A. Description of the Advisory Firm
ETF Model Solutions, LLC (“ETF Model Solutions,” “ETFMS,” “We,” or the “Firm”) is a registered
investment adviser with the U.S. Securities & Exchange Commission (“SEC”) operating as a Limited
Liability Company organized in the State of Wisconsin. The Firm was founded in 2013.
ETF Model Solutions® specializes in providing 3-dimensional (“3D”) portfolios based on the
endowment model of investing, which we refer to as the Endowment Investment Philosophy®, or “EIP”.
The EIP constructs portfolios using an asset allocation methodology pursued by major universities like
Yale and Harvard, which expands the number of asset classes and strategies used to create a portfolio by
including alternative investments beyond just stocks and bonds to include such assets as hedge funds,
private equity, and real assets. The key differentiator of the EIP is that it reduces the equity and fixed
income components of a portfolio and replaces those portions with the alternatives seeking to enhance
return or reduce risk. ETF Model Solutions refers to this third dimension as the “Risk Managed” segment
of a portfolio.
Prior to rendering any services, clients are required to enter into one or more written agreements with
ETF Model Solutions, LLC setting forth the relevant terms and conditions of the advisory relationship.
The Firm is committed to minimizing potential conflicts of interest and providing transparent pricing.
As an independent adviser, we have no affiliation with any of the investments we recommend, and we
do not have a financial incentive to select any investment over another.
This Brochure is meant to help you understand the nature of the advisory services offered by ETF Model
Solutions, LLC with respect to our model portfolios offered through turnkey asset management
platforms (“TAMPs”), whether the advisory services offered by us are right for you, and the potential
conflicts of interest associated with your choice to do business with us. You should review it carefully.
B. Types of Advisory Services
ETF Model Solutions provides investment advisory and investment management services through asset
allocation models that primarily contain exchange traded funds (ETFs), but also may include Exchange
Traded Notes (ETNs), open- and closed-end mutual funds, and, to a lesser extent, other publicly traded
securities such as Business Development Companies (BDCs) and Real Estate Investment Trusts
(REITs). Clients may engage ETFMS to effect transactions within their investment portfolios on a
discretionary basis.
The investment models may be deployed or provided to various clients through several distinct client
relationship types, including: (a) discretionary investment advisory in which our models made available
to 401(k) Plans and/or as a subadvisor through various Separately Managed Account or TAMPs,
including ATC’s ModelxChange or Fidelity’s Separate Account Network, and (b) licensing or otherwise
contractually creating, managing or providing asset allocation models to affiliated or unaffiliated
investment advisors to which ETFMS serves in a non-discretionary investment advisory capacity.
ETF Model Solutions may serve clients either in a discretionary or non-discretionary capacity, offering
services such as investment advisory, portfolio construction, investment management, consulting, and
related services. These services are provided to endowments, foundations, institutions, or other
investment advisory firms. As a registered investment adviser, we are held to the highest standard of
client care - a fiduciary standard. As a fiduciary, we always put our client's interests first and must fully
disclose any potential conflicts of interest. We do not directly hold customer funds or securities. All
transaction instructions are sent to our qualified custodian(s) who execute, compare, allocate, clear, and
settle the trades. The custodian(s) also maintain our clients' accounts and may grant clients access to
them.
When making investment selections, ETFMS may consider the tax implications of any ETF or other
holdings that it includes in its portfolio allocations. For example, ETFMS may generally, but not always
seek to avoid including securities in its model portfolios that issue Form K-1 tax reporting in favor of
securities that issue Form 1099 tax reports. ETF Model Solutions is not responsible for tax reporting for
securities held in its model or investment portfolios. The custodial brokerage firm which the client’s
account is held is responsible for providing tax statements to clients.
ETF Model Solutions does not provide tax advice. We recommend that clients direct tax questions to a
qualified tax professional who is familiar with the federal, state, and local tax issues applicable to the
client’s specific tax circumstances and needs. For non-qualified accounts, and in its sole discretion, ETF
Model Solutions may periodically conduct tax loss harvesting activities with respect to some or all
securities within an account or a model, giving consideration to the potential tax impact for non-qualified
accounts.
(a) Investment Advisory- Managed ETF Models. ETF Model Solutions’ ETF-based models are available
on Separately Managed Account Platforms or Turnkey Asset Management platforms, including ATC’s
ModelxChange and Fidelity’s Separate Account Network (SAN). In these instances, clients are being
serviced by an adviser that either has discretion to place the client assets with ETFMS, or, when the
adviser does not have discretion, the client makes the decision upon the advice of their adviser to utilize
ETFMS’ services. When utilized by independent advisors for managing client assets, ETFMS provides
model management services to clients in the various models selected by the Client’s advisor. Our model
strategies may include passive risk-based models, strategically managed models, and adaptive, tactical,
or dynamically managed strategies.
Retirement (401-k) Plans access our services through American Trust Custody’s (“ATC”)
ModelxChange platform. ETF Model Solutions provides model management services to the Plans when
Plan Sponsors elect to utilize
the Firm’s models as investment selections within their Plan. Models
available to Plans include 3D Endowment risk-based portfolios intended for investors that identify
themselves within a certain risk category, such as Conservative, Moderate, or Aggressive. Investment
advisers serving the retirement Plan Sponsors in a fiduciary capacity under either an ERISA (3)(21) non-
discretionary, or ERISA (3)(38) discretionary capacity, may recommend that these investment models
are appropriate investment options for their respective Plan clients. When its investment models are
included as investment options within a retirement or 401(k) Plan, ETFMS serves as a discretionary
investment manager to the Plan only with respect to assets place in its models. Clients (Plan Sponsors)
can impose reasonable restrictions on the managed portfolios or models.
ETF Model Solutions constructs and maintains its managed ETF model portfolios. From time to time
the model portfolios may be rebalanced or reconstituted. Typically, these model changes are affected on
the Separate Account or TAMP platforms through which ETF Model Solution’s models are available,
(i.e., ModelxChange). Upon constructing, or making a change to a model portfolio, ETFMS
communicates (via secure web portals or other methods) the changes in the portfolios to ModelxChange
or other platform providers. ETFMS will then instruct the platform provider or custodian to rebalance
the accounts to the model’s new target allocations. ETFMS can set systematic rebalance instructions at
scheduled times (i.e., monthly, quarterly) or drift. Drift is defined as when a security’s actual allocation
relative to its target allocation. For example, a “10% drift threshold” for a security with a target allocation
of 9% of a total portfolio, the lower drift threshold would be 8.1% (or 9% below the target allocation)
and the upper drift threshold would be 9.9% (or 10% above the target allocation. We also can submit
manual instructions for rebalancing to occur at our discretion.
(b) Model Licensing. ETF Model Solutions provides non-discretionary investment advisory services to
affiliated and/or non-affiliated investment advisers. These licensing activities include the creation and
maintenance of ETF-based investment models. These models and subsequent model changes are
communicated as recommended allocations or changes to the advisory firms that license the models.
These recommendations are provided on a non-discretionary basis. ETF Model Solutions is not
responsible for enacting or making discretionary trades in client accounts with respect to its model
licensing activities. Firms that license these models are responsible for any discretionary activities with
respect to assets they manage according to the models. ETF Model Solutions’ compensation for these
activities is subject to the terms of a model licensing/management agreement that is agreed upon with
the advisory firm utilizing these services.
(c) Other activities. ETF Model Solutions conducts ongoing research which may result in the
construction of various indexes. ETF Model Solutions conducts research and index construction
according to proprietary methodologies. Calculation and dissemination of historical and current data on
index construction which may be made publicly available through various index calculation services
such as Nasdaq OMX®. Index data and research may also be licensed to various institutional investment
managers.
(d) Automated Investing Solutions. ETF Model Solutions DBA Embark (“Embark”) is investment
service provided directly to individual investors through the Betterment for Advisors platform.
Disclosures related to Embark are disclosed in a separate Form ADV Part 2 accessible at:
https://adviserinfo.sec.gov/firm/brochure/168410.
C. Services Limited to Specific Types of Investments
ETF Model Solutions generally limits its investment advice to domestically registered securities that
trade on major U.S. securities exchanges and/or offer daily liquidity and do not require investor
accreditation. These securities include but are not limited to exchange traded funds and notes, mutual
funds (including closed-end funds) and business development companies that hold equities, fixed income
securities, precious metals, commodities, and real estate investment trusts (REITs). Certain mutual funds
or exchange-traded funds may implement hedging strategies or invest in derivatives, including, but not
limited to futures and options within their underlying holdings. ETF Model Solutions does not utilize
illiquid investments such as private placements or non-publicly traded securities within its models. ETF
Model Solutions primarily utilizes ETFs to represent the targeted asset classes in the model portfolios,
and to a lesser extent, ETFMS may include exchange traded notes (ETNs), publicly traded development
companies, business development companies (BDCs) and/or closed and open-ended mutual funds. ETF
Model Solutions does not typically include individual stocks and bonds in our models or portfolio
allocations.
D. Client Tailored Services and Client Imposed Restrictions
ETF Model Solutions offers its Endowment Target Risk models through Turnkey Asset Management
Platforms (TAMPs). These services make it possible for individuals, trusts, retirement plans, or other
entities to access an endowment-based investment strategy designed to be consistent with the clients’
investment objectives and risk tolerances.
ETF Model Solutions allows its clients to impose reasonable restrictions on investing in certain securities
or types of securities and will accommodate those requests to the extent that the respective TAMPs
and/or custodians through which the strategies are provided maintain operational functionality that
supports those restrictions.
E. Assets Under Management
As of 12/31/2023, ETF Model Solutions had $15,746,673 assets under management, all of which were
discretionary. Of this amount, $5,302,906 was managed through model portfolios in Turnkey Asset
Management Platforms.