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Cascade Investment Group, Inc.
Broker-Dealer Conflicts of Interest Disclosure
June 30, 2020
This disclosure applies solely to the broker-dealer services of Cascade Investment Group, Inc. and not to its investment advisory services or the associated persons of Cascade. For purposes of discussing the Conflict of Interest Obligation, the term “broker-dealer” or “you” refers only to Cascade and not to such individuals.
Conflicts of Interest Related to RBC. Cascade clears through RBC Capital Markets, LLC (“RBC”). This means RBC is our clearing firm and acts as custodian for your account(s). We execute all equity and fixed income trades for you through them. Cascade also directs its investment advisory clients to clear through RBC as well. Cascade is a separate and unrelated business from RBC.
Conflicts of Interest Related to Cascade’s Dual Registration. Cascade is a dually registered firm which means we provide services for both brokerage accounts and investment advisory accounts. We receive management fees from our advisory services accounts which is different than the transaction-based commissions we receive from you for each buy or sale transaction that you do.
Conflicts of Interest Related to Mutual Fund or Exchange-Traded Fund (ETF) No Transaction Fee Programs. Your financial representative purchases mutual funds and ETFs offered on RBC’s No Transaction Fee (NTF) Programs. Your financial representative can buy, sell, and exchange load and no-load mutual funds and ETFs without incurring ticket clearing costs. Ticket clearing costs at present are $16 per trade. This practice is a conflict of interest as it provides your financial representative an incentive to recommend mutual funds and ETFs from this list and subsequently, he or she will not pay a ticket’s clearing cost for those transactions. You do not pay for this program directly, however since your financial representative is responsible for the payment of trading expenses, he or she has a financial incentive to use NTF funds to decrease his or her clearing expenses. This creates an incentive for your financial representative to recommend or use such NTF funds over other funds that are available. Your financial representative selects or recommends securities that he or she believes are in your best interest and the costs paid both by he or she and you are part of the account review and security selection process.
Conflicts of Interest Related to Mutual Fund Share Class Selection. Many mutual funds offer multiple share classes. In certain circumstances your financial representative will not invest in the lowest share class available. Use of NTF funds, as described above, does, at times, lead to the use of higher expense share classes. Your financial representative can purchase or hold a share class that pays 12b-1 fees when a less costly share class of the same fund is available. As a result, you should not assume that you will be invested in the share class with the lowest available expense ratio. Since mutual fund fees and expenses are paid from fund assets, higher fees and expenses result in lower returns.
Mutual fund issuers often offer multiple share classes with different expenses. Your financial representative will choose a share based on multiple factors, including but not limited to, eligibility requirements, distribution agreements and NTF eligibility. Cascade and your financial representative have a conflict of interest, as described above, when using NTF eligible funds as he or she will, at times, not purchase the lowest share class available. In addition, Cascade does not screen mutual funds held in your account that are transferred from your prior brokerage firm for share class review and this could lead to you continuing to hold more expensive shares classes than are otherwise available and used by Cascade. Cascade and your financial representative receive additional payments from mutual funds that have 12b-1 fees.
Conflicts of Interest Related to RBC Revenue Sharing Payments. Under the terms of its clearing agreement with RBC, Cascade receives a portion of compensation that is based on the amount invested by all clients of Cascade in the RBC Bank Deposit Program (BDP). Cascade receives a monthly rebate based on Cascade’s monthly average daily BDP balance. BDP is part of the RBC Insured Deposits which sweeps cash in client accounts into accounts at multiple Federal Deposit Insurance Corporation (FDIC) insured banks offering up to $5,000,000 in FDIC insurance coverage. You may request to use the RBC Credit Interest Program, or CIP, which is an RBC in-house cash investment alternative, allowing you to earn interest on your cash. CIP cannot be used with retirement accounts and is not available to you if you live in Louisiana or Utah. Cascade always recommends the BDP program to clients due to its FDIC insurance coverage, not because of the monthly compensation it receives. You may request to use the CIP.
Conflicts of Interest Related to RBC Money Market Funds. If you have a specific account type that is a self-trusteed pooled qualified plan it is ineligible for the BDP program described above. Per RBC, this type of account is placed in the RBC US Government Money Market Fund. This fund is also available to other types of accounts as well but is designated and only available as a secondary cash sweep option for cash balances in excess of the FDIC insurance threshold available through RBC Insured Deposits. Cascade receives a monthly rebate based on the total money market balance of all clients’ accounts.
Conflicts of Interest Related to Margin. You have the ability to request margin which is borrowing against the assets in your account. Margin debit balances in your account are charged interest by RBC. All interest charged to you in excess of the Base Rate plus 50 basis points is shared equally between RBC and Cascade, which RBC pays to Cascade monthly.
Conflicts of Interest in Other Fees/Service Charges per Trade Transactions. All trades, except mutual fund transactions, will have an “Other Fees/Service Charge” annotated on the trade confirmation and this charge is $7.50 at present that you will pay for each buy and sell transaction in your brokerage account. It is subject to change without notice. This fee is divided as follows: $3.00 is retained by RBC for processing expenses. $4.50 is paid to Cascade.
Conflicts of Interest for New Issue Security Purchase. When a new issue security is purchased, your financial representative will receive a concession which is additional income in addition to the commission that you will pay for this investment. If you would purchase this security after its initial issue, your financial representative would not receive the concession, therefore your financial representative has an incentive to recommend the purchase of initial issue securities.
Conflicts of Interest due to 529 (College Savings) and ABLE (Special-Needs Savings) Accounts. There are numerous college savings and ABLE savings plans available for you to select. We will recommend the plans that pay us commissions. You have the ability to choose an alternative plan where we do not receive commissions, but we will not provide service on those plans.
Conflicts of Interest due to Insurance Sales. You may purchase life insurance, fixed or variable annuities, disability insurance and long-term care insurance through Cascade. We receive additional commissions if you elect to purchase these products.
Conflicts of Interest Related to Client Education Events. When we provide educational events that are held at restaurants or meeting places that serve refreshments and food, we will often have the event sponsored and paid for by one of our preferred mutual fund companies. The mutual fund companies do this because we invest our clients in their funds. The training that the sponsoring mutual company provides is broad-based and not specific to their funds. We have an incentive to request their sponsorship as it pays for the cost to hold these events and also provides industry expertise.
Conflicts of Interest due to Majority Stock Ownership of Firm by Bank. Cascade is majority-owned by Eastern Colorado Bank. We do not receive additional compensation if you are referred to us from the bank for our services. We do not pay the bank for referrals. We do not receive additional compensation if we refer you to the bank for their services.
