented, Registrant shall rely upon the assessments undertaken by the unaffiliated
mutual fund, exchange traded fund or separate account portfolio manager to determine
that the fund’s or portfolio’s underlying company securities meet a socially responsible
mandate.
Cryptocurrency. For clients who want exposure to cryptocurrencies, including Bitcoin,
the Registrant, will advise the client to consider a potential investment in corresponding
exchange traded securities, or an allocation to separate account managers and/or private
funds that provide cryptocurrency exposure. Crypto is a digital currency that can be
used to buy goods and services but uses an online ledger with strong cryptography (i.e.,
a method of protecting information and communications through the use of codes) to
secure online transactions. Unlike conventional currencies issued by a monetary
authority, cryptocurrencies are generally not controlled or regulated and their price is
determined by the supply and demand of their market. Because cryptocurrency is
currently considered to be a speculative investment, the Registrant will not exercise
discretionary authority to purchase a cryptocurrency investment for client accounts.
Rather, a client must expressly authorize the purchase of the cryptocurrency investment.
The Registrant does not recommend or advocate the purchase of, or investment in,
cryptocurrencies. The Registrant considers such an investment to be speculative.
Clients who authorize the purchase of a cryptocurrency investment must be prepared for
the potential for liquidity constraints, extreme price volatility and complete loss of
principal.
Portfolio Activity. Registrant has a fiduciary duty to provide services consistent with the
client’s best interest. As part of its investment advisory services, Registrant 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, mutual 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 Registrant 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.
Inverse/Enhanced Market Strategies. Registrant may utilize long and short mutual
funds and/or exchange traded funds that are designed to perform in either an: (1) inverse
relationship to certain market indices (at a rate of 1 or more times the inverse [opposite]
result of the corresponding index) as an investment strategy and/or for the purpose of
hedging against downside market risk; and (2) enhanced relationship to certain market
indices (at a rate of 1 or more times the actual result of the corresponding index) as an
investment strategy and/or for the purpose of increasing gains in an advancing market.
There can be no assurance that any such strategy will prove profitable or successful. To
the contrary, such funds and/or strategy(ies) can suffer substantial losses. In light of these
enhanced risks/rewards, a client may direct Registrant, in writing, not to employ any or
all such strategies for his/her/their/its accounts. In light of these enhanced risks, a client
may direct the Registrant, in writing, not to employ any or all such strategies for the
client’s account.
Cash Positions. Registrant continues to treat cash as an asset class. As such, unless
determined to the contrary by Registrant, all cash positions (money markets, etc.) shall
continue to be included as part of assets under management for purposes of calculating
Registrant’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), Registrant 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, Registrant’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 Registrant 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
Registrant 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.
The above does not apply to the cash component maintained within a Registrant 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.
The client shall remain exclusively responsible for yield dispersion/cash balance
decisions and corresponding transactions for cash balances maintained in any Registrant
unmanaged accounts.
Client Obligations. In performing its services, Registrant shall not be required to verify
any information received from the client or from the client’s other designated
professionals, and is expressly authorized to rely thereon. Moreover, each client is
advised that it remains their responsibility to promptly notify Registrant if there is ever
any change in their financial situation or investment objectives for the purpose of
reviewing, evaluating or revising Registrant’s previous recommendations and/or services.
Cybersecurity Risk. The information technology systems and networks that Registrant
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 Registrant 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 Registrant has established 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.
Disclosure Statement. A copy of Registrant’s written Privacy Notice and written
disclosure statement as set forth on Part 2 of Form ADV and Form CRS (Client
Relationship Summary) shall be provided to each client or prospective client prior to, or
contemporaneously with, the execution of the Investment Advisory Agreement, Financial
Planning and Consulting Agreement, or Retirement Plan Consulting Agreement.
C. The Registrant shall provide investment advisory services specific to the needs of each
client. Prior to providing investment advisory services, an investment adviser
representative will ascertain each client’s investment objective(s). Thereafter, the
Registrant shall allocate and/or recommend that the client allocate investment assets
consistent with the designated investment objective(s). Portfolio weighting between funds
and market sectors will be determined by each individual client’s needs and
circumstances. The client may, at any time, impose reasonable restrictions, in writing, on
the Registrant’s services.
D. The Registrant does not participate in a wrap fee program.
E. As of December 31, 2023, the Registrant had $745,783,895 in assets under management
on a discretionary basis.