Lefavi Wealth Management, Inc.
2323 Foothill Drive, Suite 100
Salt Lake City, Utah 8419
This brochure provides information about the business practices of Lefavi Wealth Management. Lefavi Wealth Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any level of skill, training, aptitude or qualification Nevertheless, this document, coupled with any conversations that you have with Lefavi Wealth Management, will provide you with information about which you can determine to hire or retain Lefavi Wealth Management.
If you have any questions about the contents of this brochure, please contact us at: (800) 422-9997, or by email at: email@example.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission, or by any state securities authority. Additional information about the Adviser is available on the SEC’s website at www.adviserinfo.sec.gov.
Effective Date of Brochure: September 12, 2017
The Material Changes section of this brochure will be updated when material changes occur or at least annually.
This update to our form ADV Part 2 incorporates the following changes:
This update to ADV part 2B incorporates the company’s staffing changes.
Whenever you would like to receive a complete copy of our Firm Brochure, please contact us by telephone at: 800-422-9997 or by email at: firstname.lastname@example.org.
You may also download the brochure here.
Lefavi Wealth Management, Inc., hereinafter (“the Adviser”) was founded in 1980 and is an SEC registered investment adviser. The Adviser generally provides continuous investment management services and financial planning services to the separately managed accounts of its clients. The clients are mostly individuals or high net worth individuals, but clients also include some business, charitable entities, and retirement/pension accounts.
Portfolios mainly consist of mutual funds, but may also include individual securities including equities, corporate debt, and municipal securities. Variable Annuities, Non-traded Real Estate Investment Trusts (REITs) and other alternative investments such as Business Development Companies (BDCs) are also part of client portfolios.
In addition to management fees, the Adviser, through its affiliated Broker Dealer, Bruce A Lefavi Securities (“BALS”), is in the business of selling annuities, insurance, stocks, bonds, mutual funds, limited partnerships, or other commissioned products for which it oftentimes receives commissions.
The Adviser does not act as a custodian of client assets and the client always maintains asset control from the Adviser, which are held in custody at either the clearing firm, the mutual fund company or its transfer agent, at the issuer (for non-certificated, privately placed securities) or some other duly authorized custodian. The Adviser has discretion of client accounts and places trades for clients under discretionary authority granted in the Advisory contract. The Adviser uses its affiliated brokerage firm, Bruce A Lefavi Securities, Inc., to trade, generating commissions to be paid to the brokerage firm. The Adviser has discretion over where the account is held in custody and the resulting expenses related to that custodianship.
The Adviser does not act as a sponsor and does not provide investment advice to a WRAP program.
Other professionals (e.g., lawyers, accountants, insurance agents, etc.) are engaged directly by the client on an as-needed basis. Any conflicts of interest arising out of the Adviser’s or its associated persons are disclosed in this brochure.
Bruce A. Lefavi is a 70% stockholder of the Adviser. The other 30% is split evenly between John Jaicks, Chris Light, and JD Slatter.
The Adviser provides investment supervisory services, also known as asset management services, manages investment advisory accounts not involving investment supervisory services and furnishes investment advice through consultations. On more than an occasional basis, the Adviser furnishes advice to clients on matters not involving securities, such as financial planning matters generally, retirement planning, long-term care insurance, taxation issues, and trust services that often include estate planning as arranged through 3rd party Certified Public Accountants or attorneys.
As of December 31, 2016, the Adviser manages approximately $489,000,000 in assets for approximately 1,400 clients. As of the effective date of this Brochure, all assets are managed on a discretionary basis, and none are managed on a non-discretionary basis.
The goals and objectives for each client are documented in our client relationship management system. Clients may impose restrictions on investing in certain securities or types of securities.
Assignment of Investment Management Agreements
Agreements may not be assigned without client consent.
The following agreements define the typical client relationships.
As part of the investment management service, (i) the material aspects of the client’s financial affairs are reviewed, (ii) realistic and measurable goals are set and (iii) objectives to reach those goals are defined. Following modern portfolio theory, Adviser creates asset allocation models for its clients. In consultation with the client, the investment advisor will invest the client’s assets based on the appropriate asset allocation model and monitor the performance of the client’s assets. An Advisory representative will recommend changes as the Adviser deems appropriate.
The Adviser periodically reviews a client’s financial situation and portfolio through regular contact with the client, which often includes an annual meeting with the client. Adviser also periodically updates the asset-allocation models and reviews the allocations in client portfolio. Adviser will determine the appropriate changes to be made to balance the client’s portfolio to the client-appropriate model with a review and rebalancing as necessary (depending upon the client’s needs and possibly upon market conditions) and which otherwise, in the ordinary course of business, occur no less than annually.
The scope of work for an investment management assignment is provided to the client in writing prior to the start of the relationship through an investment management agreement and/or an investment policy statement. The agreement sets forth the services to be provided, the fees for the service; the agreement may be terminated by either party in writing at any time.
The financial plan may include, but is not limited to: a net worth statement; a cash flow statement; a review of investment accounts, including reviewing asset allocation and providing repositioning recommendations; strategic tax planning; a review of retirement accounts and plans including recommendations; a review of insurance policies and recommendations for changes, if necessary; one or more retirement scenarios; estate planning review and recommendations; and education planning with funding recommendations.
The financial planning may be the only service provided to the client and does not require that the client use or purchase the investment Advisory services offered by the Adviser or any of the insurance products or other products and services offered by the investment adviser representatives of the Adviser. There is an inherent conflict of interest for the Adviser whenever a financial plan recommends use of professional investment management services or the purchase of insurance products or other financial products or services. The Adviser or its investment adviser representatives oftentimes receive compensation for financial planning, the provision of investment management services and/or the sale of insurance and other products and services. The Adviser does not make any representation that these products and services are offered at the lowest available cost and the client may be able to obtain the same products or services at a lower cost from other providers. However, the client is under no obligation to accept any of the recommendations of the Adviser or use the services of the Adviser in particular.
The Adviser may provide hourly services for clients who need advice on a limited scope of work. The services generally include basic, non-specific investment advice and/or some basic financial planning considerations. The hourly rate for limited scope engagements is $150.00 to $300.00.
Investments may include: equities (stocks), warrants, corporate debt securities, Non-traded REITs and Business Development Companies (BDCs), municipal securities, investment company securities (e.g., mutual funds shares), variable insurance products, U.S. Government securities, interests in partnerships or other private placements (Regulation D and Regulation A offerings).
Assets are invested primarily in no-load or low-load mutual funds and exchange-traded funds, usually direct through our affiliated Broker/Dealer and custodian, but occasionally directly through the fund companies. Fund companies charge each fund shareholder an investment management fee that is disclosed in the fund prospectus. Brokerages may charge a transaction fee for the purchase of certain mutual funds. Increasingly, clients will be invested in adviser share classes, which do not include these additional fees. Purchasing securities through our affiliated Broker/Dealer may generate transaction fees and other commissions that may be passed along to the investment adviser representatives of the Adviser who are also registered representatives of the Broker/Dealer. This represents a conflict of interest as the Adviser and its investment adviser representatives may be motivated to sell products that generate higher fees.
Initial public offerings (IPOs) are not available through the Adviser.
The Adviser offers insurance products through an insurance company with which the affiliated Broker/Dealer has established a relationship as an agent. Insurance products include both fixed and variable annuities. The affiliated Broker/Dealer earns commissions on these insurance products in addition to any fees earned from financial planning, investment management or other services offered. Increasingly, annuity companies are offering advisory class annuities, which do not pay commissions. When commissions are paid, the commissions are based on the standard commission schedule of the provider of the insurance products and are generally not negotiable. As the Adviser can also be the ultimate recipient of insurance commissions, per the insurance agency selling agreement with the affiliated Broker/Dealer, there is an inherent conflict of interest in providing such insurance products as part of a financial plan or investment management agreement that results in the recommendation to purchase insurance products. Moreover, the Adviser does not make any representation that these products are available at the lowest cost and similar products are available from other providers. The client is under no obligation to purchase insurance products from the Adviser.
A client may terminate any of the aforementioned agreements at any time by notifying the Adviser in writing. Clients may terminate the agreement within the first five (5) days after execution of the agreement at no charge. Thereafter, clients shall be charged pro rata for services provided through the date of termination and any applicable administrative fees. If the client made an advance payment, the Adviser will refund any unearned portion of the advance payment.
The Adviser reserves the right to terminate any engagement where a client has willfully concealed or has refused to provide pertinent information about financial situations when necessary and appropriate, in the Adviser’s judgment, to provide proper financial advice.
The Adviser bases its fees on a percentage of assets under management, hourly charges, fixed fees and commissions or other brokerage compensation such as 12b-1 fees that are earned by the affiliated Broker/Dealer. Advisers have discretion regarding the percentage charged to individual clients and the actual amount paid will be detailed on the client’s agreement. However, at no time will the fee charged by the investment adviser exceed the fees detailed in the table below. Although the Wealth Management Agreement is an ongoing agreement and periodic adjustments are made, the length of service to the client is at the client’s discretion. The client or the investment manager may terminate the Agreement by written notice to the other party. At termination, fees will be billed on a pro rata basis for the portion of the quarter completed. The portfolio value at the completion of the prior full billing quarter is used as the basis for the fee computation, adjusted for the number of days during the billing quarter prior to termination. The investment management fees are negotiable at the sole discretion of the Adviser.
Lefavi Wealth Management may charge a minimum annual fee of $400.00.
Lefavi investment management accounts are primarily mutual funds, but many have an illiquid allocation in REITs and other non-traded, illiquid investments. Some portfolios also hold individual securities and annuities. Fees charged are by asset class and accounts are billed in accordance to the management fees detailed below.
|Mutual Funds1||Up to 1.75% per year|
|Annuities not purchased through Lefavi Wealth Management that are managed by Lefavi Wealth Management..2||Up to 1.75% per year|
|Real Estate Investment Trusts (REITs), Business Development Companies (BDCs), and other non-traded alternative investments, limited partnerships3||Up to 1.75% per year if no commission was earned. 0.00% if a commission was earned.|
|Stocks, Bonds, Exchange Traded Funds & notes, Other exchange traded securities||Up to 1.75% per year|
|Held Away Assets4||Up to 1.75% per year|
Fee Table Notes
Bruce A. Lefavi Securities Inc. and/or the Adviser may receive overrides and reallowances from product providers for utilizing their financial products in client portfolios. This presents a conflict of interest that incentivizes the Adviser to utilize these products to obtain greater compensation. The Adviser has a fiduciary obligation to place the client’s interests before its own; however this conflict of interest continues to exist.
The fee for a financial plan is predicated upon the facts known at the start of the engagement. The range for the financial planning fees is $400 and higher depending on the scope of the engagement, and is negotiable at the sole discretion of the Adviser. Since financial planning is a discovery process, situations occur wherein the client is unaware of certain financial exposures or predicaments.
In the event that the client’s situation is substantially different than disclosed at the initial meeting, a revised fee will be provided for mutual consideration and agreement. The client must approve the change of scope in advance of the additional work being performed when a fee increase is necessary.
After delivery of a financial plan, future face-to-face meetings may be scheduled as necessary for up to one month. Follow-on implementation work is billed separately at the rate of $300.00 per hour.
Investment management fees are billed quarterly, in advance, meaning that we invoice you at the beginning of each billing period. Payment in full is expected upon invoice presentation. Fees are normally deducted from the client account to facilitate billing as authorized by the investment management agreement. However, clients may also pay by check or credit card. Fees for financial plans are initially billed at half of the agreed upon fee in order to commence work, and, upon delivery of the financial plan, an invoice for the balance is presented.
Unless the client portfolio account is in a wrap program, the client will likely incur fees from unaffiliated brokerage firms, custodians, administrators and other service providers. These fees are incurred as a result of managing a client account and are charged by the service provider. The amount and nature of these fees is based on the service provider’s fee schedule(s) at the provider’s sole discretion. These fees are separate and distinct from any fees charged by the Adviser.
The Adviser includes mutual funds, variable annuity products and other managed products or partnerships in clients’ portfolios. Clients may be charged for the services by the providers/managers of these products in addition to the management fee paid to the Adviser. The fees and expenses charged by the product providers are separate and distinct from the management fee charged by the Adviser. These fees and expenses are described in each mutual fund’s or underlying annuity fund’s prospectus or in the offering memorandums of a partnership or other alternative investment. These fees will generally include a management fee, other fund expenses and a possible distribution fee. No-load or load mutual funds may be used in client portfolios which will determine if there is an initial or deferred sales charge which a client will pay. In some instances, portions or all of these fees may be passed on to our affiliated Broker/Dealer in the form of trailing commissions. A portion of these trailing commissions may then be paid to the investment adviser who is also a registered representative of the Broker/Dealer. Clients can invest in a mutual fund or variable annuity or investment partnership directly, without the services of the Adviser. Accordingly, the client should review both the fees charged by the funds and the applicable program fee charged by the Adviser to fully understand the total amount of fees to be paid by the client and to thereby evaluate the Advisory services being provided.
If it is determined that a client portfolio shall contain corporate debt or other types of over the counter securities, the client may pay a mark-up or mark-down or a “spread” to the broker or dealer on the other side of the transaction that is built into the purchase price of the security.
The Adviser’s affiliate, Bruce A. Lefavi Securities Inc., provides brokerage for which it charges fees to the client. Bruce A. Lefavi Securities Inc. charges a $12-$25 ticket charge on orders placed through it by the Adviser. This ticket charge may be waived at the discretion of the investment adviser, who is also a registered representative of the Broker/Dealer. Recommending clients use these services is a conflict of interest and the client may obtain these services from other providers at possibly a lower cost. The client is under no obligation to purchase these services from the Adviser.
The Adviser offers several different services detailed in this brochure that compensate the Adviser differently depending on the service selected. There is a conflict of interest for the Adviser and its associated personnel to recommend the asset classes that offer a higher level of compensation to the Firm through either higher management fees, commissions earned by the affiliated Broker/Dealer, or income from administrative charges. However, the Adviser is committed to its obligation to ensure associated persons adhere to the Firm’s Code of Ethics and to ensure that the Firm and its associated persons fulfill their fiduciary duty to clients or investors.
Fees are not based on a share of the capital gains or capital appreciation of managed securities. However, the Adviser may employ certain types of investments that do charge a performance fee in which the Adviser does not participate. For these investments, refer to their offering or private placement memorandum for an explanation and amounts of the performance fees.
The Adviser generally provides investment advice to individuals, pension and profit sharing plans, trusts, estates, or charitable organizations, corporations or business entities. Client relationships vary in scope and length of service.
There is no minimum account size but there may be a minimum annual fee of $400.00.
If there were a minimum account size, clients with assets below that minimum account size might pay a higher percentage rate on their annual fees than the fees paid by clients with greater assets under management. The Adviser has the sole discretion to waive the fees for accounts. Exceptions may apply to employees of the Adviser and their relatives, or relatives of existing clients.
Security analysis methods may include fundamental analysis and technical analysis and modern portfolio theory. The main sources of information include financial newspapers and magazines, research materials prepared by others, corporate rating services, annual reports, prospectuses, filings with the Securities and Exchange Commission, company press releases and specialty research providers such as Morningstar’s Mutual Fund Rating Service.
While technical and fundamental analysis focuses on the merits of the issuers and trading patterns of individual securities, modern portfolio theory, with its assumption that diversification is necessary to reap the benefits of the model, more naturally applies to the primary positions in client account, mutual fund allocations, although one could create a diversified portfolio of equities if were effective “stock pickers”. Modern portfolio theory determines the allocation of assets between investment areas. Modern portfolio theory seeks to use models of diversified selections of securities types and industry sectors to maximize the expected return on a portfolio within the framework of the amount of risk the portfolio’s owner is willing to take.
The primary investment strategy used on client accounts is strategic asset allocation utilizing mutual funds. Portfolios may also contain equities and bonds. The Adviser’s strategies also make use of specialty securities such as non-traded REITs and BDCs to provide additional diversification. Portfolios are globally diversified to control the risk associated with traditional markets.
In the case of non-traded REITs, benefits generally include non-correlation to the stock market, steady distribution income, which may or may not be taken from operating expenses, and an opportunity for qualified investors to own shares of the real estate market without owning the actual property. Additionally, there may be tax advantages to owning non-traded REITs. Investors should consult with their tax advisors regarding their personal situation. Investors should be aware that these advantages come with illiquidity risk and that non-traded REITs are often associated with high commissions and fees.
The investment strategy for a specific client is based upon the objectives stated by the client during consultations. The client may change these objectives at any time. Clients may execute an Investment Policy Statement that documents their objectives and their desired investment strategy.
The Adviser’s strategies do not involve frequent trading.
Any investment with the Adviser involves risk, including a complete loss of capital and conflicts of interest. All investment programs have certain risks that are borne by the investor that are described below:
Market Volatility: The profitability of the Adviser depends upon it correctly assessing the future price movements of stocks, bonds, and other securities and the movements of interest rates. The Adviser cannot guarantee that it will be successful in accurately predicting price and interest rate movements.
Lefavi Wealth Management’s Investment Activities: The Adviser’s investment activities involve a degree of risk. The performance of any investment is subject to numerous factors which are neither within the control of nor predictable by the Adviser. Such factors include a wide range of economic, political, competitive, technological and other conditions (including acts of terrorism and war) that may affect investments in general or specific industries or companies. The securities markets may be volatile, which may adversely affect the ability of the Adviser to realize profits.
Material Non-Public Information: By reason of their responsibilities in connection with other activities of the Adviser and/or its affiliates, certain principals or employees of the Adviser and/or its affiliates may acquire confidential or material non-public information or be restricted from initiating transactions in certain securities. The Adviser will not be free to act upon any such information. Due to these restrictions, the Adviser may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold.
Accuracy of Public Information: The Adviser selects investments, in part, on the basis of information and data filed by issuers with various government regulators or made directly available to the Adviser by the issuers or through sources other than the issuers. Although the Adviser evaluates all such information and data and sometimes seeks independent corroboration when it is considered appropriate and reasonably available, the Adviser is not in a position to confirm the completeness, genuineness or accuracy of such information and data, and in some cases, complete and accurate information is not available.
Investments in Undervalued Securities: The Adviser intends to invest in undervalued securities. The identification of investment opportunities in undervalued securities is a difficult task, and there are no assurances that such opportunities will be successfully recognized or acquired. While investments in undervalued securities may offer the opportunities for above-average capital appreciation , these investments involve a high degree of financial risk and can result in substantial losses. Returns generated from the Adviser’s investments may not adequately compensate for the business and financial risks assumed.
Small Companies: The Adviser may invest a portion of its assets in small and/or unseasoned companies with small market capitalization. While certain, well-chosen, smaller companies may have potential for more rapid growth than large companies, they often involve higher risks because they may lack the management experience, financial resources, product diversification and competitive strength of larger companies. In addition, in many instances, the frequency and volume of their trading may be substantially less than is typical of larger companies. As a result, the securities of smaller companies may be subject to wider price fluctuations.
Leverage: When deemed appropriate by the Adviser and subject to applicable regulations, the Adviser may incur leverage in its investment program, whether directly through the use of borrowed funds, or indirectly through investment in certain types of financial instruments with inherent leverage. While such strategies and techniques increase the opportunity to achieve higher returns on the amounts invested, they also increase the risk of loss.
Market or Interest Rate Risk: The price of most fixed income securities move in the opposite direction of the change in interest rates. For example, as interest rates rise, the price of fixed income securities generally falls. If the Adviser holds a fixed income security to maturity, the change in its price before maturity may have little impact on the Adviser’s performance (assuming no default/insolvency); however, if the Adviser has to sell the fixed income security before the maturity date, an increase in interest rates could result in a loss.
Fixed Income Call Option Risk: Many bonds, including agency, corporate and municipal bonds, as well as mortgage-backed securities, may contain a provision that allows the issuer to “call” all or part of the issue before the bond’s maturity date. The issuer usually retains this right to refinance the bond in the future if market interest rates decline below the coupon rate. There are three disadvantages to the call provision. First, the cash flow pattern of a callable bond is not known with certainty. Second, because the issuer will call the bonds when interest rates have dropped, the Adviser’s clients are exposed to reinvestment rate risk – the Adviser will have to reinvest the proceeds received when the bond is called at lower interest rates. Finally, the capital appreciation potential of a bond will be reduced because the price of a callable bond may not rise much above the price at which the issuer may call the bond.
Inflation Risk: Inflation risk results from the variation in the value of cash flows from a security due to inflation, as measured in terms of purchasing power. For example, if the Adviser purchases a 5-year bond in which it can realize a coupon rate of 5%, but the rate of inflation is 6%, then the purchasing power of the cash flow has declined. For all but inflation-linked bonds, adjustable bonds or floating rate bonds, the Adviser is exposed to inflation risk because the interest rate the issuer promises to make is fixed for the life of the security.
Investments in Non-U.S. Investments: From time to time, the Adviser may invest and trade a portion of its assets into non-U.S. securities and other assets (through ADRs and otherwise), which will give rise to risks relating to political, social and economic developments abroad, as well as risks resulting from the differences between the regulations to which U.S. and foreign issuers and markets are subject. Such risks may include:
Risk of Default or Bankruptcy of Third Parties: The Adviser may engage in transactions in securities, commodities, other financial instruments and other assets that involve counterparties. Under certain conditions, the Adviser could suffer losses if a counterparty to a transaction were to default or if the market for certain securities, commodities, other financial instruments and/or other assets were to become illiquid.
Strategy Restrictions: Certain institutions may be restricted from directly utilizing investment strategies of the type in which the Adviser may engage. Such institutions, including entities subject to ERISA, should consult their own Advisers, counsel and accountants to determine what restrictions may apply and whether conducting business with the Adviser is appropriate in light of the Adviser’s investment management style and strategies.
Trading Limitations: For all securities, instruments and/or assets listed on an exchange, the exchange generally has the right to suspend or limit trading under certain circumstances. Such suspensions or limits could render certain strategies difficult to complete or continue and subject the Adviser to loss. Also, such a suspension could render it impossible for the Adviser to liquidate positions and thereby expose the Adviser to potential losses.
Conflicts of Interest: In the administration of client accounts, portfolios and financial reporting, the Adviser faces inherent conflicts of interest, which are described in this brochure. The Adviser follows a Code of Ethics that provides that the client’s interest is always held above that of the Firm and its associated persons.
Supervision of Trading Operations: The Adviser, with assistance from its affiliated brokerage and clearing firms, intends to supervise and monitor trading activity in the portfolio accounts to foster compliance with firm and client objectives. Despite the Adviser’s efforts, however, there is a risk that unauthorized or otherwise inappropriate trading activity may occur in portfolio accounts.
Depending on the nature of the investment management service selected by a client and the securities used to implement the investment strategy, clients will be exposed to risks that are specific to the securities in their particular investment portfolio.
Liquidity: Liquidity is the ability to readily convert an investment into cash. Securities where there is a ready market that is traded through an exchange are generally more liquid. Securities traded over-the-counter or that do not have a ready market or are thinly traded are less liquid and may face material discounts in price level in a liquidation situation.
Limited Liquidity of Interests: An investment in a partnership usually involves substantial restrictions on liquidity and its interests are not freely transferable. There is no market for these interests and no market should be expected to develop. Additionally, transfers are usually subject to the consent of the general partner at the general partner’s sole discretion.
Lack of Registration: Private Funds or many LP interests have neither been registered under the Securities Act nor under the securities or “blue sky” laws of any state and, therefore, are subject to transfer restrictions.
Withdrawal of Capital: The ability to withdraw funds from private funds or LP interests is usually restricted in accordance with the withdrawal provisions contained in an Offering Memorandum. In addition, substantial withdrawals by investors within a short period of time could require a fund to liquidate securities positions and other investments more rapidly than would otherwise be desirable, possibly reducing the value of the fund’s assets and/or disrupting the fund’s investment strategy.
Bruce Lefavi has three disclosed events.
John Jaicks has one disclosed client complaint.
The Adviser is affiliated by common ownership of a registered securities broker- dealer, Bruce A. Lefavi Securities Inc. (Lefavi Securities), and the Adviser, Lefavi Wealth Management, Inc. Moreover, four owners of both organizations – Bruce A Lefavi, John Jaicks, Chris Light, and JD Slatter – are Investment Adviser Representatives (of the Adviser) and Registered Representatives (of the affiliated Broker/Dealer).
Through Bruce A. Lefavi Securities Inc., the Registered Representatives conduct trading services for the Adviser and its clients. The clients of the Adviser are charged clients ticket charges for their transactions through Bruce A. Lefavi Securities, and other customary trading expenses. The broker dealer also receives 12b-1 fees/trailing commissions on certain mutual fund transactions and overrides from product providers for utilizing their financial products in the Adviser’s client portfolios. In addition, clients of the Adviser may use brokerage services provided by the Investment Adviser Representatives in their capacity as Registered Representatives of the affiliated Broker/Dealer, including conducting directed trading activity for which the Registered Representatives receive compensation according to the commission schedules of the affiliated Broker/Dealer. When effecting brokerage transactions, dually registered personnel, serving generally as both Investment Adviser Representatives and Registered Representatives, are permitted to exercise discretionary authority on behalf of clients in the capacity of Investment Adviser Representatives. Receiving both commissions and investment advisory fees may represent a conflict of interest if the total fee/commission structure exceeds what would otherwise be the compensation structure if only one entity assessed a fee or a commission. However, clients of the Adviser are not required to use the brokerage services offered by the Firm and such fees are disclosed to the client for their consideration.
The Adviser does not make any representation that the brokerage services are at the lowest cost available and clients may be able to obtain those services and/or products at a more favorable rate from other brokerage firms. The Adviser and its Investment Adviser Representatives have a fiduciary obligation to the clients to provide investment services while putting the investor’s interest ahead of the interest of the firm, and where conflicts of interest exist, they must (i) be disclosed, if not material considering the overall relationship and services, or (ii) eliminated. In other words, certain conflicts are “disclosable” and certain conflicts should just be avoided, and that is a judgment on a case-by-case basis.
The Adviser has adopted a Code of Ethics that establishes standards of conduct for its supervised persons. The Code of Ethics includes general requirements that such supervised persons comply with their fiduciary obligations to clients and applicable securities laws, and specific requirements relating to, among other things, personal trading, insider trading, conflicts of interest and confidentiality of client information. It requires supervised persons to report their personal securities transactions and holdings to the Adviser’s Compliance Officer, and requires the Compliance Officer to review those reports. It also requires supervised persons to report any violations of the Code of Ethics promptly to the Adviser’s Compliance Officer. Each supervised person of the Adviser receives a copy of the Code of Ethics and any amendments to it and must acknowledge in writing having received the materials. Annually, each supervised person must certify that he or she complied with the Code of Ethics during that year. Clients and prospective clients may obtain a copy of the Adviser’s Code of Ethics by contacting the Compliance Officer of the Adviser.
Under the Adviser’s Code of Ethics, the Adviser and its managers, members, officers and employees may invest personally in securities of the same classes as are purchased for clients and may own securities of the issuers whose securities are subsequently purchased for clients. If an issue is purchased or sold for clients and any of the Adviser managers, members, officers and employees on the same day purchase or sell the same security, either the clients and the Adviser managers, members, officers or employees shall receive or pay the same price or the clients shall receive a more favorable price. The Adviser and its managers, members, officers and employees may also buy or sell specific securities for their own accounts based on personal investment considerations, which the Adviser does not deem appropriate to buy or sell for clients.
The Chief Compliance Officer of the Adviser reviews all employee trades (except for her own trading activity, which is reviewed by another principal). The personal trading reviews are conducted to consider and avoid situations where the personal trading of employees would markets or otherwise receive preferential pricing vis-à-vis the clients.
The Adviser has the authority over the selection of the broker to be used and the commission rates to be paid without obtaining specific client consent. Although the Adviser presently uses only the broker/dealer, which is the “clearing firm” of Adviser’s affiliated Broker/Dealer, Adviser reserves the right to recommend brokerage firms as qualified custodians and for trade execution. When the affiliated Broker/Dealer is used to administer Advisory accounts, the affiliated Broker/Dealer receives commissions and fees related to the trades executed for client accounts (See Item 5 for description of fees and commissions and the conflict of interest).
In selecting brokers/dealers (affiliated or not) to execute transactions, Adviser will seek to achieve the best execution possible, but this does not require it to solicit competitive bids and it does not have an obligation to seek the lowest available commission cost. Adviser is not required to negotiate “execution-only” commission rates; thus, the client may be deemed to be paying for research and related services (i.e., “soft dollars”) provided by the broker which are included in the commission rate. Research and related services furnished by brokers may include, but are not limited to, written information and analyses concerning specific securities, companies or sectors; market, financial and economic studies and forecasts; financial publications; etc. If Adviser were to seek executions outside of the correspondent clearing relationship of its affiliated Broker/Dealer, then it would be the policy and practice of the Adviser to strive for the best price and execution for costs and discounts which are competitive in relation to the value of the transaction and which comply with Section 28(e) of the Securities Exchange Act of 1934, as amended. Nevertheless, it is understood that the Adviser may pay compensation on a transaction in excess of the amount of compensation that another Broker/Dealer may charge so long as it is in compliance with Section 28(e), and the Adviser makes no warranty or representation regarding compensation paid on transactions. If the cases where Adviser utilizes a broker/dealer other than its affiliated Broker/Dealer’s clearing firm in negotiating commissions and mark-ups/mark-downs, the Adviser will take into account the financial stability and reputation of brokerage firms and the brokerage and research services provided by such brokers, although the client may not, in any particular instance, be the sole direct or indirect beneficiary of the research services provided. The Adviser has no obligation to deal with the affiliated Broker/Dealer or any other broker or group of brokers in executing transactions in portfolio securities.
The nature of the clients and/or trading activity on behalf of client accounts are such that trade aggregation does not garner any client benefit (in regards to mutual funds for example).
The Adviser and its associated persons do not receive client referrals from Broker/Dealers or third parties as consideration for selecting or recommending brokers for client accounts.
The Adviser generally does not allow clients to direct brokerage.
The Adviser receives client referrals which may come from current clients, estate planning attorneys, accountants, employees, personal friends of employees and other similar sources. Adviser does not compensate referring parties for these referrals.
The Adviser does not accept referral fees or any form of remuneration from other professionals when a prospect or client is referred to the third party.
The Adviser does not accept or permit itself or its employees from obtaining custody of client assets including cash or securities, or from acting as trustee, providing bill paying service, having password access to control account activity or having any other form of controlling client assets. All checks or wire transfers to fund client accounts are required to be made out to/sent to the account custodian.
All assets are held at qualified custodians and the custodians provide account statements not less frequently than quarterly to clients at their address of record. Clients should carefully review such statements for any discrepancies or inaccuracies.
Pursuant to amendments to Rule 206(4) under the Investment Advisers Act of 1940, the Securities and Exchange Commission now requires advisers to urge clients to compare the information set forth in their statement from the Adviser, if the Adviser sends separate statements/reports, with the statements received directly from the custodian to ensure accuracy of all account transactions.
The Adviser contracts for limited discretionary authority to transact portfolio securities accounts on behalf of clients. Discretionary authority is granted either by the Adviser’s investment management agreement and/or by a separate limited power of attorney where such document is required. The Adviser has the authority to determine, without obtaining specific client consent, the securities to be bought or sold, and the amount of the securities to be bought or sold. A firm’s discretionary authority regarding investments may however be subject to certain limitations. These limitations are recognized as the restrictions and prohibitions placed by the client on transactions in certain types of business or industries. All such restrictions are to be agreed upon in writing at the account’s inception or, upon specific instruction of the client, at any point thereafter.
The Adviser will consult with the client where discretion is not obtained prior to each trade in order to obtain client approval for the transaction(s).
The client authorizes the discretion to select the custodian to be used and the commission rates paid by the Adviser.
The Adviser will not vote nor advise clients how to vote proxies for securities held in client accounts. The client clearly keeps the authority and responsibility for the voting of these proxies. The Adviser does not give any advice or take any action with respect to the voting of these proxies. For accounts subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), the plan fiduciary specifically keeps the authority and responsibility for the voting of any proxies for securities held in plan accounts. The Adviser promptly passes along any proxy voting information to the clients or their representatives.
Adviser likewise does not provide any advice or services related to class action lawsuits or bankruptcies. If Adviser receives information of this nature, it will forward it to the client for consideration.
The Adviser does not have any financial impairment that will preclude the firm from meeting contractual commitments to clients. The Adviser has not been the subject of a bankruptcy petition in the last 10 years.
The Adviser is not required to provide a balance sheet as it does not serve as a custodian for client funds or securities, and does not require prepayment of fees of more than $1,200 per client, and six months or more in advance.
The Adviser has a Business Continuity Plan in place that provides detailed steps to mitigate and recover from the loss of office space, communications, services or key people.
The Business Continuity Plan covers natural disasters such as snow storms, hurricanes, tornados, and flooding. The Plan covers man-made disasters such as loss of electrical power, loss of water pressure, fire, bomb threat, nuclear emergency, chemical event, biological event, T-1 communications line outage, Internet outage, railway accident and aircraft accident. Electronic files are backed up daily and archived offsite.
Alternate offices are identified to support ongoing operations in the event the main office is unavailable. It is our intention to contact all clients within five days of a disaster that dictates moving our office to an alternate location. In the event of an emergency, clients may access their funds through contacting the custodians of their investments by the means printed on the clients’ statements from those custodians.
A summary of the business continuity plan is available upon request to Lefavi Wealth Management’s Chief Compliance Officer.
The Adviser maintains an information security program to reduce the risk that your personal and confidential information may be breached. This program includes password protected files and devices, the frequent changing of passwords, encryption, and verification of requests to transfer funds.
Lefavi Wealth Management requires that Advisers have a bachelor’s degree and further coursework or work experience demonstrating knowledge of investment management principles. FINRA licensing is required, or must be obtained because the Adviser requires that its Investment Adviser Representatives are also registered with its affiliated Broker/Dealer.
Examples of acceptable coursework may include: an MBA, a CFP, a CFA, a ChFC, JD, CTFA, or CPA. Alternatively, Investment Adviser Representatives must have work experience that demonstrates their aptitude for investment management.
Employees have earned certifications and credentials that are required to be explained in further detail. Their individual education and business backgrounds are detailed below.
Bruce A. Lefavi
Date of birth: 11/13/45
As it relates to past, current or prospective clients, Mr. Lefavi has three disclosure events.
In the course of business, Mr. Lefavi does not receive economic benefit from non-clients for providing advisory services. As part of due diligence and research, Mr. Lefavi may receive benefits from attending sales conferences that are sponsored by vendors.
The Chief Compliance Officer reviews Mr. Lefavi’s work through frequent office interactions as well as remote interactions and through our client relationship management system.
John David Jaicks
Date of birth: 7/23/1959
As it relates to past, current or prospective clients, Mr. Jaicks has been involved in one client initiated complaint in 2000. The client alleged the mutual funds recommended were an unsuitable investment for his risk tolerance. The complaint was settled by litigation and closed in July 2000.
Bruce A. Lefavi Securities Inc.
John Jaicks is a Registered Representative with Bruce A. Lefavi Securities Inc. A conflict of interest exists in that he may encourage the sale of securities for commission in addition to his compensation as an Investment Adviser Representative. Clients are under no obligation to purchase securities or advisory services through Mr. Jaicks.
John Jaicks is a minority stock holder for Lefavi Wealth Management.
In the course of business, John Jaicks does not receive economic benefit from non- clients for providing advisory services. As part of due diligence and research, Mr. Jaicks may receive benefits from attending sales conferences that are sponsored by vendors.
John Jaicks is supervised by the Bruce Lefavi. Mr. Lefavi reviews Mr. Jaicks’ work through frequent office interactions as well as remote interactions. He also reviews John Jaicks’ activities through our client relationship management system.
Phone: (800) 422-9997
Date of birth: 12/24/1982
As it relates to past, current or prospective clients, Chris Light not been involved in legal or disciplinary events, has not been involved in arbitrations, has not been subject to self-regulatory organization or administrative proceedings and has neither filed nor is planning to file a bankruptcy petition.
Bruce A. Lefavi Securities Inc.
Mr. Light is a Registered Representative with Bruce A. Lefavi Securities Inc. A conflict of interest exists in that he may encourage the sale of securities for commission in addition to his compensation as an Adviser. Clients are under no obligation to purchase securities or advisory services through Chris Light.
Chris Light is a minority stock holder for Lefavi Wealth Management and Bruce A Lefavi Securities, Inc.
In the course of business Chris Light does not receive economic benefit from non- clients for providing advisory services. As part of due diligence and research, Mr. Light may receive benefits from attending sales conferences that are sponsored by vendors.
Chris Light is supervised by Bruce Lefavi. He reviews Chris Light’s work through frequent office interactions as well as remote interactions. She also reviews Chris Light’s activities through our client relationship management system.
Phone: (800) 422-9997
Joel D “JD” Slatter
Date of birth: 3/18/1978
As it relates to past, current or prospective clients, Mr. Slatter has not been involved in legal or disciplinary events, has not been involved in arbitrations, has not been subject to self-regulatory organization or administrative proceedings and has neither filed nor is planning to file a bankruptcy petition.
Bruce A. Lefavi Securities Inc.
Mr. Slatter is a Registered Representative with Bruce A. Lefavi Securities Inc. A conflict of interest exists in that he may encourage the sale of securities for commission in addition to his compensation as an Adviser. Clients are under no obligation to purchase securities or advisory services through Mr. Slatter.
JD Slatter is a minority stock holder for Lefavi Wealth Management and Bruce A Lefavi Securities, Inc.
In the course of business, Joel Slatter does not receive economic benefit from non- clients for providing advisory services. As part of due diligence and research, Mr. Slatter may receive benefits from attending sales conferences that are sponsored by vendors.
Joel Slatter is supervised by Bruce Lefavi. He reviews Joel Slatter’s work through frequent office interactions as well as remote interactions. He also reviews Joel Slatter’s activities through our client relationship management system.
Phone: (800) 422-9997
Date of birth: 10/4/1973
As it relates to past, current or prospective clients, Ms. Bakelar has not been involved in legal or disciplinary events, has not been involved in arbitrations, has not been subject to self-regulatory organization or administrative proceedings and has neither filed nor is planning to file a bankruptcy petition.
Ms. Bakelar acts as Chief Compliance Officer for both Lefavi Wealth Management and Bruce A. Lefavi Securities and is a registered principal of both firms.
In the course of business, Ms. Bakelar does not receive compensation for advisory services. As part of due diligence and research, Ms. Bakelar may receive benefits from attending sales conferences that are sponsored by vendors.
Sherrie Bakelar is supervised by Bruce Lefavi. She reports to him regarding compliance matters on a regular basis.
Phone: (800) 422-9997