Part 2A of Form ADV: Firm Brochure

Transcription

1 Part 2A of Form ADV: Firm Brochure Item 1 Cover Page September 10, 2014 Wolfers Asset Management Established in 2001 Erik Sean Wolfers, MBA, CFP - Principal and Sole Proprietor 235 Wildwood Avenue Piedmont, CA (510) phone (510) cellular phone (510) fax [email protected] This brochure provides information about the qualifications and business practices of Wolfers Asset Management (WAM). If you have any questions about the contents of this brochure, please feel free to contact me, Erik. 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 Wolfers Asset Management also is available on the SEC s website at Wolfers Asset Management is registered with the State of California as a registered investment advisor. To become a registered investment advisor one must complete the appropriate paperwork after having passed a few securities licensing exams. Erik Wolfers passed the series 7 and 66 exams. Registered investment advisors are allowed to collect compensation for investment advice and are subject to audits while agreeing to have information (such as this document) about the firm be publicly available. Being a registered investment advisor does not imply any particular level of proficiency other than having passed securities licensing exams. Wolfers Asset Management has been audited one time by the State of California for compliance with its registry regulations as well as accurate billing to clients. With a few minor administrative changes Wolfers Asset Management was found to be in compliance. Registered investment advisors act as fiduciaries for their clients. As such it is our obligation to act in the best interest of our clients and disclose any potential conflicts of interest. More detailed information about conflicts of interest and the code of ethics adhered to by Erik Wolfers can be found below.

2 Item 2 Material Changes April 2014 New web site,

3 Item 3 Table of Contents Page 1 Cover Page Page 2 Material Changes Page 3 Table of Contents Page 4 Advisory Business Page 5 Fees and Compensation Page 6 Performance-Based Fees and Side-By-Side Management Page 7 Types of Clients Page 8 Methods of Analysis, Investment Strategies and Risk of Loss Page 9 Disciplinary Information Page 10 Other Financial Industry Activities and Affiliations Page 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Page 12 Brokerage Practices Page 13 Review of Accounts Page 14 Client Referrals and Other Compensation Page 15 Custody Page 16 Investment Discretion Page 17 Voting Client Securities Page 18 Financial Information Page 19 - Requirements for State-Registered Advisers

4 Item 4 Advisory Business I, Erik, founded Wolfers Asset Management in 2001after I finished my MBA in Finance (4.0 cumulative GPA) at Arizona State University. I graduated from the University of California at Santa Barbara in 1993 with a B.A. in Business-Economics. Between the spring of 1993 and matriculating at ASU in the fall of 1999 I worked primarily in the high tech industry. After a few years of high tech I decided to attend graduate school with the specific intent of studying finance and investments after I fully realized my interest and passion in those areas. ASU s MBA program requires a practical application class for its second year students and in part, I picked ASU because of the investments practicum offering 5 selected students the opportunity to actively invest a small portion of the school s foundation. The MBA investments practicum is overseen by the head of the finance department as well as a board of alumni who work in the investments field. Once or twice a month a board member would come in to visit and share their processes and philosophies for managing money. Some of the board members who visited were responsible for managing $ billions. It was through this experience, the math and theories learned at ASU, and my own experience actively managing my own money, and that of a few others, that I had the confidence to start my own firm. Personal finance can be a very daunting subject for many but I learned there are certain tenants, often not practiced in retail finance, that one can adhere to which have generally been shown to work well over the long run. WAM continues to practice proven methodologies for managing money for its clients. By putting the client first, charging reasonable to low fees, and sticking to what it knows, WAM has experienced steady and stable growth. At this phase new clients are mainly added through referral. The majority of WAM s business is managing accounts for individuals. At the time of this writing WAM managed 91 individual accounts and $23.2 million. All assets are managed on a discretionary basis, meaning; clients all agree to have Erik make all specific investment decisions for them while doing his best to understand their ability to take risk, their goals, and their tolerance for risk. I also provide financial planning services to any clients wanting them. The most common type of financial planning performed by me is retirement planning but comprehensive plans are also done including the evaluation of: insurance, estate, college, cash flow, budgeting, home buying, stock options, tax, and alternative investments like real estate. After initial discovery and discussions, items like tax, estate planning, mortgages and insurance are often referred to specialists in those areas as I am not certified to do tax returns, an attorney, mortgage broker or licensed to sell insurance. I am the only person at WAM and I thus do all the work associated with portfolio management, investment selection, client service, compliance, administrative, etc.

5 Item 5 Fees and Compensation WAM is paid quarterly in arrears based on the value of each account at the close of the quarter. The highest account management fee charged by WAM is 1.00% of assets on an annual basis (0.25% quarterly). WAM offers tiered billing to clients with over $500k in assets under management. For example, a client with $720k with WAM could be billed the following: 1.00% annual on the first $500k 0.90% annual on the next $500k 0.80% annual on the next $500k and so on. Once clients get past $2.5 million the highest tier generally drops down to as low as 0.40% annual. The fee structure offered to clients is often based on the targeted risk tolerance for the portfolio. It s a simple fact that if WAM could charge nothing in fees client accounts would experience higher rates of return so WAM does its best to keep fees as low as possible especially for more conservative portfolios where upside potential is by definition limited. I am generally also paid for financial planning engagements, $250 minimum, often $2,500 for a comprehensive plan. When a client becomes an asset management client it is very rare to charge for ongoing financial planning. Existing and older clients who chose to initially not do any financial planning with me generally do not get charged for financial planning time. Asset management fees are deducted directly from client accounts through TD Ameritrade. Within a few weeks of fees being pulled from client accounts, clients get an invoice in the mail, or uploaded to a client web portal, showing how much they have paid. With billings statements clients also get a performance report. WAM does not earn commissions for recommending financial products nor does he receive referral fees or any back-end marketing fees from mutual fund companies. My only compensation comes from my clients, this helps to create the greatest incentive possible to have interests aligned directly with clients.

6 Item 6 Performance-Based Fees and Side-By-Side Management WAM does not earn any performance based fees or do any side-by-side (co-mingled) management of assets.

7 Item 7 Types of Clients WAM works with individual clients. WAM s asset minimum for new clients is $500k.

8 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss WAM primarily invests its clients assets in mutual funds (mostly provided by DFA). WAM currently uses a few commission free exchange traded index funds. Each mutual fund specializes in one sector of the global markets. The following are the types of assets focused on by the various funds: Small cap domestic stocks Mid cap domestic stocks Large cap domestic stocks Stocks outside the U.S. in developed markets Emerging markets stocks Global real estate stocks California municipal bonds National municipal bonds Global bonds Domestic bonds Inflation protected bonds Hedged bonds Money market funds and insured cash funds I am continually evaluating and re-evaluating mutual funds for their risk adjusted performance and ability to generate consistent results. Many of the funds used by WAM have track records of over 10 years. Younger client portfolios are often more concentrated in stock mutual funds. Older clients, or those wanting to have a less volatile portfolio, generally also hold a greater percentage of cash, intermediate and long bonds, international bonds and inflation protected bonds. While a younger client may hold a portfolio that is diversified among the types of stock mutual funds, the portfolio may wind up being 100% stocks. Older clients generally have at least a 20% to 30% weighting in bonds and cash, sometimes up to 80% bonds and cash. Retirement accounts are rebalanced periodically, depending on market conditions or cash needs, while taxable accounts may be left alone to grow for periods much longer than one year. A 100% stock portfolio has the chance of declining dramatically in any given 12 month period when global economic events conspire to create world market panic. Something near a 50% decline is possible. A more diversified portfolio containing 30% to 80% bonds and cash is likely to drop much less in a global market panic but can still drop a painful amount. WAM holds the long view not attempting to pull assets out of the market when things are looking less favorable because it s impossible to predict the future. Diversification protects as best it can and has been shown to work well over time.

9 Item 9 Disciplinary Information Neither Erik Wolfers nor WAM have ever been disciplined by any securities oversight agencies or industry organizations. There are also no current or pending actions against Erik Wolfers or WAM. There are no past, current or pending civil or criminal cases against Erik Wolfers or WAM.

10 Item 10 Other Financial Industry Activities and Affiliations 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 ). 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 62,000 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, administered in 10 hours over a two-day period, 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 units of continuing education 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 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.

11 Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading I adhere to the CFP Board s Standards of Professional Conduct. In short this means that the client s interests always come first. The code of conduct also relates to courteous and professional treatment of others coming into contact with me for business purposes. More information can be obtained about the CFP at

12 Item 12 Brokerage Practices For practical business purposes all of WAM s clients have their portfolios held by TD Ameritrade Institutional (TDAI). TDAI offers quality custody and trading services for a very reasonable price. Equities and exchange traded funds are traded for $10 while mutual fund trades cost $24 or $31depending on whether the client agrees to get electronic notification of statements and trade confirmations or physical copies in the mail. Some mutual funds are free to trade although fee free mutual funds held less than 90 days are subject to a $50 short term redemption fee. In order to be able to offer free mutual fund trading for participating funds TDAI gets paid a percentage of assets fee by the mutual fund companies. This fee is often called a 12(b)1 fee but there are other names for similar fees. This fee is often something close to 0.25% annual of assets. This fee will never be seen by the end client but all performance figures are calculated net of these fees as well as those charged directly by the mutual funds companies for their services. Mutual funds generally charge close to between 0.09% and 1.85% annual on assets for their services. Neither Erik Wolfers nor WAM receive any form of compensation from TDAI and neither WAM nor Erik pay TDAI for anything ever. Neither Erik Wolfers nor WAM receive any form of compensation from any mutual fund companies so mutual funds are selected solely on their merits. TDAI makes its best efforts to execute trades at the best prices in accordance with federal regulations.

13 Item 13 Review of Accounts I regularly and continually review accounts. More active accounts, or those held by retired clients needing monthly distributions, are reviewed more often. Most days I look down the list of accounts under my purview to ensure everything is in place. Each client is different with respect to financial planning so it is often the client who notifies me of changes in their lives, or circumstances, which would warrant a comprehensive review. Most financial planning clients are in contact with me at least a few times throughout the year.

14 Item 14 Client Referrals and Other Compensation WAM does not have any referral agreements with any person or entity nor does it receive any compensation from anyone other than clients.

15 Item 15 Custody WAM does not custody client assets.

16 Item 16 Investment Discretion WAM holds investment discretion over all its clients portfolios. At the outset of every client relationship Erik Wolfers and the client sign an agreement stating that WAM will be compensated for investment advice and that all investments put in the client s portfolio are at WAM s discretion. Clients state preferences about what does or does not go into a portfolio but the details seem to be almost always left up to Erik.

17 Item 17 Voting Client Securities WAM provides proxy voting services for some clients.

18 Item 18 Financial Information To be in compliance with State of California regulations WAM holds $12,000 in assets (as cash) at all times. WAM never holds liabilities, anything payable is paid right away.

19 Item 19 Requirements for State-Registered Advisers Please see Items 1 and 4 for a description and background on Erik Wolfers, Principal and sole proprietor of WAM.