Part 2A Appendix 1 of Form ADV: Wrap Fee Program Brochure
Item 1 Cover Page
Cascade Investment Group, Inc.
90 S. Cascade Avenue, Suite 1250
Colorado Springs, CO 80903
Contact Information: Dana Capozzella, Chief Compliance Officer
Wrap Fee Program Brochure
This wrap fee program 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 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 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
Cascade Investment Group, Inc. has had the following material changes since its last annual update:
We have added disclosures related to our use of Standing Letters of Authorization to move money.
Item 3 Table of Contents
Table of Contents
1. Services, Fees and Compensation
2. Account Requirements and Types of Clients
3. Portfolio Manager Selection and Evaluation
4. Client Information Provided to Portfolio Managers
5. Client Contact with Portfolio Managers
6. Additional Information
Item 4 Services, Fees and Compensation
Cascade Investment Group, Inc. (CIGI) provides two programs in our Investment Advisory Services:
1. 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:
•Securities traded over-the-counter
•Corporate debt securities (other than commercial paper)
•Certificates of deposit
•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).
2. Consulting and Evaluation Services (CES)
CIGI provides clients with assistance in selecting one or more investment management firms to manage clients’ accounts. The minimum account size is generally $100,000; certain managers may establish different minimums. In CES, the client remains the investment manager, with CIGI’s assistance. Many investment management firms available through CES are otherwise available only to clients with significantly greater assets to invest.
Below are the details of each program:
1. Portfolio Freedom Accounts (PFA):
Our annual fees for PFA accounts are based upon a percentage of assets under management and
generally range from 2.50% to 1.00%.
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.
2. CONSULTING and EVALUATION SERVICES (CES)
Fees are negotiable based on the level of service provided and/or types of securities traded, which may result in a particular client paying a fee greater than or less than the standard fees. For accounts larger than $10 million, fees; generally, are arranged separately on the basis of service provided. Fees are prorated and payable quarterly in advance. Fees generally range from .60% to 2.20% depending on the investment manager.
In addition to fees paid to CIGI, in the CES program, clients pay investment fees separately to the investment manager(s). At a client’s discretion, these fees may be payable through RBC which debits the client’s account and remits the advisory fee to the investment manager.
The portion of the total wrap fee paid to the portfolio managers is 60%.
Participation in a wrap fee program may cost the client more or less than purchasing such services separately. Factors that bear upon the relative cost of the program depend on the number of trades a client would typically execute and the price of the trade depending on the amount and price of the security.
Termination of the Advisory Relationship: A client agreement may be canceled at any time, by either party, for any reason with 30 days written notice. 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.
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.
The Account Fee payable under this Agreement represents an alternative to commission/ transaction fee schedules. 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 specialized 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.
Wrap Fee Programs and Separately Managed Account Fees: Clients participating in separately managed account programs may be charged various program fees in addition to the advisory fee charged by our firm. Such fees may include the investment advisory fees of the independent advisers, which may be charged as part of a wrap fee arrangement. In a wrap fee arrangement, clients pay a single fee for advisory, brokerage and custodial services. Client’s portfolio transactions may be executed without commission charge in a wrap fee arrangement. In evaluating such an arrangement, the client should also consider that, depending upon the level of the wrap fee charged by the broker-dealer, the amount of portfolio activity in the client’s account, and other factors, the wrap fee may or may not exceed the aggregate cost of such services if they were to be provided separately. We will review with clients any separate program fees that may be charged to clients.
Additional Fees and Expenses: 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 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.
Limited Prepayment of Fees: Under no circumstances do we require or solicit payment of fees in excess of $1200 more than six months in advance of services rendered.
The investment advisor who recommends a wrap fee program receives compensation as a result of a client’s participation in the program. The amount of this compensation may be more than what the advisor would receive if the client participated in one of CIGI’s other programs or if the client paid for investment advice, brokerage, and other services. The advisor may have a financial incentive to recommend the wrap fee program over other programs or services.
Item 5 Account Requirements and Types of Clients
CIGI does not impose a minimum account size for investment advisory accounts. Investment advisory representatives may require a minimum account size.
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
Item 6 Portfolio Manager Selection and Evaluation
The Portfolio Manager for the PFA wrap fee program is the CIGI Investment Advisor Representative a client personally chooses to manage his/her assets.
Under the CES wrap fee program, the CIGI Investment Advisor recommends a portfolio manager for a particular client based on the following criteria:
1. People – the reputation of that portfolio manager and the research staff.
2. Process – the investment style used by the investment manager. Is it Bottom Up or Top Down/ Growth or Value-based?
3. Price – the fee schedule available for the client’s assets. Is it appropriate and beneficial to the client?
4. Performance – how does the investment manager fair in comparison to his/her peers?
CIGI reviews managers who have similar processes to see which has the best reputation, performance and price for the individual client.
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.
CIGI offers a wide variety of investment management services and programs. CIGI also provides consulting and financial planning services through a variety of programs. Clients in these programs retain final authority and responsibility to determine whether and how any recommendations should be affected and by whom. CIGI does tailor its advisory services to meet the needs of individual clients. These needs can include but are not limited to length of managed service, exclusion of particular securities from the management process (no fees associated) to hold in their account, and restriction of particular securities or types of securities.
CIGI does not accept performance-based fees.
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.
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 7 Client Information Provided to Portfolio Managers
CIGI will provide portfolio managers the basic information under the “Know Your Client Rule” which is needed to best determine the investment needs of the client.
CIGI collects this basic information about the client from the following sources:
1. Account Applications, customer profiles and other forms, which may include a customer’s name, address, social security number, date of birth, employment, tax bracket, savings, and information about a customer’s investment goals and risk tolerance;
2. Account History, for example, copies of confirmations or statements which may include information about investment transactions or the balances in a customer’s account; and
3. Correspondence, written, telephonic or electronic between the client and CIGI.
Item 8 Client Contact with Portfolio Managers
There are no restrictions placed on a client’s ability to contact and consult with their PFA portfolio manager.
Under the CES program, CIGI investment advisors serve as the conduit and evaluator of the independent advisory programs and communicate the client’s needs and desires to that manager. There are no restrictions on a client’s ability to contact and consult with their CIGI investment advisor to perform these services for them in communicating with their CES manager.
Item 9 Additional Information
There are no legal or disciplinary events that are material to a client’s or prospective client’s evaluation of CIGI’s advisory business or the integrity of CIGI’s management.
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. The Principals spend approximately 10% of their time selling securities, 75% of their time managing securities and 15% of their time providing investment advice.
MANAGEMENT PERSONNEL Registrations:
All management personnel of our firm are licensed as registered representatives of CIGI.
CIGI has three registered investment advisors 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’s management 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.
IARs of CIGI will review client’s accounts at least annually to determine if client’s investment objectives were met. 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 broker/dealer custodian for CIGI’s clients.
CIGI does not compensate any person for client referrals. It is CIGI’s policy not to engage solicitors or to pay related or non-related persons for referring potential clients to our firm.
CIGI does not require or solicit prepayment of more than $1200 in fees per client, six months or more in advance.
CIGI has not been the subject of a bankruptcy petition at anytime in its corporate history.
CIGI has no soft dollar arrangements or client referral arrangements that influence our choice of broker-dealer choices.
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.
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 Related to RBC Revenue Sharing Payments. Under the terms of its clearing agreement with RBC, CIGI receives a portion of compensation that is based on the amounts invested by clients of CIGI in the RBC Bank Deposit Program (BDP). CIGI receives a monthly rebate based on CIGI’s monthly average daily BDP balance. Your IAR does not receive directly any portion of revenue sharing payments that CIGI receives. 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. A Client may request to use the RBC Credit Interest Program, or CIP, which is an RBC in-house cash investment alternative, allowing Clients to earn interest on their cash reserves between investments. CIP cannot be used with retirement accounts and is not available to clients living in Louisiana or Utah. CIGI always recommends the BDP program to clients due to its FDIC insurance coverage, not because of the monthly compensation it receives. Clients may request to use the CIP. The revenue sharing payments CIGI receives from the BDP program is in addition to, and will not offset or reduce, the Account Fee. Clients should consider the additional compensation CIGI receives when evaluating the amount and appropriateness of the Account Fee.
Conflicts of Interest Related to RBC Money Market Funds. Client accounts that are self-trusteed pooled qualified plans and advisory retirement accounts are ineligible for the BDP program described in Section E. above. Per RBC, these types of accounts are placed in the RBC US Government Money Market Fund. This fund is also available to other types of Client 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. CIGI receives a monthly rebate based on CIGI’s money market balance. Your IAR does not receive directly any portion of revenue sharing payments that CIGI receives. The revenue sharing payments CIGI receives from the money market program is in addition to, and will not offset or reduce, the Account Fee. Clients should consider the additional compensation CIGI receives when evaluating the amount and appropriateness of the Account Fee.
Conflicts of Interest Related to Margin. Clients have the ability to request margin for their accounts. Margin debit balances in Client accounts are charged interest by RBC. All interest charged to Clients in excess of the Base Rate plus 50 basis points is shared equally between RBC and CIGI, which RBC pays to CIGI monthly. Your IAR is not compensated for this interest.
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. 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 credited to CIGI. This fee is not paid to your IAR. It is additional compensation paid to CIGI.
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.
I. 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.
II. We uphold the principles of knowing our clients, fair trades, and resist all efforts to allow any unethical behavior such as churning or switching.
III. We protect each client’s right to privacy and confidentiality with respect to information sought or received.
IV. We recognize and respect each client’s individual financial investment needs.
V. 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.
VI. 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.
VII. 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.
VIII. 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.