Stonehearth Capital Management ("SCM"/"Advisor") is an investment advisory firm that sponsors a wrap fee program and provides portfolio management services under the wrap fee program. Clients electing to participate in a wrap fee program will receive portfolio management services and execution of securities transactions for a single fee.
The Advisor has entered into a relationship to offer the Client brokerage and custodial services through Charles Schwab & Co., Inc. ("Schwab"). There is no affiliation between the Advisor and Schwab. Clients with an account atSchwab may participate in a wrap fee program.
Schwab will act solely as a broker-dealer and not as an investment advisor to clients. They will have no discretion over client accounts and will act solely on instructions they receives from SCM. Schwab has no responsibility for SCM's services and undertakes no duty to clients to monitor SCM's management of client accounts or other services SCM provides to Clients. Schwab will hold your assets in a brokerage account and buy and sell securities and execute other transactions when SCM instructs them to. SCM does not open the account for clients.
Under a wrap fee program, the Client will not pay any ticket charges or account maintenance fees on accounts held in custody with Schwab. All such fees and expenses will be borne by the Advisor. Clients participating in our wrap fee program with assets managed by the Advisor but not custodied at Schwab (i.e., outside accounts), will be subject to such fees if assessed.
The Advisor and Advisory Representatives of the Advisor may receive a portion of the wrap fee for providing advisory services.
The Advisor manages four strategies, each of which has its own requirements to qualify for the SCM Wrap Fee Program. The four strategies include:
•Diversified Portfolio
•Diversified CarbonLITE Portfolio
•Diversified ETF-Only Portfolio
•U.S. Stock Portfolio Wrap Fee Program Qualifications:
•Have $1,000,000 (cash or securities) or more of assets on which the Advisor or its Advisory Representatives receive any form of compensation AND maintain an account at Schwab. The $1,000,000 of assets can be comprised of accounts held at Schwab along with other financial institutions ("outside accounts") such as mutual fund companies, 529 college savings plan providers, variable annuity companies, retirement plan providers and private and public partnerships. These assets must be managed by the Advisor and the Advisor must receive (or have received) some form of compensation to qualify towards the minimum threshold. The Advisor will monitor the Client's account values at least quarterly, and maybe more frequently, for continued eligibility in our wrap fee program. Should the Client's account values fall below $800,000, the Client will no longer be eligible to participate in the wrap fee program. This means that the Advisor will no longer pay for ticket charges or account maintenance fees on the Client's accounts held in custody with Schwab. Under certain circumstances, the Advisor may permit exceptions to the 4 qualification requirements for the wrap fee program. Further information on the non-wrap fee investment management program is available in the Stonehearth Capital Management Brochure (Form ADV Part 2A).
The Advisor offers portfolio review and investment management services on a discretionary basis. Discretionary trading authorization permits the Advisory Representative to make buys, sells and exchanges within the account as the Advisory Representative deems appropriate without contacting the Client prior to execution. The Client will need to execute a limited power of attorney granting discretionary trading authorization to Stonehearth Capital Management and the Client's Advisory Representative. The Advisor will manage the account exercising discretionary authority on the securities to be purchased and sold and the timing of such transactions. With the exception of the authorized payment of the Advisor's advisory fees, the Advisor will not have the authorization to withdraw Clients' securities or funds.
Advisory Representatives will gather information on the Client's financial history, goals, objectives and financial concerns and assist the Client in developing an Investment Policy Statement which specifies the Client's investment objectives, goals, and an asset allocation strategy. The Client(s) will establish an account with Schwab and deposit cash, cash equivalents and securities, and engage an Advisory Representative to manage the Account. Based on the Client's investment objectives, risk tolerance and financial situation, the Client's Advisory Representative will provide investment management services on a continuous and ongoing basis consistent with the Client's Investment Policy Statement.
Payment Schedule The annual fee for the wrap fee program is based on a percentage of assets under management, according to the schedule below. Fees are negotiable under certain circumstances (e.g., friends, family members, and employees of the Advisor) and are subject to change. Fees are not based on a share of capital gains upon or capital appreciation of the funds or any portion of the funds.
Advisory fees will be charged quarterly in advance based on the market value of the account assets as of the close of business on the last day of the preceding quarter.
If the management of an Account commences at any time other than the beginning of a calendar quarter, the initial quarterly fee shall be charged in arrears. The initial quarterly fee will be based on the initial account balance and will be pro-rated based on the number of days during the quarter when the agreement was in effect. Advisory fees for the wrap fee program are in accordance with the following fee schedule: Account SizeAnnual Fee First $250,0001.25% Next $750,0001.00% Next $2,000,0000.75% Next $2,000,0000.50% Ongoing0.25% The Advisor may change the above fee schedule upon 30-days prior written notice to the Client.
Advisory fees are based on the aggregate value of all managed accounts within the established

household. The value of the portfolio will include, but is not limited to, assets under the management of the Advisor held at Schwab, as well as those assets under the Advisor's management held at other 5 financial institutions (outside accounts) such as mutual fund companies, 529 college savings plan providers, variable annuity companies, retirement plans providers and private and public partnerships. Further information on non-wrap fee investment management services is available in the Stonehearth Capital Management Brochure (Form ADV Part 2A).
Depending upon the circumstances, the Advisor may combine Client accounts from one household with Client accounts from other households to aggregate account values for fee calculations. The annual fee may then be based on an aggregate value of all accounts within the combined households.
If the Client participates in a wrap fee program, advisory fees will be deducted directly from the Client's account(s) withSchwab, provided the Client has given the Advisor written authorization. The Client will be provided with an account statement reflecting the deduction of the advisory fee. If the account does not contain sufficient funds to pay advisory fees, the Advisor has limited authority to sell or redeem securities in sufficient amounts to pay advisory fees. The Client may reimburse the account for advisory fees paid to the Advisor, except for ERISA and IRA accounts.
Transactions in the Client's account, account reallocations and rebalancing may trigger a taxable event, with the exception of retirement accounts (e.g., IRA or Roth).
A portion of the wrap fee may be paid to the following parties:
•The Client's Advisory Representative,
•Advisor, and
•Schwab for brokerage and custodial services. If the wrap fee account is opened with securities previously purchased through the Advisor's Advisory Representative, the Advisory Representative may have already receive commissions on the purchase.
SCM's wrap fee covers SCM's advisory services and the brokerage and execution services provided by Schwab. As a result, SCM has an incentive to execute transactions for your account at Schwab. In addition to SCM's advisory fee, the Client should also be aware that SCM's wrap fee does not cover all fees and costs. The fees not included in the wrap fee include charges imposed directly by a mutual fund, index fund, or exchange traded fund which shall be disclosed in the fund's prospectus (i.e., fund management fees and other fund expenses), mark-ups and mark-downs, spreads paid to market makers, fees (such as a commission or markup) for trades executed away from Schwab at another broker-dealer, wire transfer fees and other fees and taxes on brokerage accounts and securities transactions.
The Advisor will utilize exchange traded funds (ETF) and open-ended mutual funds including no-load and load waived. While certain products may pay 12b-1 fees, the Advisor will not receive these fees. Where applicable and for those accounts under its custody, Schwab will retain the 12b-1 fees.
Depending on the level of the wrap program fee being charged to the Client and the amount of portfolio activity in the Client's account, the cost of a wrap fee program may be more or less than if the Client obtained services separately or paid commissions or paid for execution services. A wrap fee account, as compared with a traditional commission-based account or a fee-based account where the Client pays transaction charges, may be more costly to the Client, particularly during periods when trading activity is lower. Therefore, this may result in a higher annual cost than if transactional costs and investment advice were segregated. During periods when trading activity is heavier, such as when the account is first opened, wrap fee accounts may result in lower costs.
6 Under the wrap fee program, the Advisor will pay transaction and execution charges in an Client's account held at Schwab. As such, there is a disincentive for Advisory Representatives to affect trades in these accounts held at Schwab.
SCM's wrap fee covers SCM's advisory services and the brokerage and execution services provided by Schwab. As a result, we have an incentive to execute transactions for your account at Schwab. Our wrap fee does not cover all fees and costs. The fees not included in the wrap fee include charges imposed directly by a mutual fund, index fund, or exchange traded fund which shall be disclosed in the fund's prospectus (i.e., fund management fees and other fund expenses), mark-ups and mark-downs, spreads paid to market makers, fees (such as a commission or markup) for trades executed away from [Schwab] at another broker-dealer, wire transfer fees and other fees and taxes on brokerage accounts and securities transactions.
Compensation received from a wrap fee program may be higher or lower than the compensation received should the Client have selected another advisory program or paid for brokerage and advisory services separately. Therefore, the Client's Advisory Representative may have a financial incentive to recommend the wrap fee program over other programs or services. Such a practice presents a conflict of interest and gives the Advisor and the Advisory Representatives incentive to recommend investment products based on the compensation received rather than the Client's needs.
Termination Schedule The Client may terminate investment advisory services obtained from the Advisor, without penalty, upon written notice within five (5) business days after entering into the advisory agreement with the Advisor. The Client will be responsible for any fees and charges incurred from third parties as a result of maintaining the account such as transaction fees for any securities transactions executed and account maintenance or custodial fees. Thereafter, the Client may terminate investment advisory services with written notice to the Advisor. Should the Client terminate investment advisory services during the quarter, the Client will be issued a pro-rated refund of the prepaid advisory fee from the date of termination to the end of the three-month billing period.