A. Description of Advisory Firm
Apella (the “Firm”) is an investment adviser registered with the Securities and Exchange
Commission (“SEC”) under the Investment Adviser Act of 1940 (the “Advisers Act”). The
firm is located in West Hartford, Connecticut and was established in 2013. The firm was
founded by and is currently operated under the control of David E. Connelly Jr. and Patrick
A. Sweeny, and continues to be majority owned by David Connelly and Patrick Sweeny
through Strategic Investment Holdings, LLC. Apella provides investment advisory services
to individuals, trusts, estates, charitable organizations, corporations, and other business
entities, pension plans, endowments, 401k, 403b and similar account structures, among
other types of clients. The Firm has been an SEC Registered Investment Adviser since
April 2014. As of December 31, 2023, the Firm had approximately $3.3 billion in
discretionary and non-discretionary assets under management.
In addition to the main Apella office in West Hartford, CT. the Firm also has various office
locations throughout the United States.
Apella offers services through its various remote offices. All Firm office locations are under
common supervision and the advisory services are provided through Apella.
B. Types of Advisory Services
Investment Advisory Services
Apella offers investment advisory services to clients through the efforts of the firm’s
investment adviser representatives (“IARs or Financial Advisors”). Acting as a client’s
investment adviser, the Apella IAR builds custom investment programs. The IAR
collaborates with the client to develop objectives within suitable risk/reward parameters
relative to the client’s financial circumstances, and then develop an appropriate asset
allocation strategy. The Apella IAR begins with a model portfolio constructed for each
specific investment strategy the Firm offers, and then tailors the model for each client, taking
into account the client’s individual needs, including client requested restrictions, cash needs,
tax considerations, and other items, while generally remaining consistent with the Firm’s
model for that strategy. There may be an opportunity to employ client requested restrictions
on a case-by-case basis; any proposed client requested restrictions should be provided to
the Firm in writing in advance for its consideration. The Firm will also consider allowing
clients to impose restrictions on investing in certain securities or types of securities.
Apella acknowledges that it is a fiduciary with respect to any investment advice. Apella strives
to ensure high standards of ethical conduct among its employees to protect the firm’s clients
and firm reputation. Apella employees take their positions of trust seriously and must act
professionally and with complete propriety at all times.
The model strategies utilized by Apella IARs cover a range of investment strategies that
include equity and fixed income allocations in varying percentages. The various model
strategies are generally composed of pooled investments including mutual funds, exchange
traded funds, and other similar registered products. Some of the model strategies are
designed and maintained by the Investment Committee of Symmetry Partners, LLC
(“Symmetry”) (an affiliated registered investment adviser). Apella or the Investment
Committee, as the case may be, selects third party investment advisory firms (“External
Managers”) to manage specific portions of the allocation consistent with the overall asset
allocation strategy developed by the Investment Committee, including model portfolios
comprised of the Symmetry-managed Panoramic Funds (described below under Panoramic
Fund Model Portfolios). External Managers are selected based on an evaluation of the
investment advisory organization, including the organization’s performance against
selected benchmarks, investment style within a particular asset class, expenses and related
factors. Apella also creates individual security portfolio solutions under the Apella Select
program, designed to give clients exposures similar to several diversified indices, as well as
offering specific factor emphasis.
Apella or the Investment Committee, as the case may be, monitors the performance of
External Managers, including managers’ adherence to investment style and continuing
suitability with respect to model strategies and overall asset allocation strategy, as well as
overall expense levels. As part of this monitoring process, Apella or the Investment
Committee, as the case may be, employs the services of various outside consulting and
research providers to obtain performance measurement, including index and peer group
comparisons, and/or other services. Apella and/or the Investment Committee continually
monitor the capital markets and various asset classes. Periodically, Apella and/or the In-
vestment Committee may recommend adjustments to model strategies in seeking to avoid
risk or gain exposures associated with investment opportunities.
The Firm’s advisory services may include the following: reviewing the client’s investment
portfolio at the commencement of the Apella advisory relationship; assessing the client’s
investment needs and objectives; investment policy planning and suitability; developing an
asset allocation strategy designed to meet client objectives; ongoing monitoring of the
performance of the accounts; implementation of asset allocation strategy; reviewing
accounts to ensure adherence to policy guidelines and rebalancing asset allocations when
Apella, in its discretion, deems such re-balancing appropriate for the client; answering client
inquiries; updating client information; and interviewing the client at least annually to identify
changes in the client’s financial situation. The client should notify Apella promptly if the
client’s financial situation or investment objectives change.
Discretionary Services - As designated in the client’s Investment Advisory
Agreement, Apella may be engaged to provide investment advisory services on a
discretionary basis, whereby Apella may, without client consent, implement
investment strategies or change portfolio holdings or allocations, provided all actions
are consistent with a client’s risk tolerance and investment objectives. Please see
Investment Discretion below, Item 16.
Non-Discretionary Services - In contrast to “Discretionary Services,” when Apella is
engaged (per the Investment Advisory Agreement) to provide Non-Discretionary
advisory services, the Apella IAR will recommend a course of action and seek client
consent or direction before proceeding with implementation.
Qualified Plan Clients - Apella IARs may refer qualified plan clients to Symmetry for
investment management services provided by the Symmetry Retirement Program.
Qualified plan clients include those complying with the requirements of Section
401(a) (and related sections) of the Internal Revenue Code. Should a qualified plan
client engage Symmetry for investment management services, the Apella IAR would
serve as a co-adviser to the qualified plan client.
Symmetry is an investment manager as defined in sections 402(c)(3) and (3)(38) of
the Employment Retirement Income Security Act of 1974 (“ERISA”). Symmetry
works with a select group of third-party administrators referred to as Symmetry's QP
Partners. Symmetry offers its investment management services to 401(k) and
qualified plans through the Symmetry Retirement Program. Symmetry services
include, but are not limited to, reviewing investment options, recommending a
portfolio structure, and recommending appropriate changes in portfolio holdings.
A full description of the Symmetry Retirement Program will be provided to plan
sponsor/client by the Apella IARs. Other Apella IARs services may include, but are
not limited to, assist in assessing and gathering information to determine the
suitability of Symmetry's services for the plan, assist in enrollment meetings, provide
investment education to participants, be reasonably available to plan sponsor for
questions and requests, and contacting the plan sponsor at least annually to see if
there has been a change in the plan's financial situation.
To the extent that an account is an employee benefit plan described in section 3(3)
of ERISA and subject to Title I of ERISA (an “ERISA plan”) or a plan described in
Section 4975(e)(1)(B) through (F) of the Internal Revenue Code of 1986, as
amended (“Code”) and subject to Section 4975 of the Code, including an individual
retirement account (an “IRA”) (each a “Retirement Client”), Apella acknowledges that
it is a fiduciary under ERISA or the Code, or both, as applicable, with respect to any
investment advice (as defined in 29 C.F.R. § 2510.3-21) it provides to the
Retirement Client with respect to the Account.
For additional information on Symmetry Partners, LLC, and their Retirement
Program, please refer to Symmetry’s ADV Part 1 and 2A, which can be found at
www.adviserinfo.sec.gov/Firm/120982.
Conflict of Interest – IRA Rollover Recommendations
When recommending that a client rollover his or her account from current retirement
plan to an IRA, Apella and its investment adviser representatives have a conflict of
interest. Apella and its representatives can earn investment advisory fees by
recommending that a client rollover his or her account at the retirement plan to an
IRA. Apella has taken steps to manage this conflict of interest arising from rolling
over funds from an ERISA covered retirement plan to an IRA. Apella and its
investment adviser representatives will:
i. provide investment advice to ERISA covered retirement plan participant
regarding a rollover of funds from the ERISA covered retirement plan in
accordance with the fiduciary status described below,
ii. not recommend investments which result in the firm receiving unreasonable
compensation related to the rollover of funds from the ERISA covered
retirement plan to an IRA, and
iii. fully disclose compensation received by Apella and its supervised persons
and any material conflicts of interest related to Apella recommending the
rollover of funds from the ERISA covered retirement plan to an IRA and
refrain from making any materially misleading statements regarding such
rollover.
Written Acknowledgement of Fiduciary Status
When we provide investment advice to a client regarding their 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, and will comply
with Impartial Conduct Standards as described below. The way we make money
creates some conflicts with client interests, so we operate under a special rule that
requires us to act in the client’s best interest and not put our interest ahead of the
client’s interest. 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 the client’s interest 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 the client’s best interest;
• Charge no more than is reasonable for our services;
• Give basic information about conflicts of interest; and
• Assess, in writing, whether a rollover to Apella is in the client’s best
interest.
If our investment advice includes a recommendation that the Retirement Investor
roll over assets to a Firm Account, or from one type of Firm Account to another, we
are required to provide documentation of the specific reasons that such
recommendation is in the Retirement Investor’s Best Interest.
Financial Planning
Apella also provides advice in the form of a financial plan. An advisory client of Apella may
receive these services as part of the bundled services offered under the established advisory
fee. Alternatively, clients who are seeking financial planning services only, may receive
these services on a standalone basis for a flat fee. The flat fee is negotiable depending on
the services provided and is typically a one-time fee unless the client requests the services
the following year.
Financial Planning clients that come through the various remote offices may pay an on-
going financial planning fee for the services provided. All financial planning clients receive
a written financial plan, providing the client with a detailed financial plan designed to achieve
the client’s stated financial goals and objectives. Implementation of financial plan
recommendations is entirely at the client’s discretion.
In order to develop a comprehensive plan, the Apella IAR will:
• Determine and prioritize personal and financial goals, needs and objectives.
• Gather the pertinent data and documents and conduct personal interviews with
the client and professional advisers.
• Analyze and evaluate a client’s overall financial situation.
• Develop and present investment and financial planning recommendations both
verbally and in writing.
• Implement all investment and financial plans as directed by the client.
• Monitor and adjust plans as needed and directed on an ongoing basis.
Depending on a client’s objectives, the resulting formal written plan will cover general
financial planning, estate planning, educational fund planning, individual tax planning,
retirement planning, risk management, and insurance planning.
Financial Planning services provided to clients that come through the California offices will
include extensive financial planning services such as:
• Establish and define the relationship with Client.
• Gather Client data.
• Analyze and evaluate the Client’s financial status – conduct interviews with client and
professional advisers.
• Develop and present investment and financial planning recommendations both verbally
and in writing, to include:
o Evaluate Cash flow and advise on budgeting and debt management.
o Evaluate and advise on tax, estate, and charitable giving.
o Evaluate and advise on retirement and college planning.
o Evaluate and advise on investment strategies and portfolio construction.
o Evaluate and advise on risk management and insurance planning.
o Develop and present divorce planning recommendations.
o Provide other financial planning services, as needed.
Clients in the California offices are provided with a comprehensive service combining financial
planning and investment advisory services, detailed in our investment advisory agreement that
each client must sign.
Joint Marketing Relationship
Apella has entered into a Joint Marketing Agreement with CFS Financial, LLC, an
investment adviser registered in the state of MA (“Referring Firm”), whereby Apella co-
sponsors college planning seminars with Referring Firm. The purpose of the seminars is to
educate participants regarding college funding options and, for a planning fee, to guide
individuals (“College Planning Clients”) through the college funding process. Certain
College Planning Clients have financial planning or investment advisory needs beyond
the scope of services provided by Referring Firm. Referring Firm may refer such College
Planning Clients to Apella for broader scope financial planning and/or for ongoing
investment advisory services. Referring Firm receives fees for services it provides and
additional compensation from Apella for referrals of clients for investment advisory services.
As described above, Referral Firm receives a fee for referring College Planning Clients to
Apella for investment advisory services. Therefore, Referral Firm has a financial incentive
to recommend Apella to its College Planning Clients over similar firms that do not
compensate Referral Firm for referrals.
Clients referred by Referring Firm are subject to the same standard fee schedule as other
Apella clients as other clients serviced by the same Apella office location. A portion of the
investment advisory fee earned by Apella is then paid to Referral Firm. Given that Apella
does not charge referred clients a higher fee than those clients not referred by Referral
Firm, the referral fee serves to reduce the net fee retained by Apella.
Investment Management Services
Apella IARs may use any methods of analysis and any investment strategies the Firm
believes will be helpful in achieving the investment objectives of its clients, consistent with
any guidelines and restrictions that the client may otherwise request, and consistent with
the information provided herein.
The Firm uses a variety of investment approaches and techniques in managing client
portfolios, with an emphasis on the use of quantitative research and proprietary models to
manage accounts, and to monitor selected investments and performance against internal
parameters. The Firm primarily utilizes model strategies designed by Symmetry to cover a
wide range of investment objectives, risk tolerances, and time horizons, while individually
providing managed investment allocations more closely tailored to a particular investor
profile. The strategies vary in their equity and fixed income exposures – and, within the
equity allocations, further variance with respect to market capitalization and style – and,
within the fixed income allocations, further variance in credit quality and duration.
The recommendations implicit in the model strategies may reflect recommendations being
made by Symmetry contemporaneously to, or investment advisory decisions made
contemporaneously for, similarly situated discretionary clients of Symmetry or affiliated
entities. As a result, Symmetry or its affiliates may have already commenced trading before
an Apella IAR has received or has had the opportunity to evaluate or act on Symmetry’s
model strategy information. In this circumstance, trades ultimately placed by an Apella IAR
for its clients may be subject to price movements that may result in Apella clients receiving
prices that are less or more favorable than prices obtained by Symmetry for its client
accounts.
Symmetry also has model portfolios composed of proprietary mutual funds, the Symmetry
Panoramic Funds, each a Fund and collectively the “Funds” which are registered with the
SEC under the 1940 Act, (“40 Act”) and the Securities Act of 1933. Use of Symmetry
Panoramic Funds in client portfolios is discussed further under
Symmetry Panoramic Model
Portfolios, below.
Apella IARs manage the assets in client accounts and may invest a portion or all of a client’s
assets in accordance with model strategies. IARs may also customize portfolios to better
address the client’s stated investment objective, including but not limited to, tax sensitivity,
allocation criteria, and liquidity requirements. In some cases, when a client account is
transitioned to Apella through one of Apella’s office location locations, the client may remain
in their legacy portfolio and continue to have that portfolio managed by Apella. The Firm
may use other funds and/or other investments vehicles apart from those mentioned in this
section based on the client’s unique circumstances. However, the primary investment
vehicles utilized by Apella are mutual funds or exchange traded funds and the primary
methodology is model based. Risks associated with these various vehicles are identified in
Item 8 of this brochure.
Certain Apella IARs manage assets for participants in specific employee sponsored
retirement plans and annuity contracts. The individual investments available in the
employee sponsored retirement plans and annuity contracts differ from the model portfolios
designed and managed by the Apella IARs and Symmetry. For this reason, while target
allocations are materially similar to those provided directly by Apella or Symmetry, the
returns for similar allocations will differ. Apella has contracted with Orion Advisory Services,
LLC (“Orion”) to utilize its technology platforms to support data reconciliation, performance
reporting, fee calculation and billing, research, client database maintenance, quarterly
performance evaluations, payable reports, website administration, models, trading
platforms, and other functions related to the administrative tasks of managing client
accounts. As a result of this arrangement, Orion will have access to client accounts, but
Orion will not serve as an investment advisor to Apella clients. Apella has a separate
Confidentiality Agreement with Orion and a copy of Apella’s privacy policy can be obtained
on the Apella website at
www.apellawealth.com. Apella and Orion are non-affiliated
companies. Orion charges Apella a fee for each account administered by Orion. The annual
fee is paid from the portion of the management fee retained by Apella.
Symmetry Panoramic Model Portfolios
The Apella IAR may recommend and utilize managed portfolio solutions composed of
Symmetry Panoramic Funds. When Apella utilizes Symmetry Panoramic Fund Model
Portfolios, Symmetry Partners receives a management fee from the Panoramic Funds. The
management fee is in addition to the advisory fee paid to Apella by Clients. While every
mutual fund or sub-advised portfolio component used by Apella carries its own sub-advisory
or investment management fee, in cases when Apella uses the Symmetry-managed
Panoramic Funds, the affiliated entities receive both the advisory fee at the Client account
level (paid to Apella) and the investment management fee at the fund level (paid to
Symmetry).
While an Apella IAR will not receive more compensation for using Panoramic Fund Model
Portfolios, Symmetry Partners will. The higher overall compensation received by the
affiliated entities may create an incentive for an Apella IAR to recommend Panoramic Fund
Model portfolios over another investment solution. This conflict created by higher affiliate
compensation is addressed in a variety of ways, including disclosure of the conflict in this
Brochure. In addition, as fiduciaries, the Apella IARs are required to consider the costs of
any investment solution in conjunction with the anticipated benefits to the Client. The Apella
IARs are further required to recommend only those investment solutions that are suitable
for each client based on the client’s investment objectives, risk tolerance and financial
situation and needs.
Apella Select
Apella Select services includes two distinct separately managed account (SMA) options.
The Investable Index Series targets popular equity indexes, while the Multi-Factor Strategies
are designed to capture multi-factor strategies comprised of individual stocks and ADRs.
•
Investable Index Series
Our Investable Index Series was designed to provide your Financial Advisor with Model
options that behave in a manner similar to a broad-market index while, at the same time,
allowing for customization and active overlay management techniques through individual
security ownership.
•
Multi-Factor Strategies
Our Multi-Factor Strategies are comprised of broadly diversified investment solutions that
include individual stocks and ADRs. These portfolios are constructed based on quantitative
rules-based methods that seek to capture specific factor premiums, such as Value,
Momentum and Profitability, and will rebalance on a regular basis to maintain intended
diversification and factor exposures. Portfolios of individual securities may be the
appropriate solution for clients with tastes and preferences or needs that are better met by
these portfolios. The current offering includes strategies that cover the United States,
International, and Global geographies and can include factors such as Value, Momentum,
and Profitability (or Quality).
Your Financial Advisor may utilize either of these Models to serve several construction
objectives inside your portfolios. Your Financial Advisor may wish to use these Models as
a core module inside of a larger core/satellite portfolio. These Models may also be suitable
as a starting point to express your preferences for lifestyle- or religious- specific
customizations that could otherwise not be expressed through a pooled vehicle such as an
ETF or Mutual Fund. Finally, these Models may be utilized as a tax-aware module within
your portfolio where specific tax lots of individual securities may be loss-harvested (see Tax
Overlay Management Services) while at the same time demonstrating index-like tracking
characteristics. While the Models themselves are not managed in a tax sensitive fashion, the
structure does help facilitate more effective tax management from the dispersion among a
sample of the constituents securities of an index as well as the potential for various tax lots
for these securities.
•
Completion Portfolios
As noted above, the Investable Index Series offers investment solutions that closely track
the performance of indices. In some cases, those solutions may not represent the entirety
of a client’s appropriate investment solution. As such, Apella may offer model portfolios of
mutual funds or ETFs that are intended to be paired with various solutions offered in the
Investable Index Series in order to achieve a total portfolio solution consistent with a client’s
needs. Examples of what may be included in Completion Portfolios include Emerging
Market equity, small and micro-cap equity, high-turnover factor strategies like momentum,
and other sub-strategies of a portfolio that may not be offered in the Invest- able Index
Series.
•
Tax Overlay Management Services
Apella can provide Tax Overlay Management services to Apella Select accounts. In
providing Tax Overlay Management services, we consider the tax consequences of
transactions in your account and will adjust our services accordingly. We attempt to
accomplish tax-aware investment management through gain-loss matching, harvesting
losses and/ or gains, deferring gains until securities reach preferential tax status, and
avoiding imprudent wash sale transactions to improve the after- tax return while staying as
consistent as possible with the risk/return characteristics of your account’s Strategy.
Our ability to improve your after-tax return depends on various factors beyond our control
including economic and market conditions, regulatory changes, actions taken by your
custodian broker-dealer, the specifics of your account’s strategy, the starting portfolio in
your account, your tax circumstances and mandates as communicated by your Financial
Advisor. Tax Overlay Management may cause the actual performance in your account to
vary from the "stated" performance of the Strategy’s Manager.
Tax Overlay Management services are provided in connection the Apella Select Program
and to financial planning clients who receive services from one of Apella’s appropriately
credentialed IARs. We do not provide general tax planning advice or services outside of
these types of client engagements. To provide Tax Overlay Management services, we rely
solely on the information provided by you and your custodian broker-dealer. If that
information is inaccurate, incomplete or not timely, our ability to provide Tax Overlay
Management may be adversely affected. We make no guaranty that taxes in your account will
be reduced. If an account contains mutual funds and/or exchange traded funds (“ETFs”), our
Tax Overlay Management services are generally applied on the portion of your account
containing equity securities and not to the portion that consists predominantly of mutual
funds and/or ETFs.
By default, accounts are managed without Tax Overlay Management Services unless
specifically elected by your Financial Advisor. Please note that with Apella Select there are
minimum investment levels.
C. Individual Tailored Services and Reasonable Restrictions
Apella’s IARs assist clients in determining which model strategy or allocation is most
appropriate for a client’s particular needs. Apella IARs may also customize portfolios to
meet the unique needs and objectives of its clients. Clients may place reasonable
restrictions on their accounts. However, Apella may decline a restriction request upon notice
to the client if the request is fundamentally inconsistent with Apella’s investment philosophy,
is counter to the client’s stated investment objectives, or would prevent the firm from
properly servicing client accounts.
D. Wrap Fee Programs
Apella is not a sponsor of or a portfolio manager to a wrap fee program.
E. Assets Under Management
As of December 31, 2023, Apella’s assets under management total for discretionary assets
under management was approximately $2,899,769,633 and non-discretionary assets under
management of approximately $449,250,298.