Part 2A of Form ADV: Firm Brochure
Item 1 Cover Page
Cascade Investment Group, Inc.
90 South Cascade Avenue, Suite 1250
Colorado Springs, CO 80903
Contact Information: Dana Capozzella, Chief Compliance Officer
This brochure provides information about the qualifications and business practices of Cascade Investment Group, Inc. If you have any questions about the contents of this brochure, please contact us at 719-632-0818 or 800-984-9074 or firstname.lastname@example.org. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission (SEC) or by any state securities authority.
Additional information about Cascade Investment Group, Inc. also is available on the SEC’s website at www.adviserinfo.sec.gov. You can search this site by a unique identifying number, known as a CRD number. Our firm’s CRD number is 35844.
Cascade Investment Group, Inc. is a Registered Investment Advisor although this does not imply a certain level of skill or training.
Item 2 Material Changes
Since our last annual amendment filing, we have the following material changes to report:
- We added disclosures related to our use of Standing Letters of Authorization to move money.
- We retired our Wrap Fee Program, and now offer both Portfolio Freedom Accounts and separately managed accounts on a non-wrap fee basis.
- Consulting and Evaluation Services was incorporated into the Portfolio Freedom Account service offering.
- We removed the conflicts of interest related to compensation from RBC Revenue Sharing Payments, RBC Money Market Funds, and Margin as we no longer participate in these programs.
- On July 14, 2021, CIGI was censured by the SEC for the firm’s mutual fund share class selection practices. It was found that CIGI recommended positions charging 12b-1 fees instead of the lower cost share classes of the same funds that were available to clients. The firm and its representatives received these 12b-1 fees and failed to disclose sufficiently the conflict this created to firm clients. CIGI paid a civil penalty on July 16, 2021, of $125,000. CIGI settled the issue with the SEC and neither admits nor denies the findings contained in the order.
Item 3 Table of Contents
Table of Contents Page
1. Advisory Business 4-8
2. Fees and Compensation 9-12
3. Performance-Based Fees and Side-by-Side Management 13
4. Types of Clients 14
5. Methods of Analysis, Investment Strategies and Risk of Loss 15-17
6. Disciplinary Information 18
7. Other Financial Industry Activities and Affiliations 19-20
8. Code of Ethics, Participation or Interest in Client Transactions and Personal Trading 21
9. Brokerage Practices 22
10. Review of Accounts 23
11. Client Referrals and Other Compensation 24-25
12. Custody 26
13. Investment discretion 27
14. Voting Client Securities and Other Services 28
15. Financial Information 29
Item 4 Advisory Business
Cascade Investment Group, Inc. (hereafter referred to as CIGI) is a SEC-registered investment adviser with its principal place of business located in Colorado. CIGI began conducting business in 1993.
CIGI’s principal owner, owning 74.17% or more in the firm, is The Eastern Colorado Bank.
In addition, the following information identifies subsidiaries that indirectly own 25% or more of our firm:
- Gregory Justin Weed, Majority TTEE Weed Investment Group, Inc.
CIGI’s principal activities include retail and institutional private client services, including but not limited to providing advice with respect to financial markets, securities, and executing securities transactions as broker or dealer.
INVESTMENT SUPERVISORY SERVICES (“ISS”)
INDIVIDUAL PORTFOLIO MANAGEMENT
Our firm provides continuous advice to clients regarding the investment of clients’ funds based on the individual needs of the client. We develop a client’s portfolio based on his or her goals and objectives. During our data-gathering process, we determine the client’s individual objectives, time horizons, risk tolerance, and liquidity needs. As appropriate, we also review and discuss a client’s prior investment history, as well as family composition and background.
We provide the following Investment Advisory Services:
- Portfolio Freedom Account (PFA) Program:
We manage PFA accounts on a discretionary or non-discretionary basis. Account supervision is guided by the client’s stated objectives (e.g., maximum capital appreciation, growth, income, or growth and income), as well as tax considerations.
Clients may impose reasonable restrictions on investing in certain securities, types of securities, or industry sectors.
Our investment recommendations are not limited to any specific product or service offered by a broker-dealer or insurance company and will generally include advice regarding the following securities:
- Exchange-listed securities
- Securities traded over-the-counter
- Foreign issuers
- Corporate debt securities (other than commercial paper)
- Certificates of deposit
- Municipal securities
- Variable life insurance/Variable annuities
- Mutual fund shares
- United States governmental securities
- Other securities such as but not limited to master limited partnerships (MLPs), real-estate investment trusts (REITs), and exchange traded funds (ETFs).
CIGI may utilize separately managed account (“SMA”) programs to aid in the implementation of an investment portfolio. Before selecting an SMA, CIGI will conduct initial due diligence and ensure that the chosen party is properly licensed or registered.
PENSION and CHARITABLE CONSULTING SERVICES
We provide several advisory services separately or in combination. While the primary clients for these services will be pension, profit sharing and 401(k) plans, we offer these services, where appropriate, to individuals and trusts, estates, and charitable organizations. Pension Consulting Services are comprised of four distinct services. Clients may choose to use any or all of these services.
Pension Trustee Services:
We will meet with clients (in person or through telephone or electronic communications) to support retirement and pension plan trustees in their plan design and selection and review of vendors, such as the third-party administrator (TPA), record keeper and participant investment options.
Investment Policy Statement Preparation (hereinafter referred to as ”IPS”):
We will meet with the client (in person or over the telephone) to determine an appropriate investment strategy that reflects the plan sponsor’s stated investment objectives for management of the overall plan. Our firm then prepares a written IPS detailing those needs and goals, including an encompassing policy under which these goals are to be achieved. Organizations may, at time, write an IPS that lists the criteria for selection of investment vehicles as well as the procedures and timing interval for monitoring of investment performance. Other organizations elect to write an IPS that gives their investment advisors discretion on security selection and replacement within determined guidelines.
Selection of Investment Vehicles:
We assist plan sponsors and charitable organizations in constructing appropriate asset allocation models. We will then review various securities, to determine which investments are appropriate to implement as determined by the client’s IPS.
Monitoring of Investment Performance:
Discretionary accounts at CIGI are monitored continually, based on the procedures and timing intervals determined with the clients and their primary advisor at CIGI. Our firm does not monitor individual holdings for retirement plan participants on a continual basis and does not have discretionary authority to make changes for those participants. We assist plans and participants in the review of securities offered and will asset participants in selecting funds based on their needs, market factors and risk tolerances.
For pension, profit sharing and 401(k) plan clients with individual plan participants exercising control over assets in their own account (”self-directed plans”), we provide educational support and investment workshops designed for the plan participants when the plan sponsor engages our firm to provide these services. The nature of the topics to be covered will be determined by us and the client. The educational support and investment workshops will not provide plan participants with individualized, tailored investment advice or individualized, tailored asset allocation recommendations.
FINANCIAL PLANNING (CONSULTING SERVICES)
We provide financial planning services. Financial planning is a comprehensive evaluation of a client’s current and future financial state by using known variables to predict future cash flows, asset values and withdrawals. Financial planning results in a comprehensive examination of an individual’s or entity’s objectives and usually includes a savings and investing strategy to support those objectives. Through the financial planning process, questions, information, and analysis are considered as they impact and are impacted by the entire financial and life situation of the client.
In general, the financial plan can address any or all of the following areas and will depend on the needs and interests of the client:
- PERSONAL: We review family records, budgeting, personal liability, estate information and financial goals.
- CASH FLOW: We analyze the client’s spending and planning for past, current, and future years; then illustrate the impact of various investments on the client’s current income and expected income and spending needs. We discuss tax strategies that have the potential to reduce taxes even though we do not provide tax advice.
- INVESTMENTS: We analyze investment and asset allocation alternatives and their effect on the client’s future cash flow and capital growth.
- INSURANCE: We review existing policies and make recommendations with regards to coverage for life, disability and long-term care when requested to do so by clients.
- RISK MANAGEMENT: We discuss risk management techniques, at times, with clients around liability insurance coverages, debt reduction and corporate formation. We do not provide solutions in these areas.
- RETIREMENT: We analyze current strategies and investment plans to help the client implement strategies to assist them in achieve retirement and other life goals.
- DEATH & DISABILITY: We review the client’s cash needs at death, income needs of surviving dependents, estate planning and disability income.
- ESTATE: We assist the client in assessing and developing long-term strategies, including as appropriate, living trusts, wills, review estate tax, powers of attorney, asset protection plans, nursing homes, Medicaid, and elder law. We do not provide solutions in these areas.
- SPECIAL NEEDS: We are familiar with the differing requirements families have if a member has a qualifying disability that could provide access to such benefits as Supplemental Security Income and Medicaid and the strategies required to gain, protect, and preserve these benefits.
As part of our financial planning process, we gather required information through in-depth personal interviews and materials given to us by clients. Ideally, information gathered includes the client’s current financial status, tax status, future goals, returns objectives and attitudes towards risk. We review documents supplied by the client and prepare a written report. Should the client choose to implement the recommendations contained in the plan, we suggest the client work closely with his/her attorney, accountant and, at times, an insurance agent or investment provider (of those are not with us). Implementation of financial planning recommendations is entirely at the client’s discretion.
We can provide general non-securities advice on topics that may include tax and budgetary planning, estate planning and business planning.
- Exchange-listed securities
- Securities traded over-the-counter
- Foreign issuers
- Corporate debt securities (other than commercial paper)
- Certificates of deposit
- Municipal securities
- Variable life insurance
- Variable annuities
- Mutual fund shares
- United States governmental securities
- ABLE Accounts
Financial Planning recommendations are not limited to any specific product or service offered by a broker-dealer or insurance company. All investment, insurance, estate, and tax recommendations are of a generic nature unless we are engaged as an insurance or investment professional.
AMOUNT OF MANAGED ASSETS
As of 12/31/2020, we actively managed $283,337,856 of clients’ assets on a discretionary basis, $34,236,129 of clients’ assets on a non-discretionary basis.
Item 5 Fees and Compensation
INVESTMENT SUPERVISORY SERVICES (“ISS”) INDIVIDUAL PORTFOLIO MANAGEMENT FEES
PORTFOLIO FREEDOM ACCOUNTS
Our annual fees for PFA accounts are based upon a percentage of assets under management and generally range from 2.50% to 1.00%. Fees to be assessed shall be charged quarterly in advance based upon the average daily balance during the previous quarter. The below fees are those charged for CIGI’s services. Clients utilizing an SMA to assist in the management of their portfolio will pay a separate fee in addition to CIGI’s fee that will be described in separate disclosure documents provided by the chosen SMA.
The annualized fee for PFA Program is charged as a percentage of assets under management, according to the following schedule:
Assets Under Management Annual Fee
Less than $250,000 2.50%
Over $250,000 but less than $500,000 2.00%
Over $500,000 but less than $1,000,000 1.50%
Over $1,000,000 Negotiable
Limited Negotiability of Advisory Fees: Although CIGI has established the aforementioned fee schedule(s), we retain the discretion to negotiate alternative fees on a client-by-client basis.
Client facts, circumstances and needs are considered in determining the fee schedule. These include the complexity of the client assets to be placed under management, anticipated future additional assets, related accounts, portfolio style, account composition, reports, among other factors. The specific annual fee schedule is identified in the contract between the adviser and each client. The negotiated fee will not be lowered or increased automatically to a fee on the fee schedule when the account value meets a different level listed on the fee schedule. The negotiated fee will remain in effect for the entirety of the relationship or until a
new negotiated flat fee is entered.
There is no minimum account size, but CIGI reserves the right to decline management services.
Discounts, not generally available to our advisory clients, may be offered to family members and friends of associated persons of our firm.
PENSION CONSULTING FEES
Our fees for Pension Consulting Services are based on a percentage of assets under advisement and are negotiated per plan ranging from .25% to 1.00%.
Plan sponsors are invoiced in arrears at the end of each calendar quarter when billed by CIGI. Other payment schedules apply dependent on the record keeping firm’s schedule.
ADVISORY REFERRAL SERVICES FEES
We do not have any agreements that pay outside entities or adviser referrals fees.
FINANCIAL PLANNING (CONSULTING SERVICES) FEES
CIGI’s Financial Planning fee is determined based on the nature of the services being provided and the complexity of each client’s circumstances. All fees are agreed upon prior to entering into a contract with any client.
Our Financial Planning fees are calculated and charged on an hourly basis at $325 per hour. Although the length of time it will take to provide a Financial Plan will depend on each client’s personal situation, we will provide an estimate for the total hours and cost at the start of the advisory relationship.
The client is billed upon completion of actual hours accrued.
Termination of the Advisory Relationship: A client agreement may be canceled at any time, by either party, for any reason. As disclosed above, certain fees are paid in advance of services provided. Upon termination of any account, any prepaid, unearned fees will be promptly refunded. In calculating a client’s reimbursement of fees, we will pro rate the reimbursement according to the number of days remaining in the billing period.
CIGI and its IARs or employees intend to act or are acting as an investment advisor or investment advisor representative in respect to the client’s Account. CIGI or its IARs will provide specialized services or investment advice different from that which is customarily provided where commissions or similar fees (e.g. markups or markdowns) are paid on a transaction-by-transaction basis.
CIGI may, from time to time and at its discretion, compensate any of its IARs or employees.
Mutual Fund Fees: All fees paid to CIGI for investment advisory and financial planning services are separate and distinct from the fees and expenses charged by mutual funds and/or ETFs to their shareholders. These fees and expenses are described in each fund’s prospectus. These fees will generally include a management fee, other fund expenses, and a possible distribution fee. If the fund also imposes sales charges, a client may pay an initial or deferred sales charge. A client could invest in a mutual fund directly, without our services. In that case, the client would not receive the services provided by our firm which are designed, among other things, to assist the client in determining which mutual fund or funds are most appropriate to each client’s financial condition and objectives. Accordingly, the client should review both the fees charged by the funds and our fees to fully understand the total amount of fees to be paid by the client and to thereby evaluate the advisory services being provided.
Many mutual funds offer multiple share classes, including those expressly designed for, or made available to clients in fee-based advisory programs. CIGI will invest in those share classes designed for advisory accounts. In instances where a fund family does not offer these share classes, any service fees received by CIGI (such as 12b-1 fees) will be rebated to the client’s account.
CIGI’s IARs will choose a mutual fund based on multiple factors, including but not limited to, eligibility requirements, and distribution agreements.
CIGI will screen funds transferred from other custodians for share class review and will convert any 12b-1 fee paying share classes when available to advisory or institutional share within 90 days of Client account transfer. Any 12b-1 fees that occur during this time period will be reimbursed to Client’s account at the end of each month by RBC, our clearing firm. If the Client transfers in with C share mutual funds, the conversion may take more than 90 days to fully convert as only shares that have been held for over 1 year are eligible to convert. Any 12b-1 fees received for these C shares will be reimbursed by RBC, to the Client into the Client’s account at the end of each month.
Additional Fees and Expenses: The Fee Schedule or Negotiated Flat Fee does not include fees the client may otherwise be required to pay CIGI or RBC Capital Markets, LLC for the opening, closing, or servicing of the Account, such as, but not limited to, applicable account maintenance fees, or fees for any other account with CIGI, or fees that may be required by law. Examples of; including but not limited to, not included fees are RBC Annual Account fees, check writing fees, FED FUND wired fees, overnight check fees, TOD fees, alternative investment fees, safekeeping fees, IRA closure fees, and any fee RBC deems necessary for managing the custody of the Client’s account. The Fee Schedule or Negotiated Flat Fee also does not include fees for other services relating to the Account or for transaction services in respect of assets not covered by the Account Fee. In the normal course of its business, CIGI may suggest that the Client utilize other of its services or those of an affiliate. To the extent that the Client utilizes such services, CIGI, its affiliates, and employees may receive additional fees and considerations.
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. This fee is divided as follows: $3.00 is retained by RBC for processing expenses. $4.50 is credited to CIGI. This fee is paid by the client and results in additional compensation paid to CIGI.
In addition to our advisory fees, clients are also responsible for the fees and expenses charged by custodians and imposed by broker dealers, including, but not limited to, any transaction charges imposed by a broker dealer with which an independent investment manager effects transactions for the client’s account(s). Please refer to the “Brokerage Practices” section (Item 12) of this Form ADV for additional information.
ERISA Accounts: CIGI is deemed to be a 3(21) fiduciary to advisory clients that are employee benefit plans or individual retirement accounts (IRAs) pursuant to the Employee Retirement Income Security Act (“ERISA”), and regulations under the Internal Revenue Code of 1986 (the “Code”), respectively. As such, our firm is subject to specific duties and obligations under ERISA and the Internal Revenue Code that include among other things, restrictions concerning certain forms of compensation. To avoid engaging in prohibited transactions in advisory accounts, CIGI only charges fees for investment advice about products for which our firm and/or our related persons do not receive any commissions or 12b-1 fees. When advisory accounts do receive compensation from mutual fund companies as 12b-1 fees, these are reimbursed to the Client by our custodian on a monthly basis.
Advisory Fees in General: Clients should note that similar advisory services may (or may not) be available from other registered (or unregistered) investment advisers for similar or lower fees.
Item 6 Performance-Based Fees and Side-By-Side Management
CIGI does not accept performance-based fees.
Item 7 Types of Clients
CIGI provides advisory services to the following types of clients:
- Individuals (other than high net worth individuals)
- High net worth individuals
- Pension and profit-sharing plans (other than plan participants)
- Charitable organizations
- Corporations or other businesses entities such as Partnerships or LCCs
- Trusts and Estates
- Governmental entities
CIGI does not impose a minimum account size for investment advisory accounts. Investment advisory representatives may require a minimum account size.
Item 8 Methods of Analysis, Investment Strategies and Risk of Loss
CIGI will use the following security analysis methods:
The main sources of information CIGI uses include:
(1) Financial websites
(2) Research materials (examples: RBC Credit Suisse, Morningstar, and Argus Research)
(3) Corporate rating services (e.g. S&P)
We use the following methods of analysis in formulating our investment advice and/or managing client assets:
Fundamental Analysis. We attempt to measure the intrinsic value of a security by looking at economic and financial factors (including the overall economy, industry conditions, and the financial condition and management of the company itself) to determine if the company is underpriced (indicating it may be a good time to buy) or overpriced (indicating it may be time to sell).
Fundamental analysis does not attempt to anticipate market movements. This presents a potential risk, as the price of a security can move up or down along with the overall market regardless of the economic and financial factors considered in evaluating the stock.
Technical Analysis. We analyze past market movements and apply that analysis to the present in an attempt to recognize recurring patterns of investor behavior and potentially predict future price movement.
Technical analysis does not consider the underlying financial condition of a company. This presents a risk in that a poorly managed or financially unsound company may underperform regardless of market movement.
Asset Allocation. Rather than focusing primarily on securities selection, we attempt to identify an appropriate ratio of securities, fixed income, and cash suitable to the client’s investment goals and risk tolerance.
A risk of asset allocation is that the client may not participate in sharp increases in a particular security, industry, or market sector. Another risk is that the ratio of securities, fixed income, and cash will change over time due to stock and market movements and, if not corrected, will no longer be appropriate for the client’s goals.
Mutual Fund and/or ETF Analysis. We look at the experience and track record of the manager of the mutual fund or ETF in an attempt to determine if that manager has demonstrated an ability to invest over a period of time and in different economic conditions. We also look at the underlying assets in a mutual fund or ETF in an attempt to determine if there is significant overlap in the underlying investments held in other fund(s) in the client’s portfolio. We also monitor the funds or ETFs in an attempt to determine if they are continuing to follow their stated investment strategy.
A risk of mutual fund and/or ETF analysis is that, as in all securities investments, past performance does not guarantee future results. A manager who has been successful may not be able to replicate that success in the future. In addition, as we do not control the underlying investments in a fund or ETF, managers of different funds held by the client may purchase the same security, increasing the risk to the client if that security were to fall in value. There is also a risk that a manager may deviate from the stated investment mandate or strategy of the fund or ETF, which could make the holding(s) less suitable for the client’s portfolio.
Risks for all forms of analysis. Our securities analysis methods rely on the assumption that the companies whose securities we purchase and sell, the rating agencies that review these securities, and other publicly available sources of information about these securities, are providing accurate and unbiased data. While we are alert to indications that data may be incorrect, there is always a risk that our analysis may be compromised by inaccurate or misleading information.
We use the following strategies in managing client accounts, provided that such strategies are appropriate to the needs of the client and consistent with the client’s investment objectives, risk tolerance, and time horizons, among other considerations:
Long-term purchases. We purchase securities with the idea of holding them in the client’s account for a year or longer. Typically, we employ this strategy when:
- we believe the securities to be currently undervalued, and/or
- we want exposure to a particular asset class over time, regardless of the current projection for this class.
A risk in a long-term purchase strategy is that by holding the security for this length of time, we may not take advantage of short-term gains that could be profitable to a client. Moreover, if our predictions are incorrect, a security may decline sharply in value before we make the decision to sell.
Short-term purchases. When utilizing this strategy, we purchase securities with the idea of selling them within a relatively short time (typically a year or less). We do this in an attempt to take advantage of conditions that we believe will soon result in a price swing in the securities we purchase.
Margin transactions. If your account is set up for Margin, we will purchase stocks for your portfolio with money borrowed from your brokerage account. This allows you to purchase more stock than you would be able to with your available cash and allows us to purchase stock without selling other holdings.
Risk of Loss. Securities investments are not guaranteed, and you may lose money on your investments. Clients should understand that investing in any securities, including mutual funds, involves a risk of loss of both income and principal. We ask that you work with us to help us understand your tolerance for risk.
Item 9 Disciplinary Information
We are required to disclose any legal or disciplinary events that are material to a client’s or prospective client’s evaluation of our advisory business or the integrity of our management.
On July 14, 2021, CIGI was censured by the SEC for the firm’s mutual fund share class selection practices. It was found that CIGI recommended positions charging 12b-1 fees instead of the lower cost share classes of the same funds that were available to clients. The firm and its representatives received these 12b-1 fees and failed to disclose sufficiently the conflict this created to firm clients. CIGI paid a civil penalty on July 16, 2021, of $125,000. CIGI settled the issue with the SEC and neither admits nor denies the findings contained in the order.
Item 10 Other Financial Industry Activities and Affiliations
In addition to CIGI being a registered investment adviser, our firm is registered as a FINRA member broker-dealer. This specifically disclosed in Section 7.A. on Schedule D of Form ADV, Part 1, which can be accessed by following the directions provided on the Cover Page of this Firm Brochure.
CIGI is registered with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and various state regulatory agencies to provide services as a Broker/Dealer. In this capacity, CIGI may be compensated by fees or commissions from involvement in the sale of various types of securities, including but not limited to, stocks, bonds, and mutual funds.
MANAGEMENT PERSONNEL Registrations:
All management personnel of our firm are licensed as registered representatives of CIGI.
CIGI has three Investment Adviser Representatives licensed to sell life insurance products: Robert G. Wrubel, Theresa Brock and Fermin Padilla. This is an additional service that is provided to clients if they so desire and it is deemed appropriate for the client’s overall financial objectives. These individuals may also be insurance brokers for one or more insurance companies. In their separate capacities as registered representatives and/or insurance brokers, these individuals are able to effect securities transactions and/or purchase insurance and insurance-related investment products for CIGI’s advisory clients, for which these individuals will receive separate and additional compensation. Clients, however, are not under any obligation to engage these individuals when considering the purchase/sale of securities or insurance.
CIGI has one registered investment advisor who is a Certified Financial Planner (CFP®) who provides this additional service for clients: Robert G. Wrubel.
CIGI has two registered investment advisors who are Accredited Investment Fiduciaries (AIF®) who provides this additional service for clients: Robert G. Wrubel and Theresa Brock.
CIGI has one employee who holds the Certified in Social Security Claiming Strategies (CSSCS) designation who provides this additional service for clients free of charge. This service is also provided to non-advisory clients and non-clients on an hourly basis for $250.
While CIGI and these individuals endeavor at all times to put the interest of the clients first as part of our fiduciary duty, clients should be aware that the receipt of additional compensation itself creates a conflict of interest and may affect the judgment of these individuals when making recommendations.
Clients should be aware that the receipt of additional compensation by CIGI and its management persons or employees creates a conflict of interest that may impair the objectivity of our firm and these individuals when making advisory recommendations. CIGI endeavors at all times to put the interest of its clients first as part of our fiduciary duty as a registered investment adviser; we take the following steps to address this conflict:
- We disclose to clients the existence of all material conflicts of interest, including the potential for our firm and our employees to earn compensation from advisory clients in addition to our firm’s advisory fees.
- We disclose to clients that they are not obligated to purchase recommended investment products from our employees or affiliated companies.
- We collect, maintain and document accurate, complete, and relevant client background information, including the client’s financial goals, objectives, and risk tolerance.
- Our firm conducts regular reviews of each client account to verify that all recommendations made to a client are suitable to the client’s needs and circumstances.
- We require that our employees seek prior approval of any outside employment activity so that we may ensure that any conflicts of interests in such activities are properly addressed.
- We periodically monitor these outside employment activities to verify that any conflicts of interest continue to be properly addressed by our firm.
- We educate our employees regarding the responsibilities of a fiduciary, including the need for having a reasonable and independent basis for the investment advice provided to clients.
Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
Ethical dilemmas occur when values are in conflict. We strive to pursue the selection of employees with high morals and integrity. We strive to provide excellent personalized investment service to all our clients. We are members of a profession explicitly committed to providing fair and truthful securities information. We have a special obligation to ensure that we safeguard our clients’ assets as best we can in order to preserve principal, gain value and encourage growth for our present clients and their future generations.
The principles of this Code are expressed in broad statements to guide ethical decision-making. These statements provide a framework; they cannot and do not dictate conduct to cover particular situations.
- We provide the highest level of service to all clients through all methods of communication, mail, phone calls, meeting, and email. We provide this service in an accurate, unbiased, and courteous response to all requests.
- We uphold the principles of knowing our clients, fair trades, and resist all efforts to allow any unethical behavior such as churning or switching.
- We protect each client’s right to privacy and confidentiality with respect to information sought or received.
- We recognize and respect each client’s individual financial investment needs.
- We treat co-workers and other colleagues with respect, fairness and good faith, and advocate conditions of employment that safeguard the rights and welfare of all employees of our firm.
- We do not advance private interests at the expense of clients, colleagues, staff, or our firm. This includes no employee acquiring beneficial ownership in any security in an initial public offering or limited offering without prior approval from the Chief Compliance Officer.
- We distinguish between our personal convictions and professional duties and do not allow our personal beliefs to interfere with fair representation of the aims of our client’s investment goals.
- We strive for excellence in the profession by maintaining and enhancing our own knowledge and skills, by requiring and encouraging the continued professional development of co-workers, and by fostering the aspirations of potential members of the profession.
CIGI will provide a copy of our code of ethics to any client or prospective client upon request.
CIGI or it associated persons may buy or sell for itself investment products recommended to clients. Records will be maintained of all securities bought or sold by CIGI, associated persons or related entities. Such records will be available for client inspection upon request. All securities transactions of related persons of CIGI will be reviewed by the principal of CIGI to ensure no conflicts exist with client executions. CIGI’s policy for securities traded by related persons will be for these transactions to be placed AFTER the placement of clients’ transactions.
Item 12 Brokerage Practices
As noted, CIGI is also registered with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and various state regulatory organizations to provide services as a Broker/Dealer. In this capacity, CIGI may be compensated by fees or commissions. The Principals of CIGI, in their capacity as Registered Representatives of CIGI, may recommend CIGI’s Broker/Dealer services to clients who have or are utilizing CIGI’s advisory services. In such cases, services are offered to these clients at the same cost as are offered to non-advisory clients. Clients are under no obligation to purchase or sell securities through CIGI. However, if they choose to do so, commissions may be earned which may be higher or lower than commission rates found at other Broker/Dealers.
Clients that have granted discretionary authority for the management of their account that request to include limitations on this authority must do so in a written statement. Clients may change/amend these limitations as required. Such amendments must be provided to us in writing.
As a matter of policy and practice, CIGI. does not generally enter block client trades and, therefore, we implement client transactions separately for each account. Consequently, certain client trades may be executed before others, at a different price and/or commission rate. Additionally, our clients may not receive volume discounts available to advisers who enter block client trades.
CIGI has no soft dollar arrangements or client referral arrangements that influence our choice of broker-dealer choices.
Since we are a dual-registered company, we direct that an advisory client execute transactions through one clearing company, RBC Capital Markets, as our small size limits our ability to have multiple clearing firm relationships.
CIGI has a clearing agreement with RBC Capital Markets, LLC (RBC) to execute all equity and fixed income trades for its broker-dealer accounts; commission, or transaction-by-transaction business. CIGI directs its investment advisory clients to RBC as well. RBC serves as custodian for both broker dealer and investment advisory Clients of CIGI. There is no direct link between CIGI’s use of RBC as its clearing broker dealer and the investment advice CIGI provides to its clients in their investment advisory programs. CIGI is a separate and unrelated business from RBC. CIGI has the ability to use RBC’s investment advisory solutions at additional costs to clients and CIGI but no obligation to do so.
Item 13 Review of Accounts
Principals of CIGI will review client’s accounts at least annually to confirm that they remain suitably invested. . Reviews will also be determined based on the client’s risk tolerance, net worth, net income, and other various suitability factors. This review may be triggered by tax law changes, market changes, or market conditions. A more frequent review may also be initiated by a client inquiry due to personal changes. There is no minimum number of accounts assigned for the reviewer.
CIGI provides performance reports to clients no less than annually but may be more frequent. In addition, clients receive custodial statements no less than quarterly from CIGI’s clearing firm who serves as the custodian for CIGI’s clients’ accounts.
Item 14 Client Referrals and Other Compensation
It is CIGI’s policy not to engage solicitors or to pay related or non-related persons for referring potential clients to our firm.
Our firm and/or our officers and representatives receive noncash compensation such as lunches, sponsorship of lunch and learn programs and/or our annual client event. While we endeavor at all times to put the interest of our clients first as part of our fiduciary duty, the receipt of this noncash compensation creates a conflict of interest and may affect our judgment when making investment recommendations.
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. This fee is divided as follows: $3.00 is retained by RBC for processing expenses. $4.50 is credited to CIGI. This fee is paid by the client and results in additional compensation paid to CIGI. This creates a conflict of interest which incentivizes CIGI to use securities on which we receive a portion of the costs borne by the client.
Item 15 Custody
CIGI is an Introducing Broker-Dealer which requires it to have a clearing relationship with a clearing firm in order to conduct securities trading and custody for its clients’ assets.
CIGI has a clearing relationship with RBC. RBC, as custodian for clients’ assets provides clients, at a minimum, a quarterly account statement. Clients are urged to carefully review those statements.
For PFA accounts only, CIGI encourages clients to compare the account information sent to them by RBC with the additional PFA advisory reports that they receive from CIGI quarterly through email notification by Envestnet Tamarac.
Third Party Money Movement:
On February 21, 2017, the SEC issued a no‐action letter (“Letter”) with respect to Rule 206(4)‐2 (“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). The letter provided guidance on the Custody Rule as well as clarified that an adviser who has the power to disburse client funds to a third party under a standing letter of authorization (“SLOA”) is deemed to have custody. As such, our firm has adopted the following safeguards in conjunction with our custodian:
- The client provides an instruction to the qualified custodian, in writing, that includes the client’s signature, the third party’s name, and either the third party’s address or the third party’s account number at a custodian to which the transfer should be directed.
- The client authorizes the investment adviser, in writing, either on the qualified custodian’s form or separately, to direct transfers to the third party either on a specified schedule or from time to time.
- The client’s qualified custodian performs appropriate verification of the instruction, such as a signature review or other method to verify the client’s authorization and provides a transfer of funds notice to the client promptly after each transfer.
- The client has the ability to terminate or change the instruction to the client’s qualified custodian.
- The investment adviser has no authority or ability to designate or change the identity of the third party, the address, or any other information about the third party contained in the client’s instruction.
- The investment adviser maintains records showing that the third party is not a related party of the investment adviser or located at the same address as the investment adviser.
- The client’s qualified custodian sends the client, in writing, an initial notice confirming the instruction and an annual notice reconfirming the instruction.
Item 16 Investment Discretion
CIGI accepts discretionary authority to manage securities on behalf of its clients.
Clients may hire us to provide discretionary asset management services, in which case we place trades in a client’s account without contacting the client prior to each trade to obtain the client’s permission.
Our discretionary authority includes the ability to do the following without contacting the client:
- determine the security to buy or sell; and/or
- determine the amount of the security to buy or sell
Clients give us discretionary authority when they sign a discretionary agreement with our firm and may limit this authority by giving us written instructions. Clients may also change/amend such limitations by once again providing us with written instructions.
Clients do not normally place any limitations on this authority but do have the right with their PFA accounts only, to place additional limitations on specific securities in their portfolio if they so desire. These limitations are usually due to inherited securities that have extremely low-cost basis and must be managed carefully to ensure no large capital gains are incurred or securities that have sentimental value to a client but do not contribute to the client’s overall portfolio strategy.
CIGI assumes discretionary authority when the client signs the discretion section of the advisory agreement.
Item 17 Voting Client Securities and Other Services
We vote proxies for all client accounts; however, you always have the right to vote proxies yourself. You can exercise this right by instructing us in writing to not vote proxies in your account.
We will vote proxies “with Management” for all proxy material; company annual, semi-annual, and interim reports, and/or reorganization material. Our firm will retain all proxy voting books and records for the requisite period of time, including a copy of each proxy statement received, a record of each vote cast, and a copy of each written client request for information on how the adviser voted proxies.
Clients may obtain a copy of our complete proxy voting policies and procedures by contacting Dana Capozzella by telephone, email, or in writing. Clients may request, in writing, information on how proxies for his/her shares were voted. If any client requests a copy of our complete proxy policies and procedures or how we voted proxies for his/her account(s), we will promptly provide such information to the client.
With respect to ERISA accounts, we will vote proxies unless the plan documents specifically reserve the plan sponsor’s right to vote proxies. To direct us to vote a proxy in a particular manner, clients should contact Dana Capozzella by telephone, email, or in writing.
You can instruct us to vote a specific proxy. You will need to provide your proxy vote instruction in writing to Dana Capozzella by noon one a day prior to the vote.
We have engaged a third-party agency to file “Proofs of Claim” in class action settlements on your behalf. If you do not wish to have this service, you can instruct us in writing to “Opt Out” of this service.
Clients are automatically enrolled in a service for foreign tax collection through RBC. If you do not wish to have this service, you can instruct us in writing to “Opt Out” of this service.
Item 18 Financial Information
As an advisory firm that maintains discretionary authority for client accounts, we are also required to disclose any financial condition that is reasonable likely to impair our ability to meet our contractual obligations. CIGI has no such financial circumstances to report.
Under no circumstances do we require or solicit payment of fees in excess of $1200 per client more than six months in advance of services rendered. Therefore, we are not required to include a financial statement.
CIGI has not been the subject of a bankruptcy petition at any time during the past ten years.