Introduction
This brochure describes the investment advisory services we provide. We provide investment
advice to other third-party registered investment advisers (RIAs) by making available a variety of
services (RIA Services) for use by the RIAs with their clients. The RIA Services include
technology applications, operational support, and administrative infrastructure, access to service
providers and access to financial products among others.
The RIA Services we offer to other RIAs include: (1) RIA as Manager Accounts; (2) Wrap Fee
Programs; and (3) Retirement Services. These services are described in more detail below. The
RIA Services provided to and available from third-party RIAs may differ from RIA to RIA.
RIA Services
RIA as MANAGER ACCOUNTS
With an RIA as Manager Account, or RIA Managed Account, RIAs assist their clients in
developing a personalized asset allocation program and custom-tailored portfolio designed to
meet the clients’ investment objectives. The recommended portfolio generally includes
investments such as mutual fund shares (including no-load mutual funds and/or loaded funds
purchased at net asset value), exchange-traded funds, variable annuities, individual equity
securities, individual fixed income securities, direct participation programs, alternative
investments or a combination thereof. We provide customizable software programs through
Web-enabled platforms (platforms) so that the RIA provides an RIA Managed Account for their
clients. Our relationship with Envestnet Asset Management, Inc. (Envestnet) allows us to
provide the platforms. Please see the Envestnet Brochure for more information on the services
they provide.
RIAs render investment advice to their clients combined with portfolio administration and
reporting services, advisory fee processing and account reconciliation. RIAs are able to provide
an RIA Managed Account by using tools, resources and technology we provide on the platform,
which include the ability to produce detailed proposals, create investment models, allocate
assets, monitor specifications on an account, aggregate trades and rebalance an account.
Prior to opening an RIA Managed Account through our platforms, an RIA is responsible for
gathering information from their clients, such as, among other things, the client’s investment
experience, investment time horizon, investment objectives, risk tolerance and general financial
condition in order to create an investment profile for their client. Kestra Institutional has no
responsibility for supervision over this process by RIAs. An RIA, and not Kestra Institutional, is
responsible for determining whether Kestra Institutional and an RIA Managed Account are
suitable for a client. An RIA and their client compile pertinent financial and demographic
information to develop an investment program and portfolio that will meet their client’s goals and
objectives. These investment profiles help RIAs determine appropriate investment products and
services available through Kestra Institutional. The client’s information is forwarded to Kestra
Institutional to assist the RIA in recommending an appropriate strategy for their client. Kestra
Institutional relies on its relationship with Envestnet and their internal research team, who use a
number of proprietary analytical tools and commercially available optimization software
applications in providing such assistance to RIAs. Among the factors considered in designing
these strategies are historical rates of risk and return for various asset classes, correlation
across asset classes and risk premiums.
An RIA Managed Account will be opened through a separate contract that will provide Kestra
Institutional and Envestnet with limited trading authority to purchase and sell securities pursuant
to the investment objectives chosen by the RIA and their client. RIAs and their clients will also
receive a copy of our Brochure and Privacy Policy.
An RIA Managed Account will typically consist of a percentage of securities from various asset
classes. The percentage weightings within the asset classes will be based on the risk profile,
investment objectives and individual preferences as communicated and determined by the RIA.
RIAs are responsible for meeting with their clients periodically to review the assets in an RIA
Managed Account. Clients are encouraged to contact their RIA should they have questions
about the management of an RIA Managed Account. Performance information is not compiled
or presented by Kestra Institutional, but third parties made available to RIAs through Kestra
Institutional may compile or present performance information. RIAs are responsible for
reviewing performance of RIA Managed Accounts.
An RIA, or their client, will at all times maintain full and complete ownership rights (i.e., the right
to add or withdraw securities or cash, pledge securities, vote securities and/or receive timely
confirmations) to all assets held in an RIA Managed Account. RIA Managed Account assets will
at no time be “pooled for investment” by us. RIA Managed Accounts through Kestra Institutional
are intended to comply with Rule 3a-4 under the Investment Company Act of 1940 (1940 Act)
and each account is managed on the
basis of the client’s individual financial situation by the
RIA. Each client will have the opportunity with their RIA to select the account’s investment
objective and impose reasonable restrictions on the management of the assets in the account.
In addition, RIAs are responsible for contacting clients annually and notifying them quarterly in
order to confirm the accuracy of information regarding this client.
Clients of RIAs will also enter into separate custodial clearing agreements to choose a
custodian for their RIA Managed Account. Kestra Institutional will not have custody of the
assets, securities or funds of RIAs or their clients in RIA Managed Accounts. Transactions in
RIA Managed Accounts are cleared pursuant to a clearing and custody agreement between
Kestra Institutional and the third-party custodian chosen by the client. Custodians that clear
trades for RIA Managed Accounts include Charles Schwab, & Co., National Financial Services,
LLC and Fidelity Institutional Wealth Services, but other alternative clearing and custody
arrangements may be designated by Kestra Institutional from time to time. To the extent a client
chooses a custodian for an RIA Managed Account with Kestra Institutional, a client is directing
us and their RIA to use that certain custodian and broker for equity and mutual fund trades in
their RIA Managed Account. By doing so, Kestra Institutional does not have authority to
negotiate commissions among various brokers or to obtain volume discounts, and best
execution may not be achieved. RIAs and their clients may pay higher commissions and
transaction cost and receive less favorable net prices than other clients.
RETIREMENT SERVICES
We also provide services to assist RIAs with retirement accounts of their clients such as
individual retirement accounts (IRA) and retirement plans (Plans). Services to IRA clients of
RIAs include those described above.
Please note: A client leaving an employer typically has four options (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)
rollover to an IRA, or iv) cash out the account value (which could, depending upon the client’s
age, result in adverse tax consequences). A recommendation to roll assets out of an employer-
sponsored plan into an IRA will most likely result in more expenses and charges than if the
assets were to remain in the plan.
Please note that we will not be responsible for obtaining or paying the premiums on any bond
required pursuant to ERISA. We have no authority and are not required to vote proxies for
securities comprising Plan or IRA assets.
Other Services We Provide
ADMINISTRATIVE SERVICES
An RIA may provide advisory services to their clients separate from the platform and services
made available by Kestra Institutional as described above. In these circumstances, Kestra
Institutional only provides administrative services to the RIA, such as access to various
custodial or clearing firms to RIAs and fee-billings services for accounts of RIA clients. Kestra
Institutional will not provide any advisory services to an RIA for these accounts. An RIA, and not
Kestra Institutional, is responsible for all aspects of these client relationships, including
gathering information from their clients and determining suitability, as well as processing of
these accounts with the applicable custodian or clearing firm. Clients are responsible for any
and all Transaction Charges of the applicable custodian chosen by the client or RIA. Kestra
Institutional has no responsibility for supervision over this process by RIAs, and an RIA, not
Kestra Institutional, is responsible for determining suitability over such accounts.
THIRD-PARTY MANAGEMENT SERVICES
Separate from the RIA Managed Accounts and advisory services above, Kestra Institutional
also make available to RIAs access to various third parties that provide or sponsor different
types of money management services and investment advisory programs. Typically, RIAs will
act as a referrer for the third party in accordance with rule 206(4)-1 under the Advisers Act or as
a co-advisor with the third party. Depending on the structure of the relationship with the third
party, Kestra Institutional may or may not have any direct relationship with the RIA and clients.
For example, Kestra Institutional may not perform services for the RIA and their clients, and
they may or may not receive our disclosure Brochure. Any fees that Kestra Institutional receives
from these arrangements are usually based upon a percentage of the advisory fee charged by
the third party chosen by the RIA or the RIA. RIA Clients should read the third-party adviser’s
Brochure, investment advisory agreement and any compensation disclosure statements
provided in connection with these arrangements for information regarding the services of the
third-party adviser and applicable fees and charges.
As of Dec. 31, 2023, we managed $0 in assets for approximately 0 clients. Approximately $0 is
managed on a discretionary basis, and approximately $0 is managed on a non-discretionary
basis.