Firm Description
Retirement Management Systems Inc. (RMS) is an
independently owned and operated investment
advisory firm offering Savings Plan Management,
Portfolio Management, and Financial Planning
services. Established in 2008 as a corporation,
Retirement Management Systems registered with
the U.S. Securities and Exchange Commission (SEC)
in February 2010.
Principal Owners
RMS is privately owned. J. Michael Scarborough is
majority owner.
Savings Plan Management
Our Savings Plan Management service is offered to
individual clients either directly from RMS or
through a relationship with other Registered
Investment Advisers (RIAs) and their Investment
Adviser Representatives (IARs). These partners
introduce clients to our service in either a Solicitor or
an Adviser role. Clients may hire these professionals
for other services outside the scope of Savings Plan
Management on an as-needed basis. In the event
that conflicts of interest occur, we will disclose them
to clients.
Individual clients are those people participating in
defined contribution plans (e.g., 401(k), 403(b), 457),
where the person is responsible for selecting the
investments that will help him or her save for
retirement. Often these people are in need of help in
selecting, implementing and monitoring an
investment program for their defined contribution
plan savings. Savings Plan Management offers that
support.
As a part of the Savings Plan Management program,
RMS:
• researches the investment options available
within a client’s defined contribution plan
• develops an appropriate investment strategy
based on one of seven investment models
that cover a range of risk and return
characteristics from conservative to
aggressive
• implements the investment strategy agreed
upon by the client
• reallocates the strategy to reflect changing
market and economic conditions, while
staying within the parameters of risk and
return parameters for the client
• rebalances the strategy to maintain the
appropriate balance of risk and return
characteristics within the strategy
• communicates with the clients and their
Investment Adviser Representatives regarding
research findings, reallocation strategies, and
retirement planning
Due to the nature of the accounts on which we
provide our advisory service, RMS limits its advice to
those types of investments typically found in
qualified plans such as mutual funds, exchange
traded funds, unit investment trusts (including those
that invest in a sponsoring company’s stock), and
group variable annuity sub-accounts.
Discretionary Asset Management
Clients grant RMS limited discretionary trading
authority to conduct trading for the account in which
the client assets are held, and at client’s risk, to
purchase, sell, exchange, and otherwise trade the
account assets in accordance with the Investment
Policy Statement provided to the client. Clients may
impose reasonable restrictions on investing in
certain securities or types of securities.
RMS does not represent, warrant or imply that the
services or methods of analysis used can or will
predict future results, successfully identify market
tops or bottoms, or insulate clients from losses. No
guarantees can be offered that client’s goals or
objectives will be achieved.
Clients authorize RMS to access their account using
the client’s personal identification and password.
Under no circumstances will RMS facilitate loans
from the account or redeem, withdraw, dispense, or
distribute funds from the Account. RMS takes
precautions to safeguard client’s personal
identification and password. However, depending
on the functions allowed by the Plan’s custodian
website, unauthorized access to the client’s account
could result in adverse consequences, including
distributions, loans, address changes, and
beneficiary changes.
Additionally, RMS does not maintain a formal
relationship with the client’s defined contribution
custodian/recordkeeper and, as such, these
companies provide no oversight of RMS’s client
account access. Certain record keepers have formal
security guarantees that may become void as a
result of their participants divulging security
credentials to a third party such as RMS.
Non-Discretionary Advice
Individual clients may wish to implement our
portfolio recommendations on their own. For this
“Do It Yourself” service, we send quarterly allocation
recommendations to a client’s email address, with
instructions where possible, on how to implement
the trades.
Clients are free to accept, reject, or implement any
portion of the recommendations provided by RMS.
Be aware that partial implementation or delayed
implementation may have an impact on the
performance of the account. Because RMS does not
have access to monitor client assets, clients will be
responsible for providing RMS with copies or
duplicate statements.
Advisory Agreement
Individual clients wishing to engage RMS for the
provision of its investment advisory services must
complete RMS’s advisory agreement documents.
Upon completion, RMS will be considered engaged
by the client. The term of engagement will be an
ongoing term, as set forth in the Agreement.
Clients will be responsible for ensuring that RMS has
been informed of changes in investment objectives
and risk tolerance. To assist, RMS requests that
clients complete the Investor Profile questionnaire
annually upon renewal of the term.
Termination of Agreement
Upon termination of the Agreement by either party,
RMS will not be under any obligation to provide
further services with regard to client assets, and
client will be solely responsible for the investment of
the client assets. The power of attorney in Section III
of the Discretionary Asset Management Agreement
shall be revoked. Client agrees that any termination
of the Agreement will not affect the liabilities or
obligations of the parties under the Agreement
which arise from transactions initiated prior to
termination, including the provisions regarding
arbitration, which shall survive any termination of
the Agreement.
Special Considerations for IRA Rollovers
Qualified retirement plans (such as the 401(k)) offer
their participants the ability to rollover their money
into an Individual Retirement Account (IRA) at
separation of service or at other qualifying events,
such as attainment of age 59 ½.
Investment Adviser Representatives are considered
fiduciaries for any specific advice or
recommendations they give to clients. Therefore,
any recommendation to rollover money into an IRA
must be given in the client’s best interest. RMS
assumes no fiduciary obligation for rollover
recommendations given by IAR’s of other
investment advisory firms.
There is a conflict of interest for an Investment
Adviser Representative to recommend an IRA
rollover when an increase in compensation would
result. Clients are encouraged to carefully evaluate
advantages and disadvantages of an IRA rollover.
Effective December 20, 2021 (or such later date as
the US Department of Labor (“DOL”) Field Assistance
Bulletin 2018-02 ceases to be in effect), for purposes
of complying with the DOL’s Prohibited Transaction
Exemption 2020-02 (“PTE 2020-02”) where
applicable, we are providing the following
acknowledgment to you.
When we provide investment advice to you
regarding your retirement plan account or individual
retirement account, we are fiduciaries 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. The way we make money
creates some conflicts with your interests, so we
operate under a special rule that requires us to act in
your best interest and not put our interest ahead of
yours. Under this special rule’s provisions, we must:
• Meet a professional standard of care when
making investment recommendations (give
prudent advice);
• Never put our financial interests ahead of yours
when making recommendations (give loyal
advice);
• Avoid misleading statements about conflicts of
interest, fees, and investments;
• Follow policies and procedures designed to
ensure that we give advice that is in your best
interest;
• Charge no more than is reasonable for our
services; and
• Give you basic information about conflicts of
interest.
Portfolio Management Services
RMS provides portfolio management services to
individuals outside of their employer sponsored
plan. This service is provided on a discretionary basis
meaning that RMS Investment Adviser
Representatives (IAR) purchase or sell investments
on behalf of the client without obtaining specific
client prior consent for each transaction in
accordance with the asset management contract.
The asset management contract is provided to each
client prior to the onset of the service, and should be
read carefully by the client for further information.
This service involves allocating the client’s
investment portfolio among investments available
through
Schwab Advisor Services™ of Charles
Schwab & Co. (“Schwab”). RMS provides the IARs
with model portfolios that are intended as
guidelines. IARs can use the models as created,
deviate from models, or not use them at all.
Portfolio Management services incorporates an
investor profiling process. We use a quantifiably
scored investor profile questionnaire that helps
guide the discussion between Advisor and client
regarding an appropriate risk and return profile for
the client’s portfolio. Clients may impose reasonable
restrictions on investing in certain securities or types
of securities.
Schwab is the selected third-party clearing broker-
dealer/custodian that will execute trades, settle
securities transactions and custody client assets for
these advisory accounts on behalf of RMS and its
IARs. In evaluating Schwab as a potential broker-
dealer/custodian, it was noted that Schwab has
financial strength, extensive reporting, and
execution pricing and research. Schwab makes
available to RMS clients a broad array of no-load, no
transaction or low transaction cost mutual funds.
RMS does not sponsor a wrap, unbundled wrap, or
fee and commission offset program through these
firms.
As a point of differentiation from the Savings Plan
Management service, RMS does not limit its advice
to mutual funds, exchange traded funds, unit
investment trusts (including those that invest in a
sponsoring company’s stock), and group variable
annuity sub-accounts.
Clients also have access to accounts that invest in
covered call transactions. These accounts have a
higher fee structure and are subject to higher
degrees of market risk due to their individual stock
concentrations. Investors interested in a covered
call account should carefully evaluate all additional
costs and risks before investing. Please refer to Item
8 for more information.
Consultation Service
RMS will analyze and make recommendations on a
broad array of financial issues on a consultative
basis. Among other things, this consultation service
may include portfolio asset allocation, financial
advice regarding personal and business situations,
and/or other financial planning services.
Financial Planning
RMS also provides advice in the form of a Financial
Plan. While the specific categories to be reviewed
will be determined based on the client’s particular
financial situation, categories for review may include
the following:
a.) Investment Planning – Review client’s current
financial situation and issue a written report of
recommendations. Prepare an asset allocation
program tailored to client’s financial objectives and
Investor profile.
b.) Budgeting – Review client’s current budget and
provide feedback based upon the client’s stated
goals and lifestyle. Prepare balance sheet showing
client’s assets, liabilities, and net worth. Prepare a
cash flow statement that reflects client’s income,
living expenses and investment funding.
c.) Estate Planning – Coordinate wills and other
estate planning documents and arrangements. Make
recommendations and assist others in
recommendations that minimize the tax
consequences and maximize efficient disposition of
client’s estate within the constraints of client’s plans
and goals. Fees for this service would be in addition
to any legal fees from third parties, all of which will
be borne by client.
d.) Insurance Counseling – Work with the client to
identify insurance needs based on the client’s
individual goals and circumstances, including but not
limited to providing for adequate coverage in case of
an injury, long term care needs, or death. Coordinate
life insurance, disability insurance, and other
insurance policies. All selections and coverages are
the responsibility of client. IARs will be compensated
in their separate capacity as insurance agents for
insurance policies sold by IARs. Any incidental legal
fees and/or other insurance costs from third parties
will be borne by the client.
e.) Retirement Planning – Coordinate investment
planning to assist client in accumulating capital for
their retirement and creating an income plan to
meet financial needs in retirement. Make
recommendations on establishing individual or other
retirement accounts.
f.) Tax Planning - IAR will take into account the
general tax consequences for all recommendations
made to the client. However, IAR nor RMS will not
provide tax or legal advice and the client needs to
rely solely on their own accounting firm, law firm, or
tax preparer for such advice.
The CFP® and/or the IAR gather required
information such as current financial status, future
goals, and attitudes towards risk through personal
interviews. Related documents supplied by the client
are carefully reviewed, and then the Financial Plan
document prepared.
Financial Plan recommendations are not limited to
any specific product or service offered by a broker
dealer or insurance company. Recommendations are
generally of a generic nature.
Should a client choose to implement the
recommendations contained in the plan, the CFP®
and/or the IAR will seek to utilize the insurance,
advisory and/or brokerage services most desirable to
the client. For specific tax and legal matters, the
CFP® and/or IAR will suggest that the client work
closely with their attorney or accountant.
Clients should be aware that if they choose to utilize
RMS’s services in implementing all or a portion of
the Financial Plan, RMS will receive additional
compensation, of which the CFP® and/or IAR who
prepared the Plan will receive a portion, depending
on the specific products or services chosen. Given
that the fees for these services are in addition to any
fee paid for the preparation of the Financial Plan, a
conflict of interest exists because there is a financial
incentive for the CFP® and/or the IAR to recommend
additional services that could be executed through
the firm. However, implementation of Financial Plan
recommendations is entirely up to the client, the
Financial Plan could be implemented with another
firm, and clients are not obligated to use RMS or its
IARs for financial planning services.
Plan Sponsor Consulting Services
RMS also offers investment advisory services directly
to plan sponsors. Acting in a fiduciary capacity, RMS
offers services from recommending investments for
a retirement plan to discretionary services of
selecting an investment line-up for retirement plans.
Plan sponsors can choose from three types of
fiduciary services:
3(21) Non-Discretionary Investment Advisory
Services - RMS will review, monitor and
recommend investments for the retirement plan
based on a prudent investment selection
process that follows an Investment Policy
Statement developed in conjunction with the
Plan Sponsor. Plan sponsors will approve and
implement the recommendations.
3(38) Discretionary Investment Management
Services - The plan sponsor directs RMS to take full
responsibility and discretion over the selection,
monitoring, replacement, and implementation of
the plan’s investment options.
3(38) Plus Discretionary Investment
Management Services with Managed Accounts -
Similar to 3(38) service, 3(38) Plus also includes
risk-based portfolios that give participants pre-
constructed, diversified allocations that match
their investment timeframe and tolerance for
risk. Portfolios may be used as a qualified
default investment alternative (certain
conditions apply) or voluntarily by participants
under the guidance of a financial advisor.
Plan Sponsor clients wishing to engage RMS for the
provision of its consulting services must complete
RMS’s agreement documents. The term of
engagement will be an ongoing term, as set forth in
the Agreement.
Termination of Agreement
Either party may terminate this Agreement upon
thirty (30) days prior written notice to the other
party. Such termination will not, however, affect the
liabilities or obligations of the parties arising from
transactions initiated prior to such termination, and
such liabilities and obligations (together with the
provisions of the agreement) shall survive any
expiration or termination of this Agreement.
Educational Seminars
RMS also provides investment education seminars as
a service to financial advisors, individual clients,
prospective clients and/or plan sponsors. These
seminars are intended to help individual employees
better understand their company's qualified savings
plan, and include information about the plan
structure, the merits of saving and investing, the
general asset classes available, the specific
investment options in the plan, income tax
considerations, and plan rules regarding loans,
withdrawals and distributions.
Assets Under Management
As of December 31, 2023, across 3,955 individual
accounts, RMS managed $1,438,988,116 in
discretionary assets. We do not have any non-
discretionary client assets under management.
Additionally, we provide investment advice on an
additional $10,183,232 of assets that are directly
managed by the client. These assets are not
considered assets under management since they are
not traded by RMS.