Form ADV Part 2A Main Street, Suite 103 Ferndale, WA IARD # Date of Brochure: 01/19/2016

Transcription

1 Form ADV Part 2A 1855 Main Street, Suite 103 Ferndale, WA IARD # Date of Brochure: 01/19/2016 This brochure provides information about the qualifications and business practices of Ludeman Capital Management, Inc. If you have any questions about the contents of this brochure, please contact us at (360) 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 Ludeman Capital Management, Inc. also is available on the SEC s website at Registration does not imply a certain level of skill or training. Page 1

2 Item 2: Material Changes This Section only discusses the material changes since the last annual update of our brochure. The last annual update of our brochure was 1/30/2015. As of 01/01/2016, Ludeman Capital Management, Inc. decreased its Annual Management Fee to 1.75% from 2.25% for assets between $0 and $499, under discretionary management. As of 01/01/2016, Ludeman Capital Management, Inc. decreased its Annual Management Fee to 1.50% from 2.00% for assets between $500, and $999, under discretionary management. As of 01/01/2016, Ludeman Capital Management, Inc. decreased its Annual Management Fee to 1.25% from 2.00% for assets between $1,000, and $4,999, under discretionary management. As of 11/13/2015, Matthew Atkins is no longer affiliated with Ludeman Capital Management, Inc. as an Investment Adviser Representative. As of 4/15/2015, the fee schedule for all Frontier portfolios has been removed as we are no longer utilizing Frontier as a sub adviser. Page 2

3 Item 3: Table of Contents Item 2: Material Changes... 2 Item 4: Advisory Business... 7 A. Description of the Advisory Firm... 7 B. Types of Advisory Services Offered... 7 C. Client Tailored Services and Client Imposed Restrictions... 9 D. Wrap Fee Programs... 9 E. Amount of Client Assets Managed... 9 Item 5: Fees and Compensation... 9 A. Fee Schedule... 9 Other Fees and Charges. The Custodian may charge for additional services provided, including wires, next day delivery, and alternative asset custody service. Please see Custodian s current fee schedule for a complete description of these charges B. How Fees are Paid C. Third Party Fees D. Fees Paid in Advance E. Compensation for the Sale of Investment Products Conflict of Interest Clients have the option to purchase investment products that LCM recommends through other brokers or agents that are not affiliated with us Less than 50% of our revenue from advisory clients results from commissions for the sale of investment products We do not charge advisory fees on assets sold in which we received a commission Item 6: Performance Based Fees and Side By Side Management Item 7: Types of Clients Page 3

4 Item 8: Methods of Analysis, Investment Strategies and Risk of Loss A. Method of Analysis and Investment Strategies B. Material Risks Involved C. Risks of Specific Securities Used Item 9: Disciplinary Information Item 10: Other Financial Industry Activities and Affiliations A. Broker Dealer Registration as a Broker/Dealer or Broker/Dealer Registered Representative B. Futures Commission Merchant, Commodity Pool Operator or Commodity Trading Adviser Registration C. Material Relationships to our Advisory Business and Potential Conflicts of Interest D. Selection of other investment advisers and how we receive compensation Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading A. Brief description of LCM Code of Ethics B. Recommendations of Securities with a Material Financial Interest C. Investing in the Same Securities as Clients D. Trading Personal Securities at or about the Same Time as Client Securities Item 12: Brokerage Practices A. Factors Considered in Recommending Broker/Dealers for Client Transactions and their Compensation Research and Other Soft Dollar Benefits Brokerage for Client Referrals Directed Brokerage B. Aggregating Client Purchase or Sales of Securities Item 13: Review of Accounts A. Review of Client Accounts B. Factors That Trigger a Non Periodic Review of Client Accounts C. Frequency of Regular Reports Provided to Clients Item 14: Client Referrals and Other Compensation A. Economic Benefit from Non Clients for Providing Advice B. Compensation for Referrals Item 15: Custody Item 16: Investment Discretion Page 4

5 Item 17: Voting Client Securities Item 18: Financial Information A. Prepayment of more than $500 six months or more in advance B. Financial Conditions that are Likely to Impair Ability to Meet Contractual Commitments to Clients C. Bankruptcy Petition Item 19: Requirements for State Registered Advisers A. Principal Executive Officers and Management Persons B. Other Business Activities C. Performance Based Fees D. Involvement in Arbitration, Civil, self regulatory organization or administrative proceedings E. Other relationships with issuer of securities Page 5

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7 Item 4: Advisory Business A. Description of the Advisory Firm Ludeman Capital Management, Inc. (LCM) is a state registered investment adviser and was incorporated on January 28, Prior to September 2004 the name of the firm was Ludeman Financial Advisors, Inc. In April 2007 the firm moved from a stateregistered investment adviser to an SEC registered investment adviser and then in June 2012 reverted back to a state registered investment adviser after regulations changed. Third party money management and adviser services have been offered since incorporation in 1997 and discretionary money management has been offered since Jonathan and Heidi Ludeman are joint owners of the company beginning in January Prior to January 2014 Stephen Ludeman was the principal owner of the company. B. Types of Advisory Services Offered We offer discretionary portfolio management services, act as a solicitor for other Registered Investment Advisers, financial planning and non managed services. 1. Discretionary Money Management We manage client s investments based on the individual needs of the client and may recommend various asset management options offered by LCM. The asset management options vary from conservative to aggressive and could be specialized by focusing in on a particular sector or investment theme, as appropriate in each client situation. Many of our discretionary money management options use quantitatively driven investment systems that allocate funds between different stock sectors or capitalizations, bonds, money market, or other asset classes. Our asset management objectives include a short term bond portfolio that is geared towards conservative investors, moderate quantitatively driven equity portfolios that can deviate substantially from stock market like returns, moderate portfolios that track more traditional buy and hold investment benchmarks and aggressive Page 7

8 investments that can utilize leveraged mutual funds and Electronically Traded Funds (ETFs). 2. Act As a Solicitor We may act as a solicitor for other registered investment advisers by referring our clients to those registered investment advisers for third party money management services and receive a portion of the fee from those registered investment advisers in return. This solicitor relationship is disclosed to the client before the client enters into this arrangement with the third party money managers. 3. Financial Planning and Consultation Services Through an initial consultation with the client, the investment adviser representative (Representative) gathers information regarding the client s investment objectives and financial situation, which may include current investments and assets, tax status, insurance coverage, liquidity, risk tolerance, retirement goals, and estate needs. After the fact gathering process is complete, the Representative will use the data to develop planning recommendations that apply to the services that the client and Representative have agreed upon and will present the recommendations to the client. Financial planning services offered include: Current Asset & Allocation Review Social Security Evaluation Pension Evaluation Retirement Income Planning Legacy Evaluation Roth IRA Conversion Analysis Insurance Evaluation Life Event Transition Advisor Should the client choose to implement any of the recommendations contained in the plan, there is no obligation to implement them through the Firm or any of its Representatives. If the client chooses to implement any of the recommendations through the Firm, implementation will be under a new agreement separate and Page 8

9 apart from the financial planning services agreement and any fees paid for financial planning services. 4. Non Managed Services At times, as a courtesy, we allow clients to hold assets in their accounts that we do not exercise discretion over. These assets are generally not charged an asset management fee. All assets held at Trust Company of America in the non modeled portion of their account are considered non managed assets. If a client requests us to initiate a transaction on their behalf in their non managed assets a one time administrative fee is charged. C. Client Tailored Services and Client Imposed Restrictions Our customized retirement plans are tailored to the individual needs and goals of our clients and the client allocation between different investment programs is based on a client s risk tolerance and goals among other factors. A client may impose reasonable restrictions on investing in certain securities or types of securities. Generally, reasonable restrictions on investing include the designation of particular securities or types of securities that should not be purchased for the account, or that should be sold if held in the account. D. Wrap Fee Programs We do not participate in any wrap fee program. E. Amount of Client Assets Managed We manage $24,126, in client assets on a discretionary basis in 262 accounts as of 12/31/2015. Item 5: Fees and Compensation A. Fee Schedule 1. Discretionary Managed Portfolios Page 9

10 The fee schedule for managed portfolios, other than the LCM Bond Portfolio, is according to the fee schedule shown below: Assets Under Discretionary Management: Annual Fee Quarterly Fee From $0 to $499, % % From $500, to $999, % 0.375% From $1,000, to $4,999, % % From $5,000, and up As negotiated The fee schedule for the LCM Bond Portfolio is according to the fee schedule shown below: The fee schedule for the LCM Bond Portfolio is: Assets Under Discretionary Management: Annual Fee Quarterly Fee From $0 to $4,999, % 0.30% From $5,000, and up As negotiated We may, at our sole discretion, waive all or part of the management fee for a period of time. For assets managed by sub advisers, all management fees are collected by LCM and a portion of the fee is remitted to the sub adviser. The client will not receive bills from multiple advisers. 2. Non Managed Services We do not typically charge an assets based fee for non managed services although we do charge a $50 administrative fee for any trades a client requests we initiate on their behalf in their non managed portfolio. We provide nonmanaged portfolio management to our clients as a service for their convenience. 3. Financial Planning Page 10

11 We are compensated for our financial planning typically through an hourly rate of $250 per hour. Sometimes we will charge a flat fee for planning to a client based on an hourly estimate if the client would prefer a fixed fee. Fees are agreed upon in advance, in writing, depending upon the degree of planning desired and the estimate of hours for service and are negotiable. 4. Third Party Managers At times we refer clients to third party managers and receive compensation from those managers. The compensation received by us is normally based upon the fee paid by the client to the third party adviser. Fees are paid by clients to the third party manager and then a portion of that fee is paid to us by the third party manager. Fees paid to LCM typically range from 0.5% 1% of assets managed. Third party managers we currently have agreements to recommend to clients to include: Hanlon Investment Management, Inc. At times we refer clients to them to use their high yield bond timing program inside of variable annuities. Strategic Equity Management, Inc. Clients we refer to them use their programs that use computer driven investment models to make trading decisions. The Pacific Financial Group, Inc., We refer some clients to them for management of their 401(k) or other retirement accounts. In all cases the client will be advised of all fees to be paid to the third party adviser and to LCM. 5. Custodial Fees Trust Company of America (the Custodian ) will charge the Client a fee for each account maintained by the Custodian, based on the value of the Account (set forth below), subject to a minimum fee of $25 per quarter per account: Value of Account Annual Fee $0 to $499, % $500,000 to $999, % $1,000,000 and above % Page 11

12 The Custodian also has the following fees and charges: Brokerage Commissions for Individual Securities, Equity securities and Exchange Traded Funds will be directed by Custodian to BNY ConvergEX Execution Solutions LLC for execution. The equity and ETF orders are subject to a fee of $ per share with a minimum price per order of $2.00. The equity and ETF fee is a pass through charge that is subject to change by notification to Trust Company of America by ConvergEx. Mutual Fund Fees. The Custodian collects and retains service fees and subagency transfer fees paid by mutual funds held by Custodian for Client. TCAdviser Network Inc., member of the FINRA/SIPC shall retain all 12(b)1 trailing commissions. Other Fees and Charges. The Custodian may charge for additional services provided, including fees for checks, wires, next day delivery, paper statement delivery, and alternative asset custody service. Please see Custodian s current fee schedule for a complete description of these charges. Jefferson National Life Insurance Company will charge clients a monthly fee of $20 for each contract maintained by the Client. We believe the fees charged to our clients are reasonable in light of the type of services that are provided, our experience and the expertise of the employees of LCM and the managers we utilize. Due to the nature of the services provided, actively managed programs tend to have higher fees than passive strategies. B. How Fees are Paid Clients may choose to either have their fees deducted from their account or to be billed for fees incurred. Discretionary management and third party manager fees are charged quarterly and an itemized invoice is sent to our clients each time a fee is directly deducted from the client s account. All other fees are charged at the time service is provided. C. Third Party Fees In addition to the fees paid to us listed above, clients may also pay custodian, mutual fund or ETF fees as well as brokerage and other transaction costs. Please see section 14 for more information on brokerage practices. Page 12

13 D. Fees Paid in Advance Discretionary portfolio management fees are paid in advance each calendar quarter. Fees are calculated as a percentage of the closing value of a client s account on the last day of the preceding calendar quarter. For client accounts initially set up in the middle of a calendar quarter, fees will be taken in arrears based on the balance of the account on the last day of the quarter in which the account was opened and will be pro rated based on the number of calendar days that the client s account was open during the quarter. In the event that the Client s account is terminated, fees that were collected but yet unearned will be returned on a pro rated basis. Our Advisory Agreement can be terminated by either party by written notice to the other. Financial planning fees are paid in advance. A financial planning client can cancel the financial planning contract and receive a full refund of financial planning fees paid before the completion of the financial planning engagement. Written notification and the return of all materials received are required. LCM does not accept prepayment of fees of more than $500 per client in advance of six months. E. Compensation for the Sale of Investment Products A representative of LCM may also be a registered representative of Centaurus Financial, Inc. a Broker/Dealer based in Anaheim, California. As a registered representative of Centaurus Financial they may receive a percentage of commissions charged by Centaurus Financial on securities transactions that they complete through Centaurus Financial. In addition, representatives are also involved in selling insurance products on a commission basis as appointed agents of various insurance agencies. 1. Conflict of Interest This practice of selling securities and insurance products presents a potential conflict of interest and gives LCM and our representatives an incentive to recommend investment products based on the compensation received rather than on a client s needs. A client is under no obligation to act upon our recommendations, whether those recommendations come from our financial planning services or not, and if the client elects to act on any of our recommendations, the client is under no obligation to effect the transaction through us. We address this potential conflict of interest by disclosing our potential conflict of interest, disclosing all fees and commission received for selling a product, supervision of advisers and creating both company policies and a company culture that hold the interests of the client in the highest regard. Page 13

14 2. Clients have the option to purchase investment products that LCM recommends through other brokers or agents that are not affiliated with us. 3. Less than 50% of our revenue from advisory clients results from commissions for the sale of investment products. 4. We do not charge advisory fees on assets sold in which we have received a commission. Item 6: Performance Based Fees and Side By Side Management Neither LCM nor any of our supervised persons accepts performance based fees. Item 7: Types of Clients We generally provide services to the following types of clients: Individuals High Net Worth individuals Pension and Profit Sharing Plans Charitable organizations Corporations or Business Entities Qualified Retirement Plans There are various account minimum restrictions on many of the third party managers we use. Page 14

15 Item 8: Methods of Analysis, Investment Strategies and Risk of Loss A. Method of Analysis and Investment Strategies Our primary methods of analysis include Technical Analysis and Fundamental Analysis. Technical Analysis involves the analysis of past market data including but not limited to price and volume data. We primarily focus on quantitative systems and methods utilizing Technical Analysis. Fundamental Analysis is a method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. We may also select third party managers to run strategies in our portfolio and we use research reports and mathematical analysis in the selection of these managers. The strategies we use include both long term trading and frequent trading. Our investment strategies invest in mutual funds, ETFs and individual stocks. Investing in securities involves risk of loss that clients should be prepared to bear. B. Material Risks Involved Material risks of technical and fundamental analysis include the risk that in the future markets will behave materially different than they have in the past leading to poor trades and loss of money in the accounts over an extended period of time. Even if markets do behave consistently as they have in the past, money can be lost using technical and fundamental analysis as losses can occur any time you invest in financial markets. Some of our primary strategies include frequent trading. Frequent trading of securities can affect investment performance, particularly through increased brokerage and other transaction costs and taxes. Our buy and hold stock and bond portfolios have a material risk of losing value if stock or bond markets experience declines due to the highly correlated nature between most buy and hold strategies and the general stock and bond market indices. Investing in securities involves risk of loss that clients should be prepared to bear. Page 15

16 C. Risks of Specific Securities Used Beyond the risks of general domestic and/or international equity and currency markets we at times may use other securities that pose unusual risks. Some of our portfolios will take positions in mutual funds and ETFs that are designed to return up to double or triple the return of a specified index (these are referred to as leveraged products ). If an investor is in these leveraged products and the corresponding index loses value on any given day the investor will experience approximately double or triple the loss that day than if they were in an investment that attempted to mimic the index on an unleveraged basis. In addition, some of our portfolios will invest in inverse mutual funds or ETFs or double and triple inverse mutual funds or ETFs. These inverse and double and triple inverse mutual funds and ETFs are designed to move in the opposite directions of a financial market index. If an investor is invested in a non leveraged inverse mutual fund or ETF the position can experience a loss equal to approximately the gain of the index it is tracking if the corresponding index goes up in value on any one day. If an investor is invested in a double or triple inverse mutual fund or ETF (a leveraged position) the position can experience a loss of approximately double or triple the gain of the index it is tracking if the corresponding index goes up in value on any one day. Most double and triple leverage long and inverse mutual funds and ETFs are designed to track the index over a one day period. If we use these leveraged instruments over a time period longer than one day there is a risk that the end result may be materially different than double the return of the targeted index due to daily compounding rates of return. We also may invest in exchange traded notes (ETNs). ETNs are designed to provide investors access to the returns of various market benchmarks. The returns of ETNs are usually linked to the performance of a market benchmark or strategy, less investor fees. When an investor buys an ETN, the underwriting bank promises to pay the amount reflected in the index, minus fees upon maturity. Thus ETNs have an additional risk not borne by an ETF: upon any reduction of credit ratings or if the underwriting bank goes bankrupt, the value of the ETN will be eroded. Investing in securities involves risk of loss that clients should be prepared to bear. Page 16

17 Item 9: Disciplinary Information There are no legal or disciplinary events that we deem material to a client s or prospective client s evaluation of our advisory business or the integrity of our management. Please see Item 19 for additional disclosures. Item 10: Other Financial Industry Activities and Affiliations A. Broker Dealer Registration as a Broker/Dealer or Broker/Dealer Registered Representative We have 3 or more representatives who are also registered representatives with Centaurus Financial, Inc. These representatives are supervised by Heidi Ludeman, President. B. Futures Commission Merchant, Commodity Pool Operator or Commodity Trading Adviser Registration Neither LCM any of its associated persons are registered as a FCM, CPO or CTA. C. Material Relationships to our Advisory Business and Potential Conflicts of Interest Most of our representatives are also registered representatives of Centaurus Financial, Inc. as well as appointed with various insurance companies either through Centaurus Financial, Inc. or directly. We also have a solicitor relationship with various other investment advisers. When appropriate we may refer clients to another investment adviser for money management and be paid a solicitor s fee from the other investment adviser for doing so. Our solicitor s fee is disclosed to the client at the time of the transaction and before clients are referred we confirm these third party advisers are appropriately licensed. These outside relationships may present a material conflict of interest with clients as a representative may have an incentive to recommend an Page 17

18 investment with the highest commission or fee product and not the product that is most suitable for the client. We mitigate this risk with company policies and procedures and a corporate culture that reinforces placing the client s interest above those of LCM or its representatives, disclosure of all fees and commissions paid by the client and supervision of each adviser. D. Selection of other investment advisers and how we receive compensation When appropriate we may refer clients to another investment adviser for money management and be paid a solicitor s fee from the other investment adviser for doing so. Our solicitor s fee is disclosed to the client at the time of the transaction. These outside solicitor relationships may present a material conflict of interest with clients as a representative may have an incentive to recommend an investment with the highest fee and not the product that is most suitable for the client. We mitigate this risk with company policies and procedures and a corporate culture that reinforces placing the client s interest above those of LCM or its representatives, disclosure of all fees and commissions paid by the client and supervision of each adviser. Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading A. Brief description of LCM Code of Ethics We have a written code of ethics that covers employee standards of conduct, nonpublic information, acceptance of gifts, service as director for an outside company, outside business interests, employee trading policies and restrictions, reports of personal securities, firm review of personal transactions, record keeping requirements and code of ethics and personal trading policy violations and sanctions. We will provide a copy of our code of ethics to any client or prospective client upon request. B. Recommendations of Securities with a Material Financial Interest We do not recommend that clients buy or sell any securities in which a related person to LCM has a material financial interest. Page 18

19 C. Investing in the Same Securities as Clients LCM employees may, from time to time, invest in the same securities that we recommend to clients. This may present a conflict of interest in that a client purchase of a security held by an LCM employee may cause the price of that security to appreciate. Also, in the investment of certain private investments the LCM employee could learn of certain benefits or risks related to the security before the client learns of them and act on that knowledge for their personal account. LCM mitigates these risks by reviewing employee securities transactions quarterly, creating and enforcing policies and procedures related to putting client interests ahead of employee s interest in trading and holding securities and creating a corporate culture that emphasizes putting the client s interest first. D. Trading Personal Securities at or about the Same Time as Client Securities We may, at times, trade a security for an employee or related person at or about the same time as we trade the same security for a client s account. This could create a conflict of interest in that if a security was traded for an employee or related person before a client, the employee or related person could receive a more favorable price for that security than the client. LCM mitigates this risk by requiring all purchases or sales of securities for employees or related person to occur at the same time as our clients within a block trade or after the purchase or sale has occurred in the clients account. Item 12: Brokerage Practices A. Factors Considered in Recommending Broker/Dealers for Client Transactions and their Compensation 1. Research and Other Soft Dollar Benefits We do not receive research or other products or services other than execution from a broker/dealer in connection with client security transactions. 2. Brokerage for Client Referrals We do not receive referrals from a broker/dealer. Page 19

20 3. Directed Brokerage We do routinely require that a client execute transactions through a specified broker/dealer. LCM requires clients to use Trust Company of America (TCA) as the custodian with the exception of variable annuity sub accounts. Those accounts are held directly with the issuer. TCA does not provide written confirmations except on the list of transactions provided on the quarterly statement. Clients may individually request written confirmations in writing directly from TCA. B. Aggregating Client Purchase or Sales of Securities Whenever possible we aggregate the purchase or sale of securities for client accounts. Item 13: Review of Accounts A. Review of Client Accounts The investment positions in the investment models clients are invested in are reviewed daily, weekly or monthly depending on the investment model. The amount and percent of assets a client has allocated to each individual investment model is reviewed at least annually, preferably with the client, but for most clients the allocation is reviewed quarterly or semi annually by an investment adviser representative. B. Factors That Trigger a Non Periodic Review of Client Accounts Accounts may be reviewed on a non periodic basis due to client request, major client life event or unusual market or investment activity. C. Frequency of Regular Reports Provided to Clients Clients are sent regular account statements, at least quarterly, from the custodian that is holding their funds. Item 14: Client Referrals and Other Compensation Page 20

21 A. Economic Benefit from Non Clients for Providing Advice We receive an economic benefit from non clients for providing advice when we act as a solicitor and refer clients to third party money managers. In these situations the thirdparty managers share their investment fee with us. This arrangement is disclosed in writing with the client at the time the client signs a contract with the third party manager. B. Compensation for Referrals We do not compensate any person directly or indirectly who is not a supervised person for client referrals. Item 15: Custody LCM has custody by its authority to directly deduct fees from client accounts as defined in WAC A 005(1) (a) (ii) and described in WAC A 106. As part of the quarterly billing process: 1. Independent custodians send statements at least quarterly providing the market values for each security owned and all disbursements, including the amount of the advisory fee paid to LCM; 2. An invoice reflecting the amount of the advisory fee paid to LCM is provided to the Client, including a legend urging the Client to compare information provided in the invoice with those from the qualified custodian. Clients may request to pay their invoice each quarter via check, rather than direct deduction. Item 16: Investment Discretion Page 21

22 We accept discretionary authority to manage securities on behalf of clients. Clients have the right to place limitations on this authority. Clients sign paperwork to grant a limited power of attorney to LCM before we assume authority over an account. Item 17: Voting Client Securities We have the authority to vote client securities. Our voting policies and procedures include the responsibility for voting consistent with the best economic interests of the clients, consideration of factors related to the investment objective of the affected portfolio and any material potential conflict of interest between LCM and clients. If there appears to be a material potential conflict of interest between LCM and the clients, LCM will abstain from voting and the conflict will be disclosed to the affected clients within 24 hours by phone, or fax. Clients may direct our vote in a particular solicitation by directing us to do so in writing. Clients may obtain information from us about how we voted their securities upon request. We accept voting authority for discretionary management clients. Item 18: Financial Information A. Prepayment of more than $500 six months or more in advance We do not require prepayment of more than six month in advance and are thus not required to include a balance sheet. B. Financial Conditions that are Likely to Impair Ability to Meet Contractual Commitments to Clients There are no financial conditions that are likely to impair our ability to meet contractual commitments to clients. Page 22

23 C. Bankruptcy Petition We have not been the subject of a bankruptcy petition at any time in the past ten years. Item 19: Requirements for State Registered Advisers A. Principal Executive Officers and Management Persons Heidi Ann Ludeman President, Chief Compliance Officer and Owner Bachelor of Business Administration, 2005, Pacific Lutheran University, Tacoma, WA Bachelor of Arts Norwegian, 2005, Pacific Lutheran University, Tacoma, WA Investment Adviser Representative at LCM, 2013 to Present Registered Representative of Centaurus Financial, Inc., 2013 to Present Compliance Officer at Russell Investments, 2008 to 2013 Compliance Officer at Pacific West Financial Group, 2005 to 2008 Jonathan Paul Ludeman, CFP, AIF Owner Bachelor of Arts Business & Economics, 2004, Wheaton College, Wheaton, Il Investment Adviser Representative at LCM, 2005 to Present Registered Representative of Centaurus Financial, Inc., 2012 to Present Registered Representative of Pacific West Securities, Inc to 2012 B. Other Business Activities See Form ADV 2 Item 10 regarding other business activities. C. Performance Based Fees We currently are not compensated with performance based fees. D. Involvement in Arbitration, Civil, self regulatory organization or administrative proceedings No adviser or management person has been found liable in an arbitration claim or civil, self regulatory organization or administrative proceeding involving an investment or an investment related business or activity, fraud, false statements or omissions, theft, embezzlement or other wrongful taking of property, bribery, forgery, counterfeiting, or extortion, or dishonest, unfair or unethical practices. Page 23

24 E. Other relationships with issuer of securities Neither LCM nor any of our management persons have a relationship with any issuer of securities that is not listed in Item 10.C of Part 2A. All material conflicts of interest under CCR Section (k) which could be reasonably expected to impair the rendering of unbiased and objective advice are disclosed regarding LCM, its representatives and any of its employees. Page 24

25 Item 1: Cover Form ADV Part 2B: Brochure Supplement Jonathan Ludeman CRD # Ludeman Capital Management, Inc Main Street, Suite 103 Ferndale, WA (360) Date of supplement: 01/19/2016 This Brochure Supplement provides information about Jonathan Ludeman that supplements the Ludeman Capital Management, Inc. (LCM) Brochure. You should have received a copy of that Brochure. Please contact LCM if you did not receive LCM s Brochure or if you have any questions about the contents of this supplement. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

26 Additional information about Jonathan Ludeman is available on the SEC s website at Item 2: Educational Background and Business Experience Jonathan P. Ludeman, CFP, AIF Financial Advisor, Owner DOB: 10/21/1981 Graduated from Wheaton College, Wheaton, Il in 2004 with a Bachelor of Arts in Business & Economics. Business background for preceding five years: 1/2005 Present Investment Adviser Representative Ludeman Capital Management, Inc. 1/2012 Present Registered Representative Centaurus Financial, Inc. 11/2011 Present Insurance Agent 3/2005 1/2012 Registered Representative Pacific West Securities, Inc. Explanation of qualifications for the Certified Financial Planner (CFP) designation: The CERTIFIED FINANCIAL PLANNER, CFP and federally registered CFP (with flame design) marks (collectively, the CFP marks ) are professional certification marks granted in the United States by Certified Financial Planner Board of Standards, Inc. ( CFP Board ). Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

27 The CFP certification is a voluntary certification; no federal or state law or regulation requires financial planners to hold CFP certification. It is recognized in the United States and a number of other countries for its (1) high standard of professional education; (2) stringent code of conduct and standards of practice; and (3) ethical requirements that govern professional engagements with clients. Currently, more than 71,000 individuals have obtained CFP certification in the United States. To attain the right to use the CFP marks, an individual must satisfactorily fulfill the following requirements: Education Complete an advanced college level course of study addressing the financial planning subject areas that CFP Board s studies have determined as necessary for the competent and professional delivery of financial planning services, and attain a Bachelor s Degree from a regionally accredited United States college or university (or its equivalent from a foreign university). CFP Board s financial planning subject areas include insurance planning and risk management, employee benefits planning, investment planning, income tax planning, retirement planning, and estate planning; Examination Pass the comprehensive CFP Certification Examination. The examination includes case studies and client scenarios designed to test one s ability to correctly diagnose financial planning issues and apply one s knowledge of financial planning to real world circumstances; Experience Complete at least three years of full time financial planning related experience (or the equivalent, measured as 2,000 hours per year); and Ethics Agree to be bound by CFP Board s Standards of Professional Conduct, a set of documents outlining the ethical and practice standards for CFP professionals. Individuals who become certified must complete the following ongoing education and ethics requirements in order to maintain the right to continue to use the CFP marks: Continuing Education Complete 30 hours of continuing education hours every two years, including two hours on the Code of Ethics and other parts of the Standards of Professional Conduct, to maintain competence and keep up with developments in the financial planning field; and Ethics Renew an agreement to be bound by the Standards of Professional Conduct. The Standards prominently require that CFP professionals provide Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

28 financial planning services at a fiduciary standard of care. This means CFP professionals must provide financial planning services in the best interests of their clients. CFP professionals who fail to comply with the above standards and requirements may be subject to CFP Board s enforcement process, which could result in suspension or permanent revocation of their CFP certification. Item 3: Disciplinary Information There are no disciplinary actions to disclose Item 4: Other Business Activities A. Investment Related Business In addition to being an Investment Adviser Representative (IAR) of LCM, Mr. Ludeman is also a Registered Representative of Centaurus Financial, Inc. This activity takes up approximately 10 hours per month of his time. He is also licensed to sell insurance in the state of Washington, California, and Idaho and is appointed with several insurance companies. Mr. Ludeman spends approximately 1 hour per month on insurance sales. Mr. Ludeman receives commissions for the sale of insurance and securities products. These outside investment related business relationships, Mr. Ludeman s commission structure, and Mr. Ludeman s ownership position at LCM may present a material conflict of interest with clients as he may have an incentive to recommend the security, insurance product, or Registered Investment Adviser service that pays the highest commission. LCM mitigates this risk through company policies and procedures, disclosing all fees and commission received for selling a product to clients, IAR supervision and a corporate culture that reinforces placing the client s interest above those of LCM or its IARs. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

29 B. Other Paid Occupations Mr. Ludeman has no other paid occupations that provide substantial income. Item 5: Additional Compensation When appropriate, Mr. Ludeman may refer clients to another investment adviser for money management. In this scenario LCM will be paid a solicitor s fee from the other investment adviser for doing so and Mr. Ludeman may share in the fee. The solicitor s fee is disclosed to the client at the time of the transaction. Item 6: Supervision Jonathan Ludeman is supervised by Heidi Ludeman, LCM Chief Compliance Officer and Centaurus Financial, Inc. OSJ. Ms. Ludeman can be reached at (360) Item 7: Requirements for State Registered Advisers This disclosure is required by State securities authorities and is provided for your use in evaluating this investment adviser representative s suitability. A. Mr. Ludeman has NOT been involved in any of the events listed below. 1. An award or otherwise being found liable in an arbitration claim alleging damages in excess of $2,500, involving any of the following: a) an investment or an investment related business or activity; b) fraud, false statement(s), or omissions; Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

30 c) theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. 2. An award or otherwise being found liable in a civil, self regulatory organization, or administrative proceeding involving any of the following: a) an investment or an investment related business or activity; b) fraud, false statement(s), or omissions; c) theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. B. Mr. Ludeman has NOT been the subject of a bankruptcy petition at any time. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

31 Item 1: Cover Form ADV Part 2B: Brochure Supplement Heidi Ludeman CRD # Ludeman Capital Management, Inc Main Street, Suite 103 Ferndale, WA (360) Date of supplement: 01/19/2016 This Brochure Supplement provides information about Heidi Ludeman that supplements the Ludeman Capital Management, Inc. (LCM) Brochure. You should have received a copy of that Brochure. Please contact LCM if you did not receive LCM s Brochure or if you have any questions about the contents of this supplement. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

32 Additional information about Heidi Ludeman is available on the SEC s website at Item 2: Educational Background and Business Experience Heidi A. Ludeman President, Chief Compliance Officer, Owner DOB: 04/04/1982 Bachelor of Business Administration, 2005, Pacific Lutheran University, Tacoma, WA Bachelor of Arts Norwegian, 2005, Pacific Lutheran University, Tacoma, WA Business background for preceding five years: 12/2013 Present Chief Compliance Officer and President Ludeman Capital Management, Inc. 12/2013 Present Registered Representative Centaurus Financial, Inc. 3/ /2013 Unemployed 11/2008 3/2013 Compliance Officer Russell Investments Item 3: Disciplinary Information There are no disciplinary actions to disclose Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

33 Item 4: Other Business Activities A. Investment Related Business In addition to being an Investment Adviser Representative (IAR) of LCM, Ms. Ludeman is also a Registered Representative of Centaurus Financial, Inc. This activity takes up approximately 10 hours per month of her time. Ms. Ludeman supervises Registered Representatives and does not sell securities products. These outside investment related business relationships and Ms. Ludeman s ownership position at LCM may present a material conflict of interest with clients as she may have an incentive to recommend the security or Registered Investment Adviser service that pays the highest commission or bonus. LCM mitigates this risk through company policies and procedures, disclosing all fees and commission received for selling a product to clients, IAR supervision and a corporate culture that reinforces placing the client s interest above those of LCM or its IARs. B. Other Paid Occupations Ms. Ludeman has no other paid occupations that provide substantial income. Item 5: Additional Compensation When appropriate, Ms. Ludeman may refer clients to another investment adviser for money management. In this scenario LCM will be paid a solicitor s fee from the other investment adviser for doing so and Ms. Ludeman may share in the fee. The solicitor s fee is disclosed to the client at the time of the transaction. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

34 Item 6: Supervision Heidi Ludeman is the LCM Chief Compliance Officer and is supervised by Centaurus Financial, Inc. Ms. Ludeman can be reached at (360) Item 7: Requirements for State Registered Advisers This disclosure is required by State securities authorities and is provided for your use in evaluating this investment adviser representative s suitability. A. Ms. Ludeman has NOT been involved in any of the events listed below. 1. An award or otherwise being found liable in an arbitration claim alleging damages in excess of $2,500, involving any of the following: a) an investment or an investment related business or activity; b) fraud, false statement(s), or omissions; c) theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. 2. An award or otherwise being found liable in a civil, self regulatory organization, or administrative proceeding involving any of the following: a) an investment or an investment related business or activity; b) fraud, false statement(s), or omissions; c) theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. B. Ms. Ludeman has NOT been the subject of a bankruptcy petition at any time. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

35 Item 1: Cover Form ADV Part 2B: Brochure Supplement David Konsa CRD # Ludeman Capital Management, Inc Bridgeport Way #2E1 Tacoma, WA (253) Date of supplement: 01/19/2016 This Brochure Supplement provides information about David Konsa that supplements the Ludeman Capital Management, Inc. (LCM) Brochure. You should have received a copy of that Brochure. Please contact LCM if you did not receive LCM s Brochure or if you have any questions about the contents of this supplement. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

36 Additional information about David Konsa is available on the SEC s website at Item 2: Educational Background and Business Experience David Konsa Financial Advisor DOB: 04/24/1939 Graduated from the University of Washington in 1961 with a Bachelor of Science in Civil Engineering. Graduated from the University of Washington in 1962 with a Masters in Civil Engineering. Business background for preceding five years: 11/2001 Present Investment Adviser Representative Ludeman Capital Management, Inc. 2/2012 Present Registered Representative Centaurus Financial, Inc. 07/1976 Present Insurance Agent 11/2001 2/2012 Registered Representative Pacific West Securities, Inc. Item 3: Disciplinary Information There are no disciplinary actions to disclose. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016

37 Item 4: Other Business Activities A. Investment Related Business In addition to being an Investment Adviser Representative (IAR) of LCM, Mr. Konsa is also a Registered Representative of Centaurus Financial, Inc. Mr. Konsa spends approximately 40 hours per month on this activity. He is also licensed to sell insurance in the states of Washington, Arizona, California, Oregon, New York, and Illinois and is appointed with several insurance companies. He spends approximately 1 hour per month on insurance sales. Mr. Konsa receives commissions for the sale of insurance and securities products and bonuses for the sale of investment advisory services. These outside investment related business relationships and Mr. Konsa s bonus and commission structure may present a material conflict of interest with clients as he may have an incentive to recommend the security, insurance product or Registered Investment Adviser service that pays the highest commission or bonus. LCM mitigates this risk through company policies and procedures, disclosing all fees and commission received for selling a product to clients, IAR supervision and a corporate culture that reinforces placing the client s interest above those of LCM or its IARs. B. Other Paid Occupations Mr. Konsa has no other paid occupations that provide substantial income. Item 5: Additional Compensation When appropriate, Mr. Konsa may refer clients to another investment adviser for money management. In this scenario LCM will be paid a solicitor s fee from the other investment adviser for doing so and Mr. Konsa may share in the fee. The solicitor s fee is disclosed to the client at the time of the transaction. Form ADV Part 2B: Brochure Supplement Version: 01/19/2016