A. Isthmus Partners, LLC
Isthmus Partners, LLC (“Isthmus Partners” and/or “the firm”), is a Wisconsin limited liability
company and an SEC-registered investment adviser. The firm is owned by Frank J Gambino,
David A Hackworthy, Joel C McNeil, Victor E Rodriguez, and Jeremy Baier. The firm has been
providing investment advisory services since 2014.
A.1. Advisory Services Offered
The investment advisory services offered by Isthmus Partners include portfolio management,
investment advice, performance reporting, and related account services. The firm may also offer
financial planning services to certain clients.
Isthmus Partners offers three primary investment strategies to individual clients: (1) a Large Cap
Core Equity Counseled Portfolio; (2) a Small-Mid Cap Core Equity Counseled Portfolio; and (3) a
Small Cap Core Equity Counseled Portfolio (the “Counseled Portfolios”). Isthmus Partners may
also offer certain Counseled Portfolio clients fixed income portfolios, international equity
portfolios, or portfolio of mutual fund portfolios. Fixed income, international equity portfolios,
and portfolio of mutual fund portfolios are only available to Counseled Portfolio clients as part
of a larger diversified portfolio. Isthmus Partners typically provides Counseled Portfolio clients
with advice and guidance on matters including, but not limited to, asset allocation and financial
planning, along with discretionary investment management over the client’s account.
The firm seeks to meet the client’s particular investment needs by developing a customized
investment strategy based upon guidelines that are jointly established by the client and Isthmus
Partners. At the commencement of services, the firm reviews the client’s investment objectives
and risk tolerance. Based upon that review and other information provided by the client, Isthmus
Partners makes a subsequent recommendation to the client as to which investment style the
firm believes is best suited for the client. The client makes the final decision as to which
investment style is chosen for the client’s account.
For its discretionary asset management services, the firm receives a limited power of attorney to
effect securities transactions on behalf of its clients that include securities and strategies
described in Item 6.C.7 of this brochure.
In addition to providing Isthmus Partners with information regarding their personal financial
circumstances, investment objectives and tolerance for risk, clients are obligated to provide the
firm with any reasonable investment restrictions that should be imposed on the management of
their portfolio, and to promptly notify the firm in writing of any changes in such restrictions or in
the client's personal financial circumstances, investment objectives, goals and tolerance for risk.
On a quarterly basis, Isthmus Partners’ reports to clients will remind clients of their obligation to
inform the firm of any such changes or any restrictions that should be imposed on the
management of the client’s account. Isthmus Partners will also contact clients at least annually
to determine whether there have been any changes in a client's personal financial circumstances,
investment objectives and tolerance for risk.
A.2. Fees and Compensation
Counseled Portfolios
The following fee schedule sets forth the maximum fee rates for Counseled Portfolios.
Value of Assets Annual Fee Rate
First $2 million 1.25%
Next $3 million 1.00%
Next $5 million 0.80%
Over $10 million 0.60%
The minimum asset value to open a Counseled Portfolio is typically $2 million. The minimum
annual advisory fee is generally $25,000. For Counseled clients seeking fixed-income
management only, fees are negotiable. International equity securities management and portfolio
of mutual fund portfolios is only available to Counseled Portfolios as part of a larger diversified
portfolio.
The firm will calculate a client’s advisory fee by applying the applicable fee rate to the value of
all of the assets in the client’s account, including cash and its equivalent and including all assets
held by any third party custodian. If requested by a client and approved by Isthmus Partners a
client’s advisory fee may be determined by also including the aggregate value of assets in
certain other accounts held by a client and the client’s immediate family members residing in
the same household, which may include managed account assets held in a client’s name at
Isthmus Partners and may include at the firm’s discretion, assets held away from Isthmus
Partners non-managed assets, and assets held in a name other than that of the client. A client
should note that retirement accounts may not be included in to the extent a prohibited
transaction under ERISA or the IRC may result. The terms of any such household fee
arrangement will be set forth in the client’s investment management agreement.
The advisory fee and minimum account value are negotiable in certain instances and may vary
based upon a number of factors, including but not limited to the size and nature of the assets in
the client’s account, the client’s particular investment style or objective, and any particular
services requested by the client. In some instances, clients may pay a higher fee than indicated
in the fee schedules above.
Asset-based fees are always subject to the investment advisory agreement between the client
and Isthmus Partners. Such fees are payable quarterly in advance. The fees will be prorated if the
investment advisory relationship commences otherwise than at the beginning of a calendar
month.
These fees include charges for all transaction costs such as commissions on purchase and sales
of stocks, bonds, exchange-traded funds and options, and mutual fund transactions fees. Except
as otherwise provided below, client will incur no charges other than the adviser’s fee pursuant to
the above fee schedule in connection with the maintenance of and activity in client’s account.
The wrap fee does not include annual account fees or other administrative fees, such as wire
fees, charged by manager or brokerage firm; fees for securities transactions executed away from
the custodian; certain odd-lot differentials, transfer taxes, transaction fees mandated by the
Securities Act of 1934, postage and handling fees, and charges imposed by law with regard to
transactions in the client’s account; and advisory fees, expenses or sales charges (loads) of
mutual funds (including money market funds), closed-end investment companies or other
managed investments, if any, held in client’s account. The wrap fee also does not cover certain
costs associated with securities transactions in the over-the-counter market, such as fixed
income securities where manager must approach a dealer or market maker to purchase or sell a
security. Such costs include the dealer’s mark-up, mark-down or spread and odd-lot differentials
or transfer taxes imposed by law.
The trading cost component of the Isthmus Partners’ advisory fee is estimated to range from $0
to $500 per account per year.
The client authorizes the qualified custodian to automatically deduct the fee and all other
charges payable hereunder from the assets in the account when due with such payments to be
reflected on the next account statement sent to the client. If insufficient cash is available to pay
such fees, securities in an amount equal to the balance of unpaid fees will be liquidated to pay
for the unpaid balance. Isthmus Partners may modify the fee at any time upon 30 days’ written
notice to the client. In the event the client has an ERISA-governed plan, fee modifications must
be approved in writing by the client.
A client investment advisory agreement may be canceled at any time by the client, or by Isthmus
Partners with 30 days’ prior written notice to the client. Upon termination, any unearned,
prepaid fees will be promptly refunded. The client has the right to terminate an agreement
without penalty within five business days after entering into the agreement.
B. Disclosure of Cost Difference if Services Purchased Separately
Depending
on a number of factors, such as the number, size, and nature of the securities
transactions in an advisory account, the overall fees and charges borne by the client over time
could be more or less than what these fees and charges would be if the same services were
provided on a separate basis, either as asset-based fees or transaction-based fees. Bundled fees
(where the adviser assumes the cost of processing the trade) generally provide an economic
incentive for the advisory firm to select investments and strategies that minimize trading costs.
Frequent trading in an account where transactions fees are included as part of the overall
advisory fee to the client drive trading costs higher and reduce the overall fee revenue to the
advisor. As a result, higher trading costs in a bundled fee account have a negative impact on the
advisory firm’s profitability.
C. Additional Client Fees and Terms of Payment
C.1. Client Payment of Fees
Isthmus Partners requires clients to authorize the direct debit of fees from their accounts.
Exceptions may be granted subject to the firm’s consent for clients to be billed directly for our
fees. For directly debited fees, the custodian’s periodic statements will show each fee deduction
from the account. Clients may withdraw this authorization for direct billing of these fees at any
time by notifying us or their custodian in writing.
Isthmus Partners will deduct its advisory fees directly from the client’s account provided that (i)
the client provides written authorization to the qualified custodian, and (ii) the qualified
custodian sends the client a statement, at least quarterly, indicating all amounts disbursed from
the account. The client is responsible for verifying the accuracy of the fee calculation, as the
client’s custodian will not verify the calculation.
C.2. Prepayment of Client Fees
Isthmus Partners generally requires fees to be prepaid on a quarterly basis. Isthmus Partners’
fees will either be paid directly by the client or disbursed to Isthmus Partners by the qualified
custodian of the client’s investment accounts, subject to prior written consent of the client. The
custodian will deliver directly to the client an account statement, at least quarterly, showing all
investment and transaction activity for the period, including fee disbursements from the
account.
A client investment advisory agreement may be canceled at any time by the client, or by Isthmus
Partners with 30 days’ prior written notice to the client. Upon termination, any unearned,
prepaid fees will be promptly refunded. The client has the right to terminate an agreement
without penalty within five business days after entering into the agreement.
C.3. Additional Fees
All fees paid for investment advisory services are separate and distinct from the fees and
expenses charged by mutual funds and exchange-traded funds. Such fees and expenses are
described in each fund’s prospectus. Clients are advised to read these materials carefully before
investing. Please refer to the Brokerage Practices section (Items 9.B. and 9.B.) for additional
information regarding the firm’s brokerage practices.
D. Compensation for Recommending the Isthmus Partners Wrap Fee
Program
The Isthmus Partners Wrap Fee Program is a proprietary product offered exclusively through
Isthmus Partners. As such, there are no conflicts of interest in that there are no commissions
paid for selling the Isthmus Partners Wrap Fee Program.
E. External Compensation for the Sale of Securities to Clients
Isthmus Partners’ advisory professionals are compensated solely through a salary and bonus
structure. Isthmus Partners is not paid any sales, service or administrative fees for the sale of
mutual funds or any other investment products with respect to managed advisory assets.
F. Important Disclosure – Custodian Investment Programs
Please be advised that the firm utilizes certain custodians/broker-dealers. Under these
arrangements we can access certain investment programs offered through such custodian(s)
that offer certain compensation and fee structures that create conflicts of interest of which
clients need to be aware. Please note the following:
Limitation on Mutual Fund Universe for Custodian Investment Programs: There are certain
programs in which we participate where a client’s investment options may be limited in certain
of these programs to those mutual funds and/or mutual fund share classes that pay 12b-1 fees
and other revenue sharing fee payments, and the client should be aware that the firm is not
selecting from among all mutual funds available in the marketplace when recommending
mutual funds to the client.
Conflict Between Revenue Share Class (12b-1) and Non-Revenue Share Class Mutual Funds:
Revenue share class/12b-1 fees are deducted from the net asset value of the mutual fund and
generally, all things being equal, cause the fund to earn lower rates of return than those mutual
funds that do not pay revenue sharing fees. The client is under no obligation to utilize such
programs or mutual funds. Although many factors will influence the type of fund to be used, the
client should discuss with their investment adviser representative whether a share class from a
comparable mutual fund with a more favorable return to investors is available that does not
include the payment of any 12b-1 or revenue sharing fees given the client’s individual needs
and priorities and anticipated transaction costs. In addition, the receipt of such fees can create
conflicts of interest in instances where the custodian receives the entirety of the 12b-1 and/or
revenue sharing fees and takes the receipt of such fees into consideration in terms of benefits it
may elect to provide to the firm, even though such benefits may or may not benefit some or all
of the firm clients.
Additional Disclosure Concerning Wrap Programs: To the extent that we either sponsor or
recommend wrap fee programs, please be advised that certain wrap fee programs may (i) allow
our investment adviser representatives to select mutual fund classes that either have no
transaction fee costs associated with them but include embedded 12b-1 fees that lower the
investor’s return (“sometimes referred to as “A-Shares,” depending on the mutual fund issuer),
or (ii) allow the use of mutual fund classes that have transaction fees associated with them but
do not carry embedded 12b-1 fees (sometimes referred to as “I-Shares,” depending on the
mutual fund sponsor). Wrap fee programs offer investment services and related transaction
services for one all-inclusive fee (except as may be described in the applicable wrap fee program
brochure). The trading costs are typically absorbed by the firm and/or the investment
representative. If a client’s account holds A-Shares within a wrap fee program, the firm and/or its
investment adviser representative avoids paying the transaction fees charged by other mutual
fund classes, which in effect decreases the firm’s costs and increases its revenues from the
account. Effectively, the cost is transferred to the client from the firm in the form of a lower rate
of return on the specific mutual fund. This creates an incentive for the firm or investment adviser
representative to utilize such funds as opposed to those funds that may be equally appropriate
for a client but do not carry the additional cost of 12b-1 fees. As a policy matter, the firm does
not allow funds that impose 12b-1 or revenue sharing fees on the client’s investment within its
wrap fee programs. Clients should understand and discuss with their investment adviser
representative the types of mutual fund share classes available in the wrap fee program and the
basis for using one share class over another in accordance with their individual circumstances
and priorities.
G. Client Assets Under Management
As of December 31, 2022, Isthmus Partners had $977,296,272 of discretionary assets under
management and $0 of non-discretionary assets under management.
Item 5: Account Requirements and Types of Clients