Machamer Financial, Inc. Form ADV Part 2 Disclosure Brochure

Transcription

1 Form ADV Part 2 Disclosure Brochure Effective: February 18, 2014 This Brochure provides information about the qualifications and business practices of Machamer Financial, Inc. ( MFI ). If you have any questions about the contents of this Brochure, please contact us at (757) MFI is a registered investment Advisor registered with the Commonwealth of Virginia. The information in this Brochure has not been approved or verified by the SEC or by any state securities authority. Registration of an Investment Advisor does not imply any specific level of skill or training. The oral and written communications of an Advisor provide you with information about which you determine to hire or retain an Advisor. Additional information about MFI and its advisory persons are available on the SEC s website at CRD No: Brackenridge Ave Norfolk, VA Phone: (757) Fax: (757)

2 Item 2 - Material Changes Form ADV 2 is divided into two parts, Part 2A and Part 2B. Part 2A of the new Form (the Firm Brochure ) provides information about a variety of topics relating to an Advisor s business practices and conflicts of interest. Part 2B of the new Form (the Brochure Supplement ) requires an Advisor to provide information about certain advisory personnel. MFI believes that communication and transparency are the foundation of its relationship and continually strive to provide you with complete and accurate information at all times. MFI encourages all current and prospective investors to read this Firm Brochure and discuss any questions you may have with us. And of course, we always welcome your feedback. Material Changes MFI does not have any material changes to report since the last annual amendment. Future Changes From time to time, we may amend this Firm Brochure to reflect changes in our business practices, changes in regulations and routine annual updates as required by the securities regulators. This complete Firm Brochure or this summary of Material Changes shall be provided to each Client annually or if a material change is made. At any time, you may view the current Firm Brochure on-line at the SEC s Investment Advisor Public Disclosure website at To review the firm information for MFI, Click Investment Advisor Search in the left navigation menu and enter. Select the option for Firm and enter (our firm s CRD number) in the field labeled Firm Name or CRD# or SEC# and click Start Search. ADV Part 1 will be displayed. This will provide access to Form ADV 1 and 2A. Item 11 of the ADV Part 1 lists legal and disciplinary questions. On the left navigation, Form ADV Part 2A is located near the bottom. You may also request a copy of this Firm Brochure at any time, by contacting us at (757)

3 Item 3 Table of Contents Item 1 Cover Page... 1 Item 2 - Material Changes... 2 Item 3 Table of Contents... 3 Item 4 Advisory Services... 4 Item 5 Fees and Compensation... 6 Item 6 Performance-Based Fees... 8 Item 7 Types of Clients... 8 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss... 9 Item 9 Disciplinary Information Item 10 Other Financial Activities and Affiliations Item 11 Code of Ethics, Participation in Client Transactions and Personal Trading Item 12 Brokerage Practices Item 13 Review of Accounts Item 14 - Client Referrals and Other Compensation Item 15 Custody Item 16 Investment Discretion Item 17 Voting Client Securities Item 18 Financial Information Item 19 Requirements for State-Registered Advisors Form ADV2B Machamer, Brian Privacy Policy

4 Item 4 Advisory Services A. Firm Information ( MFI ) is a registered investment advisor with the Commonwealth of Virginia. MFI is a corporation formed under the laws of the State of Virginia that conducts business in Virginia and other states. MFI is owned and operated by President, Brian Machamer and began business as a registered investment advisor in September This Disclosure Brochure provides information regarding the qualifications, business practices, and the advisory services provided by Machamer. B. Advisory Services Offered Investment Advisory Services MFI provides continuous, active management of Client investment portfolios on a discretionary basis. Investment Advisory Services are customized to each Client s circumstances, but may be implemented with similar investment portfolios to other clients of similar profile. MFI has developed a client service model that includes discovery, implementation and monitoring components. Client Discovery Upon entering into an advisory agreement with MFI will begin a process of Client discovery. MFI seeks to uncover a Client s investment objectives, their tolerance and capacity for risk, as well as other issues. MFI will also collect information concerning the Client s financial status, and assets, among other things. Investment Plan Based on the information provided by the Client, MFI may furnish the Client with an Investment Plan, which summarizes the Client s recommended investment strategies, investment goals and objectives, and risk tolerance level. Manager Selection and Implementation Upon completion of this investment plan, MFI will implement an investment plan for the Client and implement the selected investment strategies. MFI may direct the Client s investment strategy or place Client assets with third-party advisors. These managers, depending on a variety of factors, may invest Client assets in stocks, bonds, options, mutual funds, or any other marketable security as deemed appropriate by the chosen advisor. Investment Monitoring and Maintenance MFI will monitor investment portfolios to ensure that the portfolio meets the Client s goals and objectives as well as appropriate benchmarks. Further, MFI monitors each Client portfolio in order to ensure they are invested in accordance with MFI s firm-wide investment guidance and economic outlook. It is the Client s responsibility to notify MFI promptly of any change to the information provided by the Client, including any change to any investment objectives, risk tolerance, investment time horizon, and any investment policies, guidelines or reasonable restrictions. MFI will honor Client restrictions unless those restrictions impair MFI s ability to manage Client assets. Bullion Account FideliTrade, Inc. MFI may manage precious metals through FideliTrade Inc., a bullion trading company. The Advisor may assist clients in the purchase of Gold and/or Silver bullion coins. Clients may choose to have their coins held by FideliTrade or take delivery personally. Third-party Advisors MFI has entered into agreements with third-party advisors offering managed account programs. Under these agreements, the third-party advisors have agreed to provide various types of money management programs and services to the Clients of MFI. All managed account programs utilized by MFI selects will be licensed as investment advisors by their resident state or with the United States Securities and Exchange Commission. 4

5 MFI will enter into agreements with managed account programs for the provision of client services. MFI clients will enter into a direct contract with the managed account program. After gathering information about a Client's financial situation and investment objectives, MFI may select a third-party advisor depending on the money management services required by the Client. The compensation of both MFI and managed account program is fully disclosed to each Client in the program. MFI maintains the authority to hire and terminate the services of each managed account program employed by MFI. Each program s fees are established and payable in accordance with the Form ADV Part 2 or other equivalent disclosure document of each managed account program selected by MFI. Fees for these programs may or may not be negotiable by MFI. Clients will never pay more than the stated fee amount in their MFI contract. MFI will lower its fee to keep overall Client fees as stipulated by contract. Prior to rendering investment management services, MFI will ascertain, in conjunction with the Client, the Client s financial situation, risk tolerance, and investment objective(s). C. Client Account Management In cases where MFI provides portfolio management services the following will generally apply. Prior to engaging MFI to provide investment advisory services, the Client is required to enter into an investment management agreement with MFI setting forth the terms and conditions of the engagement and the services to be provided. These services will include: Determining Portfolio Asset Allocation MFI will formulate a long-term asset allocation strategy that specifies the percentage of assets to be invested between equity, fixed-income securities and money market funds. Investment Strategy Recommendation MFI will implement its recommended investment plan via a combination of non-correlated investment strategies. Generally, portfolio management is done on a discretionary basis. MFI will use the services of a discount broker-dealer to provide account custodial services and to affect trades. Determining Investment Program In implementing the Client s investment portfolio, MFI may recommend the use of a third-party advisor. This third-party advisor will develop an investment plan consistent with the Client s investment goal and risk tolerance. Ongoing Investment Monitoring MFI provides ongoing oversight of the Client s investment program. All investments are monitored for performance relative to certain benchmarks and MFI expectations. All portfolios are rebalanced as necessary upon MFI review. More or less frequent rebalancing may be required depending on macroeconomic, market or sector factors. As noted above, MFI may utilize the services of third-party advisors. In those cases, each third-party advisor will have specific methodologies, trading processes and operational practices beyond the control of MFI. MFI will monitor these advisors for adherence to the stated strategy and portfolio performance only. D. Wrap Fee Programs MFI does not manage any proprietary wrap fee programs. 5

6 E. Assets Under Management As of December 31, 2013, MFI manages the following assets: Discretionary Assets $10,000,000 Non-discretionary Assets $0 Total $10,000,000 Item 5 Fees and Compensation The following paragraphs detail the fee structure and compensation methodology for services provided by the Advisor. Each Client shall sign an Investment Advisory Agreement that details the responsibilities of MFI and the Client. Furthermore, clients also sign a Strategy Disclosure specific to their investment strategy. A. Fees for Advisory Services Investment Advisory Service Fees MFI s standard fee for investment advisory services (Advisory Fees) vary based on the total household asset value managed by MFI. Typically, Advisory Fees are a fixed percentage of the total household asset value under management. This fee includes all investment recommendations, portfolio implementation and all portfolio reviews, unless the client contract states otherwise. Client Advisory Fees will generally adhere to the following table. Assets Under Management Annual Fee $0 to $100, % $100,001 to $250, % $250,001 to $750, % $750,001 to $2,000, % Over $2,000, % If a Client s quarterly Advisory Fee is less than $25, it will be rounded up to $25. Effectively, MFI has a minimum annual fee of $100. Advisory Fees may be negotiable at the discretion of the Advisor. The Client s Advisory Fees will take into consideration the aggregate assets under management with Advisor. All securities held in accounts managed by Machamer will be independently valued by the designated Custodian. Machamer will not have the authority or responsibility to value portfolio securities. Investment Strategies implemented by Focus Point Solutions Several investment strategies offered by MFI will be traded/implemented by Focus Point Solutions (FPS) who is working under MFI s direction. Such accounts may be custody at TD AmeriTrade, Charles Schwab or Fidelity. MFI s Advisory Fee for those accounts is 2.0% per annum, paid quarterly in advance. The FPS accounts will not be aggregated with any other accounts managed by MFI. Bullion Account FideliTrade, Inc. MFI s Advisory Fee for managing assets custody by FideliTrade Inc. is 1.0% per annum, paid quarterly in advance. 6

7 B. Advisory Fee Billing Advisory Fees Advisory Fees are a fixed percentage of assets under management, based upon the account value on the last day of the prior quarter. Advisory Fees for investment management services vary depending on the total household account value. Clients are invoiced quarterly in advance for advisory services. For accounts opened during the quarter, Advisory Fees will be prorated to cover only that period which the account was managed by MFI. Advisory Fees will be automatically deducted from the client s account by the Custodian. MFI shall send a quarterly invoice to the Custodian indicating the amount of the fees to be deducted from the Client Account. The amount due is calculated by applying the annual rate in the table above to the total assets under management with MFI at the end of each quarter. Each billing will be for a single quarter, paid in advance of the quarter. Clients will receive independent statements from the Custodian no less frequently than quarterly. In addition, the Advisor sends quarterly billing invoices to Clients. It is the responsibility of the client to verify the accuracy of these fees as listed on the Custodian s brokerage statement as the Custodian does not assume this responsibility. Third-Party Advisor Accounts When Client assets are managed by a third-party advisor, the Client may not pay a fee directly to MFI for those assets managed by the third-party advisor. The third-party advisor will generally re-allocate a portion of their fee to MFI. Clients will not pay higher fees than those of other Clients. See Item 14 Client referrals Other Compensation below for more information. Currently, the Advisor utilizes ITS Asset Management ( ITS ). ITS bills Clients 2.0% per annum paid quarterly in advance. ITS then re-allocates a portion of their fee to MFI. The payment to the Advisor varies depending on the size of the account, but in no case does it exceed 1.0% of assets under management per annum. C. Other Fees and Expenses Clients may incur certain fees or charges imposed by third parties, other than MFI, in connection with investment made on behalf of the Client s account[s]. The Client is responsible for all custodial and securities execution fees charged by the Custodian and executing broker-dealer. The investment advisory fee charged by MFI is separate and distinct from these Custodian and execution fees. In addition, all fees paid to MFI for Investment Advisory Services are separate and distinct from the expenses charged by mutual funds and exchange-traded funds to their shareholders. These fees and expenses are described in each fund s prospectus. These fees and expenses will generally be used to pay management fees for the funds, other fund expenses, account administration (e.g., custody, brokerage and account reporting), and a possible distribution fee. A Client may be able to invest in certain investments, without the services of MFI, but would not receive access to Advisor and Institutional shares classes. The Client also would not receive the services provided by MFI which are designed, among other things, to assist the Client in determining which products or services are most appropriate to each Client s financial condition and objectives. Accordingly, the Client should review both the fees charged by the fund(s) and the fees charged by MFI to fully understand the total fees to be paid. D. Advance Payment of Fees and Termination Investment Management Services As noted, above, MFI is compensated for its services in advance of each quarter for investment management services to be provided. Clients may request to terminate their Investment Management Agreement with MFI, in whole or in part, by providing advance written or oral notice, effective 10 days after receipt of notification. The Client shall be responsible for investment advisory fees up to and including the effective date of termination. MFI will refund any unearned, prepaid fees, based on the number of days remaining in the quarter from the day following the effective date of termination to the end of the quarter. The Client s Investment Management Agreement with MFI is non-transferable without the Client s written approval. 7

8 Termination Clients may request to terminate their Investment Advisory Agreement with MFI, in whole or in part, by providing advance written notice to MFI. The Client shall be responsible for investment advisory fees up to and including the effective date of termination. MFI will refund any unearned, prepaid fees, if any. The Client s Investment Management Agreement with MFI is non-transferable without Client s written approval. Clients may terminate the Investment Management Agreement without penalty (full refund or no fees due) within 5 business days of signing the Agreement if the MFI Form ADV Part 2 was not delivered at least 48 hours prior to client s execution of the Agreement. Unaffiliated Money Management In the event that a Client should wish to terminate their relationship with a managed accounts program or unaffiliated investment advisor, the terms for termination will be set forth in the respective agreements between the Client and those third parties. Machamer will assist the Client with the termination and transition as appropriate. E. Compensation for Sales of Securities MFI does not receive commissions or any compensation for transactions in any Client account. As a fee-only advisor, MFI is paid only on the advice and investment management provided to Clients based on the assets under management in the Client s account(s). Item 6 Performance-Based Fees Performance-based Fees MFI does not charge performance-based fees for its investment advisory services. The fees charged by MFI are as described in Item 5 Fees and Compensation above and are not based upon the capital appreciation of the funds or securities held by any Client. Side-by-side Management MFI does not manage any proprietary investment funds or limited partnerships (for example, a mutual fund or a hedge fund) and has no financial incentive to recommend any particular investment options for its Clients. Item 7 Types of Clients MFI may provide services to a variety of client types. Clients may include: Individuals, Personal Trusts and Estates Private investors, investing personal assets Charitable Organizations Non-profit organizations that manage a pool of assets, and distribute fund according to a mandate or mission. The relative percentage of each type of Client currently represents in available on MFI s Form ADV Part 1. The actual mix of types of Clients changes over time based upon market conditions, business plans and other factors. MFI does not specialize in, or actively seek, any given client type. MFI is committed to providing services to qualified investors, regardless of legal or corporate status. MFI generally requires a minimum fee of $100 per annum, or $25 per quarter. MFI provides customized services to meet the unique needs of each Client. Additional details are contained in Item 4 Advisory Services. 8

9 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss A. Methods of Analysis MFI subscribes to a variety of subscription-based investment news and information services. MFI draws all necessary information for developing its investment models and strategies from these services. The services are: Economic Analysis Stock Market Analysis Precious Metal Analysis Trend Analysis Trading Strategies Third-party Advisor Manager Due Diligence MFI may invest its Clients assets with independent third-party advisors that pursue investment approaches that are diversified among multiple strategies, asset classes, regions, industry sectors and securities. In selecting a third-party advisors and allocating assets to them, MFI considers both quantitative and qualitative factors including: Relative performance during various time periods and market cycles Industry reputation Experience and training of staff investment professionals The clarity of, and adherence to, a viable investment philosophy Risk management process Portfolio management capabilities Fee structure Any other factor deemed appropriate by MFI MFI may use various databases of information in order to facilitate the discovery process on each investment manager utilized by MFI. B. Investment Strategies MFI structures portfolios using the various methodologies described above. Using a proprietary methodology, MFI believes that Clients will benefit from having a portfolio of holdings invested in a variety of strategies. To the extent that these strategies are non-correlated, the portfolio will experience investment returns with mitigated risk. MFI manages three proprietary strategies. MFI is responsible for all investment decisions, research and trade coordination. These strategies are: Asset Protection Investment Strategy Multi-Asset, Long-Term Trend Analysis strategy Gold and Precious Metals strategy In addition, MFI recommends other strategies managed by third-party advisors. MFI is not involved in the management of these firms or their respective strategies. MFI s role is limited to firm due diligence and investment monitoring. ITS Asset Management (ITS) o Premiere Asset Analyzer o Asset Analyzer II 9

10 The Advisor utilizes economic and business indicators as investment selection criteria. These criteria are generally ratios and trends that may indicate the overall strength and financial viability of the entity being analyzed. Assets are deemed suitable if they meet certain criteria to indicate that they are a strong investment with a value discounted by the market. While this type of analysis helps the Advisor in evaluating a potential investment, it does not guarantee that the investment will increase in value. Assets meeting the investment criteria utilized in the fundamental analysis may lose value and may have negative investment performance. The Advisor monitors these economic indicators to determine if adjustments to strategic allocations are appropriate. More details on the Advisor s review process are included in Item 13. In addition, the Advisor reviews and assists in selecting third-party advisors. While the Advisor does due diligence on each third-party advisor to ensure the third-party advisor meets the standards of MFI, it does not guarantee that the Advisor will earn a positive investment return for the Client. C. Risk of Loss General Investment Risks Investing in securities involves certain investment risks. Securities may fluctuate in value or lose value. Clients should be prepared to bear the potential risk of loss. MFI will assist Clients in determining an appropriate strategy based on their tolerance for risk and other factors noted above. However, there is no guarantee that a Client will meet their investment goals. Each Client engagement will entail a review of the Client's investment goals, financial situation, time horizon, tolerance for risk and other factors to develop an appropriate strategy for managing a Client's account. Client participation in this process, including full and accurate disclosure of requested information, is essential for the analysis of a Client's account. The Advisor shall rely on the financial and other information provided by the Client or their designees without the duty or obligation to validate the accuracy and completeness of the provided information. It is the responsibility of the Client to inform the Advisor of any changes in financial condition, goals or other factors that may affect this analysis. The risks associated with a particular strategy are provided to each Client in advance of investing Client accounts. The Advisor will work with each Client to determine their tolerance for risk as part of the portfolio construction process. Machamer may use margin in Client accounts to manage the timing of purchases and sales, as appropriate. Machamer may employ options strategies to hedge or gain additional exposure to a particular asset class or sector. Machamer s investment strategy encompasses active trading in concentrated portfolios. Following are some of the risks associated with certain transactions: Options Contracts Investments in options contracts have the risk of losing value in a relatively short period of time. Option contracts are leveraged instruments that allow the holder of a single contract to control many shares of an underlying stock. This leverage can compound gains or losses. Investing in Securities with Inverse Component The Advisor may invest in securities that use short sales. A short sale involves the sale of a security that the Client does not own in the hope of purchasing the same security at a later date at a lower price. To make delivery to the buyer, the Client must borrow the security and is obligated to return the security to the lender, which is accomplished by a later purchase of the security. The Client realizes a profit or a loss as a result of a short sale if the price of the security decreases or increases respectively between the date of the short sale and the date on which the Client covers its short position, i.e., purchases the security to replace the borrowed security. A short sale involves the theoretically unlimited risk of an increase in the market price of the security that would result in a theoretically unlimited loss. Investing in Precious Metals The Advisor may invest directly in silver and gold bullion. These types of assets may lose value and may be volatile at times. The Advisor explains the risks to the Client prior to investment and ensure s the assets fit the Clients objectives and risk tolerance. 10

11 Item 9 Disciplinary Information There are no legal, regulatory or disciplinary events involving MFI or any of its employees. MFI and its advisory personnel value the trust you place in us. As we advise all Clients, we encourage you to perform the requisite due diligence on any advisor or service provider in which you partner. Background information is available on the Investment Advisor Public Disclosure website at To review the firm information for MFI, click Investment Advisor Search in the left navigation menu, then selecting Firm and enter (our firm s CRD number) in the field labeled Firm Name or CRD# or SEC#. This will provide access to Form ADV Parts 1 and 2. Item 11 of the ADV Part 1 lists legal and disciplinary disclosure questions. Item 10 Other Financial Activities and Affiliations MFI may refer Clients to an unaffiliated third-party investment advisor for investment management services. When referring a Client to the third-party investment advisor, MFI serves as your relationship manager and liaison between the Client and the third-party manager. MFI enters into a contractual agreement as a solicitor with the third-party investment manager and the Client will also enter into a separate agreement directly with the third-party investment manager. Brian Machamer, President of MFI, may refer Clients to ITS Asset Management ( ITS ), an independent investment advisor that is not affiliated with MFI beyond this Solicitor-to- Advisor relationship. Mr. Machamer provides the Client with a disclosure statement detailing the services provided in support of the Client s ITS relationship and compensation received by ITS for the referral and ongoing support of the Client relationship. For its services, MFI receives a quarterly asset-based fee that does not exceed 1% of assets under management per annum. Clients are not charged extra fees by MFI or the third-party investment advisor as a result of the referral fee paid to MFI. Additional information is included in Item 14.A. below. MFI may have arrangements with unrelated third party service providers (including but not limited to other registered investment advisors such as Focus Point Solutions, Inc. (FPS) to service client accounts, including, but are not limited to the following: research, due diligence, reporting, portfolio analysis, and back office administration. FPS generally does not have any direct contact with our clients. FPS provides services directly to us and we are solely responsible for Client accounts. Upon entering into an agreement for advisory services with us, Clients authorize MFI to use these unrelated third party service providers to service their account, including billing and the deduction of fees from Client accounts. Clients agree to allow us to share non-public, personal information with these unrelated third party service providers for the purpose of administering and managing Client s account. We require unrelated third party service providers to execute a confidentiality agreement and not share Client information with any unauthorized person or entity. The use of unrelated third party service providers will not cause Client to incur any additional fees. We pay unrelated third party service providers for services out of the total advisory fee charged to Client. MFI s fee schedule is disclosed under Item 5 above. 11

12 Item 11 Code of Ethics, Participation in Client Transactions and Personal Trading A. Code of Ethics MFI has implemented a Code of Ethics that defines our fiduciary commitment to each Client. This Code of Ethics applies to all persons associated with MFI. The Code of Ethics was developed to provide general ethical guidelines and specific instructions regarding our duties to you, our Client. MFI and its personnel owe a duty of loyalty, fairness and good faith towards each Client. It is the obligation of MFI associates to adhere not only to the specific provisions of the Code but to the general principles that guide the Code. The Code of Ethics covers a range of topics that address employee ethics and conflicts of interest. MFI has written its Code of Ethics to meet and exceed regulatory standards. To request a copy of our Code of Ethics, please contact us at (757) B. Personal Trading and Conflicts of Interest MFI allows our employees to purchase or sell the same securities that may be recommended to and purchased on behalf of Clients. Owning the same securities we recommend (purchase or sell) to you presents a potential conflict of interest that, as fiduciaries, we must disclose to you and mitigate through policies and procedures. As noted above, we have adopted, consistent with Section 204A of the Investment Advisers Act of 1940, a Code of Ethics, which addresses insider trading (material non-public information controls) and personal securities reporting procedures. We have also adopted written policies and procedures to detect the misuse of material, non-public information. At no time, will MFI or any associated person of MFI, transact in any security to the detriment of any Client. Item 12 Brokerage Practices A. Recommendation of Custodian[s] MFI does not have discretionary authority to select the broker-dealer/custodian for custodial and execution services. The Client will select the broker-dealer or custodian (herein the "Custodian") to safeguard Client assets and authorize MFI to direct trades to this Custodian as agreed in the Investment Advisory Agreement. Further, MFI does not have the discretionary authority to negotiate commissions on behalf of our Clients on a trade-bytrade basis. Where MFI does not exercise discretion over the selection of the Custodian, it may recommend the custodian[s] to Clients for execution and/or custodial services. Clients are not obligated to use the recommended Custodian and will not incur any extra fee or cost associated with using a broker not recommended by MFI. MFI may recommend a Custodian based on criteria such as, but not limited to, reasonableness of commissions charged to the Client, services made available to the Client, and location of the Custodian s offices. MFI does not receive research services, other products, or compensation as a result of recommending a particular broker that may result in the Client paying higher commissions than those obtainable through other brokers. MFI typically recommends to Clients that they established their brokerage account[s] at Institutional Services division of TDAmeritrade, Inc. ( TDAmeritrade ) or Pershing, LLC ( Pershing ). TDAmeritrade and Pershing are independent and unaffiliated SEC-registered broker-dealers and FINRA members. TDAmeritrade and Pershing offer services to independent investment Advisors, which include custody of securities, trade execution, clearance and settlement of transactions. MFI receives some benefits from TDAmeritrade and Pershing through its custodial agreement. MFI considers a number of factors in selecting and/or recommending brokers and custodians for its Clients accounts, including, but not limited to, execution capability, experience and financial stability, reputation and the quality of services provided. MFI is not affiliated with, or related to, TDAmeritrade or Pershing. 12

13 1. Soft Dollars - Soft dollars are revenue programs offered by broker-dealers whereby an advisor enters into an agreement to place security trades with the broker in exchange for research and other services. MFI does not participate in soft dollar programs sponsored or offered by any broker-dealer. 2. Brokerage Referrals - MFI does not receive any compensation from TDAmeritrade, Pershing or any other entity in connection with the recommendation for establishing a brokerage account. 3. Directed Brokerage - All Clients are serviced on a directed brokerage basis, where MFI will place trades within the established account[s] at the Custodian designated by the Client. Further all Client accounts are traded within their respective brokerage account[s]. MFI will not engage in any principal transactions (i.e., trade of any security from or to MFI s own account) or cross transactions with other Client accounts (i.e., purchase of a security into one Client account from another Client s account[s]). In selecting the Custodian, MFI will not be obligated to select competitive bids on securities transactions and does not have an obligation to seek the lowest available transaction costs. These costs are determined by the designated Custodian. By directing brokerage the Advisor may be unable to achieve the most favorable execution on Client transactions, and as such this practice may cost Clients additional money. B. Aggregating and Allocating Trades The primary objective in placing orders for the purchase and sale of securities for Client accounts is to obtain the most favorable net results taking into account such factors as 1) price, 2) size of order, 3) difficulty of execution, 4) confidentiality and 5) skill required of the broker. MFI will execute its transactions through an unaffiliated broker-dealer selected by the Client. MFI may aggregate orders in a block trade or trades when securities are purchased or sold through the same broker-dealer for multiple (discretionary) accounts. If a block trade cannot be executed in full at the same price or time, the securities actually purchased or sold by the close of each business day must be allocated in a manner that is consistent with the initial pre-allocation or other written statement. This must be done in a way that does not consistently advantage or disadvantage particular Client accounts. The Advisor may not be able to aggregate trades where Clients have directed brokerage to a specific broker dealer and as such the Advisor may not be able to achieve the most favorable execution on Client transactions. Item 13 Review of Accounts A. Frequency of Reviews Investment Advisory Clients Securities in Client portfolios are monitored on an ongoing basis by Brian Machamer, President of MFI. Client Accounts are monitored on a periodic basis by Mr. Machamer for adherence to investment strategy and Client Objective. Investment management and supervision over the securities contained in the Client s portfolio are performed in an ongoing basis by MFI, as applicable. B. Causes for Reviews In addition to the investment monitoring noted in Item 13.A., each Client account shall be reviewed at least quarterly. Reviews may be conducted more or less frequently at the Client s request. Accounts may be reviewed as a result of major changes in economic conditions, known changes in the Client s financial situation, and/or large deposits or withdrawals in the Client s account. The Client is encouraged to notify MFI if changes occur in his/her personal financial situation that might adversely affect his/her investment plan. Additional reviews may be triggered by actual or potential material market, economic or political events that may impact Client portfolios. 13

14 C. Review Reports Investment Portfolio Reports The Client will receive brokerage statements no less than quarterly from the Trustee or Custodian. These brokerage statements are sent directly from the Custodian to the Client. The Client may also establish electronic access to the Custodian s website so that the Client may view these reports and their account activity. Client brokerage statements will include all positions, transactions and fees relating to the Client s account[s]. The Advisor may provide additional written reports as appropriate. Item 14 - Client Referrals and Other Compensation A. Compensation Received by MFI MFI may enter into referral agreements with third-party advisors under which the third-party advisor pays a fee to MFI for client referrals as permitted by Rule 206(4)-3 of the Investment Advisers Act of 1940, as amended. The third-party advisor, ITS Asset Management, L.P, has agreed to pay MFI a percentage of the revenue generated from the assets of Clients introduced to the third-party advisor by MFI. This fee percentage may be up to 50% of the total fees generated by the Client. Clients referred to third-party advisors will not be charged an amount in addition to the MFI management fee, nor will they be charged a higher management fee than other clients to cover the cost of solicitation of their accounts. B. Client Referrals from Solicitors MFI does not presently pay any solicitors to refer business to MFI. MFI may receive a Client referral from a third-party. No compensation is given for the referral. All referrals are a professional courtesy and in the interest of the Client. Item 15 Custody MFI does not accept or maintain custody of any Client accounts, expect for the authorized deduction of the Advisor s fees from the Client s account(s). All Clients must place their assets in a qualified custodian. Clients are required to select their own custodian to retain their funds and securities and direct MFI to utilize that custodian for the Client s security transactions. For more information custodians and brokerage practices, see Item 12 - Brokerage Practices. Prior to permitting direct debit of fees each Client provides written authorization permitting fees be made direct from the custodian. MFI will send the Client and the custodian a statement showing the amount of the fee and the way in which it was calculated. The custodian sends every Client an account statement not less than quarterly showing all account activity, including the amounts disbursed from the account to MFI. Clients should carefully review the fee information provided by the Advisor to the account statements provided by the Custodian. Item 16 Investment Discretion Discretionary Portfolio Management MFI generally has discretion over the selection and amount of securities to be bought or sold in Client accounts without obtaining prior consent or approval from the Client. This authority is granted to the Advisor by the Client through the terms of the Investment Advisory Agreement. However, these purchases or sales may be subject to specified investment objectives, guidelines, or limitations previously set forth by the Client and agreed to by MFI. Discretionary authority will only be authorized upon full disclosure to the Client. The granting of such authority will be evidenced by the Client's execution of an Investment Management Agreement containing all applicable limitations to such authority. All discretionary trades made by MFI will be in accordance with each Client's investment objectives and goals. 14

15 Item 17 Voting Client Securities MFI does not accept proxy-voting responsibility for any Client. MFI and/or the Client shall correspondingly instruct the Custodian of the assets to forward to the client copies of all proxies and shareholder communications relating to the client s investment assets. MFI does not generally assist Clients with voting proxies. Item 18 Financial Information Neither MFI, nor its management, have any adverse financial situations that would reasonably impair the ability of MFI to meet all obligations to its Clients. Neither MFI, nor any of its advisory persons, has been subject to a bankruptcy or financial compromise. MFI is not required to deliver a balance sheet along with this Disclosure Brochure as the Advisor does not collect fees of $500 for services to be performed six months or more in advance. MFI charges fees for only the immediate quarter for which it will provide services. Please see Item 5 - Fees and Compensation for additional information. Item 19 Requirements for State-Registered Advisors A. Educational Background and Business Experience of Principal Officer The President of MFI is Brian S. Machamer. Information regarding the formal education and background of Mr. Machamer is included in Item 2 of Part 2B below. B. Other Business Activities of Principal Officer Mr. Machamer is dedicated to the investment advisory activities of MFI s Clients. Mr. Machamer does not have any other business activities. C. Performance Fee Calculations MFI does not charge performance-based fees for its investment advisory services. The fees charged by MFI are as described in Item 5 Fees and Compensation above and are not based upon the capital appreciation of the funds or securities held by any Client. D. Disciplinary Information There are no legal, civil or disciplinary events to disclose regarding MFI or Mr. Machamer. Neither MFI nor Mr. Machamer has ever been involved in any regulatory, civil or criminal action. There have been no client complaints, lawsuits, arbitration claims or administrative proceedings against MFI or Mr. Machamer. Securities laws require an advisor to disclose any instances where the advisor or its advisory persons have been found liable in a legal, regulatory, civil or arbitration matter that alleges violation of securities and other statutes; fraud; false statements or omissions; theft, embezzlement or wrongful taking of property; bribery, forgery, counterfeiting, or extortion; and/or dishonest, unfair or unethical practices. As previously noted, there are no legal, civil or disciplinary events to disclose regarding MFI or Mr. Machamer. E. Material Relationships with Issuers of Securities Neither MFI nor Mr. Machamer has any relationships or arrangements with issuers of securities. 15

16 Form ADV Part 2B Individual Disclosure Brochure for Brian S. Machamer President and Chief Compliance Officer Effective: February 18, 2014 This Brochure Supplement provides information about the background and qualifications of Brian S. Machamer (CRD# ) in addition to the information contained in the ( MFI ) Brochure. If you have not received a copy of this Brochure or if you have any questions about the contents of the MFI Brochure or this Brochure Supplement, please contact us at (757) Additional information about Brian S. Machamer is available on the SEC s Investment Adviser Public Disclosure website at CRD No: Brackenridge Ave Norfolk, VA Phone: (757) Fax: (757)

17 Item 2 Educational Background and Business Experience The President of Machamer is Brian S. Machamer. Mr. Machamer, born in 1960, is dedicated to advising Clients of Machamer. Mr. Machamer earned a Bachelor of Science from Old Dominion in Mechanical Engineering in In addition, Mr. Machamer earned Masters of Science in Engineering Management in Mr. Machamer earned the following designations: Professional Financial Planner in 1997, Chartered Financial Consultant in 2002, Chartered Advisor in Philanthropy in 2004, and Certified Wealth Strategist in Mr. Machamer also passed the Commodity Futures Series 3 exam in Professional Financial Planner: Candidates for the Professional Financial Planner Certificate must hold a baccalaureate degree or have relevant experience in financial services. Individuals who meet the minimum educational requirement and are interested in entering the financial planning field are invited to apply. The courses in this program cover the areas of expertise that are needed to develop comprehensive, effective financial plans for a variety of individual clients. Those who successfully complete the program are awarded a Professional Financial Planner certificate by Old Dominion University. This is a career enhancing credential that distinguishes those professionals who have received hands-on training in a university-sponsored program. This educational program is registered with the Certified Financial Planner Board of Standards, Inc. The CFP Board is a professional regulator of personal financial planning so that the public values, has access to, and benefits from competent and ethical financial planning. ChFC (Chartered Financial Consultant ): The ChFC designation has been a mark of excellence for almost thirty years and currently requires nine college-level courses, the most of any financial planning credential. Average study time to earn the ChFC exceeds 450 hours. Required courses cover extensive education and application training in financial planning, income taxation, investments, and estate and retirement planning. Additional electives are chosen from such topics as macroeconomics, financial decisions for retirement, and executive compensation. ChFC designees must meet experience requirements and adhere to continuing education and ethical standards. The credential is awarded by The American College, a non-profit educator with an 85-year heritage and the highest level of academic accreditation. CAP (Chartered Advisor in Philanthropy ): The advisor earning the CAP designation has taken three graduate school courses in philanthropy including planning for impact in the context of family wealth, charitable strategies, and gift planning in a nonprofit context. The courses are offered through the Irwin Graduate School of The American College, a non-profit educator with an 85-year heritage and the highest level of academic accreditation. CAP advisors must meet experience, ethics, and continuing education requirements to use the credential. CWS (Certified Wealth Strategist ): The Certified Wealth Strategist designation was designed to help professionals become wealth strategists by familiarizing them with a finite number of wealth management topics critical to the consumer, affluent and wealthy. The program combines practice management, client interaction skills and academic knowledge so advisors are able to provide strategic direction over a broad base of issues important to these clients and effectively utilize the resources of their firm and alliances to help create wealth management plans and solve gaps in the client's financial situation on an ongoing basis. Requirements: Must have 3+ years experience in the financial services, legal, tax preparation, or insurance industry, and Must have significant experience in a client-facing role, OR a 4-year degree from an accredited institution Continuing Education requirements: 33 hours every two years, with 3 hours focused on ethics; and 17

18 CWS is applicable for over 50 CE hours (varies every 2 years) with CFP, PACE, CIMA, CTFA, FINRA and others Additional information regarding Mr. Machamer s employment history is included below. Employment History: President, 2004 to Present Independent Insurance Agent 1997 to 2010 Registered Representative and Investment Advisor Representative, First Allied Securities 2008 to 2009 Registered Representative and Investment Advisor Representative, Next Financial Group 2004 to 2008 Item 3 Disciplinary Information MFI and its advisory personnel value the trust you place in us. As we advise all clients, we encourage you to perform the requisite due diligence on anyone providing services to you. Except as noted above, there are no legal or disciplinary events to disclose regarding Brian S. Machamer. However, we do encourage you to independently view the background of Brian S. Machamer on the Investment Adviser Public Disclosure website at Select the option for Investment Adviser Search and enter in the field labeled Individual Name or CRD# Item 4 Other Business Activities Mr. Machamer dedicates the majority of his business time serving the needs of the advisory Clients of MFI. Mr. Machamer serves all investment advisory and administrative functions within MFI. Item 5 Additional Compensation Mr. Machamer is compensated solely by MFI for the services provided to Clients. Mr. Machamer does not receive any additional compensation or economic benefit from any unaffiliated person, company or organization in connection with the services provided to Clients of MFI. Item 6 Supervision Mr. Machamer serves as the sole investment advisory representative of MFI, as well as performing all operational and administrative functions. Mr. Machamer s full contact information is included on the cover of this Brochure Supplement. MFI has implemented a Code of Ethics and internal compliance that guide each employee in meeting their fiduciary obligations to Clients of MFI. Further, MFI is subject to regulatory oversight by various agencies. These agencies require registration by MFI and its employees. As a registered entity, MFI is subject to examinations by regulators, which may announced or unannounced. MFI is required to periodically update the information provided to these agencies and to provide various reports regarding firm business and assets. 18

19 Privacy Policy Effective: January 1, 2014 Our Commitment to You MFI is committed to safeguarding the use of your personal information that we have as your Investment Advisor. MFI (referred to as "we", "our" and "us" throughout this notice) protects the security and confidentiality of the personal information we have and make efforts to ensure that such information is used for proper business purposes in connection with the management or servicing of your account. Our relationship with you is our most important asset. We understand that you have entrusted us with your private information, and we do everything we can to maintain that trust. We do not sell your non-public personal information to anyone. Nor does MFI provide such information to others except for discrete and proper business purposes in connection with the servicing and management of your account as discussed below. Details of our approach to privacy and how your personal non-public information is collected and used are set forth in this privacy policy. The Information We Collect About You You typically provide personal information when you complete the paperwork required to become our Client. This information may include your: Name and address address Phone number Social security or taxpayer identification number Assets Income Account balance Investment activity Accounts at other institutions In addition, we may collect non-public information about you from the following sources: Information we receive on Brokerage Agreements, Managed Account Agreements and other Subscription and Account Opening Documents; Information we receive in the course of establishing a customer relationship including, but not limited to, applications, forms, and questionnaires; Information about your transactions with us or others Information About You That MFI Shares MFI works to provide products and services that benefit our customers. We may share non-public personal information with non-affiliated third parties (such as brokers and custodians) as necessary for us to provide agreed services and products to you consistent with applicable law. We may also disclose non-public personal information to other financial institutions with whom we have joint business arrangements for proper business purposes in connection with the management or servicing of your account. In addition, your non-public personal information may also be disclosed to you, persons we believe to be your authorized agent or representative, regulators in order to satisfy MFI s regulatory obligations, and is otherwise required or permitted by law. Lastly, we may disclose your non-public personal information to companies we hire to help administrate our business. Companies we hire to provide services of this kind are not allowed to use your personal information for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of your personal information to the performance of the specific service we have requested. To repeat, we do not sell your non-public personal information to anyone. 19

20 Information About Former Clients MFI does not disclose, and does not intend to disclose, non-public personal information to non-affiliated third parties with respect to persons who are no longer our clients. Confidentiality and Security Our employees are advised about the firm's need to respect the confidentiality of our customers' non-public personal information. Additionally, we maintain physical, procedural and electronic safeguards in an effort to protect the information from access by unauthorized parties. We'll Keep You Informed We will send you notice of our privacy policy annually for as long as you maintain an ongoing relationship with us. Periodically we may revise our privacy policy, and will provide you with a revised policy if the changes materially alter the previous privacy policy. We will not, however, revise our privacy policy to permit the sharing of non-public personal information other than as described in this notice unless we first notify you and provide you with an opportunity to prevent the information sharing. You may obtain a copy of our current privacy policy by contacting us at (757)