Financial Planning Services, Inc. 185 Wind Chime Ct. Ste

Transcription

1 Item 1 Cover Page Form ADV Part 2A Brochure March 7, 2014 Financial Planning Services, Inc. 185 Wind Chime Ct. Ste This Brochure provides information about the qualifications and business practices of Financial Planning Services, Inc. If you have any questions about the contents of this Brochure, please contact us at and/or hollyknick@gmail.com. Currently, our Brochure may be requested free of charge by contacting Holly Nicholson, President at or hollyknick@gmail.com. Our Brochure is also available on our web site also free of charge. 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. Financial Planning Services, Inc. is a registered investment adviser. Registration of an Investment Adviser does not imply any level of skill or training. The oral and written communications of an Adviser provide you with information about which you determine to hire or retain an Adviser. Additional information about Financial Planning Services, Inc. is also is available on the SEC s website at i

2 Item 2 Material Changes The following are the material changes that have been made to our Brochure since our last annual update (February 25, 2013). 1. Material Change 1. Since last update the 2 nd office location in Oak Island, NC is no longer in existence. 2. Material Change 2. Since last update the minimum aggregate account size for new clients has changed from $200,000 to $400,000. ii

3 Item 3 -Table of Contents Item 1 Cover Page... i Item 2 Material Changes... ii Item 3 -Table of Contents... iii Item 4 Advisory Business... 1 Item 5 Fees and Compensation... 1 Item 6 Performance-Based Fees and Side-By-Side Management... 4 Item 7 Types of Clients... 4 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss... 5 Methods of Analysis & Investment Strategies:... 5 Methods may include charting, fundamental analysis, technical analysis and cyclical analysis. The main sources of information include financial publications, research materials, annual reports, prospectus, conference calls, webinars, Morningstar, Web Content and filings with the SEC Investing in securities involves risk of loss that clients should be prepared to bear Item 9 Disciplinary Information... 6 Item 10 Other Financial Industry Activities and Affiliations... 7 Item 11 Code of Ethics, Participation in Client Transactions and Personal Trading... 7 Item 12 Brokerage Practices... 8 Item 13 Review of Accounts... 9 Item 14 Client Referrals and Other Compensation... 9 Item 15 Custody Item 16 Investment Discretion Item 17 Voting Client Securities Item 18 Financial Information Item 19 Requirements for State-Registered Advisers Brochure Supplement(s) iii

4 Item 4 Advisory Business Sample Language Financial Planning Services, Inc. is owned by Holly K. Nicholson and has been providing advisory services since As of 12/31/2013, Financial Planning Services, Inc. managed $95.8 million on a discretionary basis and $0 on a nondiscretionary basis. Financial Planning Services, Inc. provides personalized/confidential financial planning and investment management services to individuals, pension and profit sharing plans, trusts, estates, charitable organizations and small businesses. Advice is provided through consultation with the client and may include: determination of financial objectives, identification of financial problems, cash flow management, tax planning, insurance review, investment management, portfolio development, education funding, retirement planning and estate planning. Item 5 Fees and Compensation The specific manner in which fees are charged by Financial Planning Services, Inc. is established in a client s written agreement with Financial Planning Services, Inc. Financial Planning Services, Inc. is a fee-only firm. Summary Description FINANCIAL PLANNING SERVICES, INC. bases its fees on a percentage of assets under management, hourly charges and fixed fees. In most cases, fees are not negotiable. The following agreements define the typical client relationships and associated fees. 1

5 On-going Investment Management/Advisory Services Fees: Many clients choose to have Financial Planning Services, Inc. manage their assets in order to obtain on-going in-depth advice and life planning. Financial Planning Services, Inc. will generally bill its investment management fees on a quarterly basis in arrears each calendar quarter. Clients shall authorize Financial Planning Services, Inc. to directly debit fees from client accounts. Management fees shall be prorated for each capital contribution and withdrawal made during the applicable calendar quarter (with the exception of de minimis contributions and withdrawals). Accounts initiated or terminated during a calendar quarter will be charged a prorated fee. Upon termination of any account, any earned, unpaid fees will be due and payable. The client has the right to terminate an agreement at any time but the first $2,000 of the annual advisory fee is not refundable due to the time and effort involved in transferring accounts, developing and implementing a portfolio. Financial Planning Services, Inc. may terminate the investment advisory relationship by sending written notification to the client. Financial Planning Services, Inc s fees are exclusive of transaction fees, and other related costs and expenses which shall be incurred by the client. Clients may incur certain charges imposed by custodians, brokers, third party investment and other third parties such as fees charged by managers, custodial fees, trade away fees, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities transactions. Mutual funds and exchange traded funds also charge internal management fees, which are disclosed in a fund s prospectus. Such charges and fees are exclusive of and in addition to Financial Planning Services, Inc. s fee. Financial Planning Services, Inc. shall not receive any portion of these fees, and costs. Item 12 further describes the factors that Financial Planning Services, Inc. considers in selecting or recommending broker-dealers for client transactions and determining the reasonableness of their compensation (e.g., fees). The fee schedule applicable as of this Brochure is as follows: Client Assets Annual Fee (%) for all assets On the first $250, % On the next $250, % On the next $500,000 On the next $ 1 million On the next $ 3 million 0.75% 0.50% 0.40% On all amounts in excess of $ 5 million Negotiable 2

6 Financial Planning Agreement A financial plan is designed to help the client with all aspects of financial planning without ongoing investment management after the financial plan is completed. The financial plan may include, but is not limited to: a net worth statement; a cash flow statement; a review of investment accounts, including reviewing asset allocation and providing repositioning recommendations; strategic tax planning; a review of retirement accounts and plans including recommendations; a review of insurance policies and recommendations for changes, if necessary; one or more retirement scenarios; estate planning review and recommendations; and education planning with funding recommendations. Detailed investment advice and specific recommendations are provided as part of a financial plan. Implementation of the recommendations is at the discretion of the client. The fee for a financial plan is predicated upon the facts known at the start of the engagement. The fee range is $2,500 to $15,000 and is NEGOTIABLE depending on the scope of work. Since financial planning is a discovery process, situations occur wherein the client is unaware of certain financial exposures or predicaments. In the event that the client s situation is substantially different than disclosed at the initial meeting, a revised fee will be provided for mutual agreement. The client must approve the change of scope in advance of the additional work being performed when a fee increase is necessary. After delivery of a financial plan, future face-to-face meetings may be scheduled as necessary for up to one month. Follow-up implementation work is billed separately at the rate of $250 per hour. Portfolio Review & Analysis Fees for portfolio development and analysis are based on fair market value of investment account. Accounts less than $250,000 will be charged a flat fee of $1,250. Accounts valued at $250,000 and over will be charged 50% of the annual 3

7 fee per investment advisory fee schedule above. A portion of this fee may be applied toward the management fee if the client hires applicant to manage the account. Retainer Agreement In some circumstances, a Retainer Agreement is executed in lieu of an Advisory Service Agreement when it is more appropriate to work on a fixedfee basis. The minimum annual fee for a Retainer Agreement is $2,000 and is Not Negotiable. Hourly Planning Engagements FINANCIAL PLANNING SERVICES, INC. provides hourly planning services for clients who need advice on a limited scope of work. The hourly rate for limited scope engagements is $250 with a one hour minimum. Termination of Agreement A Client may terminate any of the aforementioned agreements at any time by notifying FINANCIAL PLANNING SERVICES, INC. in writing and paying the rate for the time spent on the investment advisory engagement prior to notification of termination. If the client made an advance payment, FINANCIAL PLANNING SERVICES, INC. will refund any unearned portion of the advance payment. FINANCIAL PLANNING SERVICES, INC. may terminate any of the aforementioned agreements at any time by notifying the client in writing. If the client made an advance payment, FINANCIAL PLANNING SERVICES, INC. will refund any unearned portion of the advance payment. Item 6 Performance-Based Fees and Side-By-Side Management Financial Planning Services, Inc. does not charge any performance-based fees (fees based on a share of capital gains on or capital appreciation of the assets of a client). Item 7 Types of Clients 4

8 Financial Planning Services Inc. generally provides portfolio management services and financial planning services to individuals, high net worth individuals, small business pension and profit-sharing plans but may advise other entities. Investment Advisory Services: Financial Planning Services, Inc. generally requires a minimum aggregate account value of $400,000/client to open a portfolio in Financial Planning Services, Inc. has the discretion to waive the account minimum. Accounts less than $400,000 may be set up when the client and the advisor anticipate the client will add additional funds to the account within a reasonable time to meet the minimum. Other exceptions will apply to employees of Financial Planning Services, Inc., and their relatives or relatives of existing clients. When an account falls below the minimum the account will either be maintained per the stated fee schedule or under an hourly agreement. Financial Planning and Portfolio Review Services: There is no net- worth requirement for these services. Item 8 Methods of Analysis, Investment Strategies and Risk of Loss Methods of Analysis & Investment Strategies: Methods may include charting, fundamental analysis, technical analysis and cyclical analysis. The main sources of information include financial publications, research materials, annual reports, prospectus, conference calls, webinars, Morningstar, Web Content and filings with the SEC. The primary investment strategy is strategic asset allocation. Both passive and actively managed investments are utilized. Portfolios are individually tailored to a specific client based on the objectives and risk tolerance as stated by the client during consultations. 5

9 Investing in securities involves risk of loss that clients should be prepared to bear. Investors face the following risks: Interest-rate risk: Fluctuations in interest rate risk may cause investment prices to rise or decline. Market risk: Political, economic and social conditions may trigger market events. The price of a security, bond, mutual fund or other investment may drop in reaction to tangible and intangible events and conditions. Inflation risk: Purchasing power may erode when any type of inflation is present. Currency risk: Overseas investments are subject to fluctuations in the value of the dollar against the currency of the investment s originating country, also referred to as exchange rate risk. Reinvestment risk: Future proceeds from reinvestments may have to be reinvested at a lower rate of return this primarily relates to fixed income investments. Business risk: Particular industries or companies within an industry may have more risk than others. Liquidity risk: Some investments cannot be readily converted to cash which may cause concern if you need cash and this is your only source. Financial risk: During periods of financial stress a company may not be able to meet its loan obligations which may result in bankruptcy and/or a declining market value. Item 9 Disciplinary Information Registered investment advisers are required to disclose all material facts regarding any legal or disciplinary events that would be material to your evaluation of financial Planning Services, Inc. or the integrity of it s management. Financial Planning Services Inc. nor its employees have been involved in any legal or disciplinary events related to past of present investment clients. 6

10 Item 10 Other Financial Industry Activities and Affiliations FINANCIAL PLANNING SERVICES, INC. has arrangements that are material to its advisory or its clients with a related person who is a broker-dealer. Client accounts are held at either Charles Schwab or TD Ameritrade. No material conflict of interest with the client is created from this relationship. Item 11 Code of Ethics, Participation in Client Transactions and Personal Trading Financial Planning Services, Inc. has adopted a Code of Ethics for all supervised persons of the firm describing its high standard of business conduct, and fiduciary duty to its clients. The Code of Ethics includes provisions relating to the confidentiality of client information, a prohibition on insider trading, a prohibition of rumor mongering, restrictions on the acceptance of significant gifts and the reporting of certain gifts and business entertainment items, and personal securities trading procedures, among other things. All supervised persons at Financial Planning Services, Inc. must acknowledge the terms of the Code of Ethics annually, or as amended. The firm will provide a copy of the Code of Ethics to any client or prospective client upon request. Participation or Interest in Client Transactions FINANCIAL PLANNING SERVICES, INC. and its employees may buy or sell securities that are also held by clients. Employees may not trade their own securities ahead of client trades. Employees comply with the provisions of the FINANCIAL PLANNING SERVICES, INC. Compliance Manual. Personal Trading The Chief Compliance Officer of FINANCIAL PLANNING SERVICES, INC. is Holly K. Nicholson. She reviews all employee trades each quarter. Her trades are reviewed by herself. The personal trading reviews ensure that the personal trading of employees does not affect the markets, and that clients of the firm receive preferential treatment. Since most employee trades are small mutual fund trades or exchange-traded fund trades, the trades do not affect 7

11 the securities markets. Financial Planning Services, Inc. anticipates that, in appropriate circumstances, consistent with clients investment objectives, it will cause accounts over which Financial Planning Services, Inc. has management authority to effect, and will recommend to investment advisory clients or prospective clients, the purchase or sale of securities in which Financial Planning Services, Inc., its affiliates and/or clients, directly or indirectly, have a position of interest. Financial Planning Services, Inc. s employees and persons associated with Financial Planning Services, Inc. are required to follow Financial Planning Services, Inc. s Code of Ethics. Item 12 Brokerage Practices Selecting Brokerage Firms FINANCIAL PLANNING SERVICES, INC. does not have any affiliation with product sales firms. Specific custodian recommendations are made to Clients based on their need for such services. FINANCIAL PLANNING SERVICES, INC. recommends custodians based on the proven integrity and financial responsibility of the firm and the best execution of orders at reasonable commission rates. FINANCIAL PLANNING SERVICES, INC. recommends discount brokerage firms and trust companies (qualified custodians), such as Scottrade, Fidelity, Charles Schwab and TD Ameritrade. FINANCIAL PLANNING SERVICES, INC. is an advisor with TD Ameritrade and Charles Schwab. FINANCIAL PLANNING SERVICES, INC. DOES NOT receive fees or commissions from any of these arrangements. Best Execution FINANCIAL PLANNING SERVICES, INC. reviews the execution of trades at each custodian each quarter. The review is documented in the FINANCIAL PLANNING SERVICES, INC. Compliance Manual. Trading fees charged by the custodians is also reviewed on a quarterly basis. FINANCIAL PLANNING SERVICES, INC. does not receive any portion of the trading fees. Soft Dollars FINANCIAL PLANNING SERVICES, INC. receives a software maintenance 8

12 credit of about $300 per year from Charles Schwab & Company because some client assets are custodied at Schwab. This credit offsets annual maintenance fees for our portfolio management software. All clients benefit from this credit as it reduces the firm.s overall expenses. The selection of Charles Schwab & Company as a custodian for clients is not affected by this nominal credit. Order Aggregation Most trades are mutual funds or exchange-traded funds where trade aggregation does not garner any client benefit. Item 13 Review of Accounts Periodic Reviews Account reviews are performed monthly by advisor Holly K. Nicholson, President. Account reviews are performed more frequently when market conditions dictate. Review Triggers Other conditions that may trigger a review are changes in the tax laws, new investment information, and changes in a client's own situation. Regular Reports Account reviewers are members of the firm's Investment Committee. They are instructed to consider the client's current security positions and the likelihood that the performance of each security will contribute to the investment objectives of the client. Retainer agreement clients receive periodic communications on at least an annual basis. Investment Management clients receive written quarterly reports. Item 14 Client Referrals and Other Compensation Incoming Referrals 9

13 FINANCIAL PLANNING SERVICES, INC. has been fortunate to receive many client referrals over the years. The referrals came from current clients, estate planning attorneys, accountants, employees, personal friends of employees and other similar sources. The firm does not compensate referring parties for these referrals. Referrals Out FINANCIAL PLANNING SERVICES, INC. does not accept referral fees or any form of remuneration from other professionals when a prospect or client is referred to them. Other Compensation None Item 15 Custody Clients will receive at least quarterly statements from the qualified custodian that holds and maintains client s investment assets. Financial Planning Services, Inc. urges you to carefully review such statements and compare such official custodial records to the account statements that we may provide to you. Our statements may vary from custodial statements based on accounting procedures, reporting dates, or valuation methodologies of certain securities. Financial Planning Services, Inc. does not custody any client assets. Item 16 Investment Discretion Discretionary Authority for Trading FINANCIAL PLANNING SERVICES, INC. accepts discretionary authority to manage securities accounts on behalf of clients. FINANCIAL PLANNING SERVICES, INC. has the authority to determine, without obtaining specific 10

14 client consent, the securities to be bought or sold, and the amount of the securities to be bought or sold. However, FINANCIAL PLANNING SERVICES, INC. consults with the client prior to each trade to obtain concurrence if a blanket trading authorization has not been given. The client approves the custodian to be used and the commission rates paid to the custodian. FINANCIAL PLANNING SERVICES, INC. does not receive any portion of the transaction fees or commissions paid by the client to the custodian on certain trades. Discretionary trading authority facilitates placing trades in your accounts on your behalf so that we may promptly implement the investment policy that you have approved in writing. Limited Power of Attorney A limited power of attorney is a trading authorization for this purpose. You sign a limited power of attorney so that we may execute the trades that you have approved. Item 17 Voting Client Securities Proxy Votes FINANCIAL PLANNING SERVICES, INC. will vote proxies on securities if requested. If not requested, clients are expected to vote their own proxies. When assistance on voting proxies is requested, FINANCIAL PLANNING SERVICES, INC. will provide recommendations to the Client. If a conflict of interest exists; it will be disclosed to the Client. In most cases, FINANCIAL PLANNING SERVICES, INC.s proxy voting policy is to vote with the board of directors. Item 18 Financial Information Registered investment advisers are required in this Item to provide you with certain financial information or disclosures about Financial Planning Services, Inc. s financial condition. Financial Planning Services, Inc. has no financial commitment that impairs its 11

15 ability to meet contractual and fiduciary commitments to clients, and has not been the subject of a bankruptcy proceeding. A balance sheet is not required to be provided because FINANCIAL PLANNING SERVICES, INC. does not serve as a custodian for client funds or securities, and does not require prepayment of fees of more than $500 per client, and six months or more in advance. Item 19 Requirements for State-Registered Advisers Business Continuity Plan General FINANCIAL PLANNING SERVICES, INC. has a Business Continuity Plan in place that provides detailed steps to mitigate and recover from the loss of office space, communications, services or key people. Disasters The Business Continuity Plan covers natural disasters such as snow storms, hurricanes, tornados, and flooding. The Plan covers man-made disasters such as loss of electrical power, loss of water pressure, fire, bomb threat, nuclear emergency, chemical event, biological event, T-1 communications line outage, Internet outage, railway accident and aircraft accident. Electronic files are backed up daily and archived offsite. Alternate Offices Alternate offices are identified to support ongoing operations in the event the main office is unavailable. It is our intention to contact all clients within five days of a disaster that dictates moving our office to an alternate location. Loss of Key Personnel FINANCIAL PLANNING SERVICES, INC. has a Business Continuation Agreement with another financial advisory firm to support FINANCIAL PLANNING SERVICES, INC. in the event of Holly K. Nicholson s serious disability or death. Information Security Program 12

16 Information Security FINANCIAL PLANNING SERVICES, INC. maintains an information security program to reduce the risk that your personal and confidential information may be breached. Privacy Notice FINANCIAL PLANNING SERVICES, INC. is committed to maintaining the confidentiality, integrity and security of the personal information that is entrusted to us. The categories of nonpublic information that we collect from you may include information about your personal finances, information about your health to the extent that it is needed for the financial planning process, information about transactions between you and third parties, and information from consumer reporting agencies, e.g., credit reports. We use this information to help you meet your personal financial goals. With your permission, we disclose limited information to attorneys, accountants, and mortgage lenders with whom you have established a relationship. You may opt out from our sharing information with these nonaffiliated third parties by notifying us at any time by telephone, mail, fax, , or in person. With your permission, we share a limited amount of information about you with your brokerage firm in order to execute securities transactions on your behalf. We maintain a secure office to ensure that your information is not placed at unreasonable risk. We employ a firewall barrier, secure data encryption techniques and authentication procedures in our computer environment. 13

17 We do not provide your personal information to mailing list vendors or solicitors. We require strict confidentiality in our agreements with unaffiliated third parties that require access to your personal information, including financial service companies, consultants, and auditors. Federal and state securities regulators may review our Company records and your personal records as permitted by law. Personally identifiable information about you will be maintained while you are a client, and for the required period thereafter that records are required to be maintained by federal and state securities laws. After that time, information may be destroyed. We will notify you in advance if our privacy policy is expected to change. We are required by law to deliver this Privacy Notice to you annually, in writing. 14

18 Brochure Supplement (Part 2B of Form ADV) Education and Business Standards FINANCIAL PLANNING SERVICES, INC. requires that advisors in its employ have a bachelor's degree and further coursework demonstrating knowledge of financial planning and tax planning. Examples of acceptable coursework include: an MBA, a CFP, a CFA, a ChFC, JD, CTFA, EA or CPA. Additionally, advisors must have work experience that demonstrates their aptitude for financial planning and investment management. Professional Certifications Employees have earned certifications and credentials that are required to be explained in further detail. Certified Financial Planner (CFP): Certified Financial Planners are licensed by the CFP Board to use the CFP mark. CFP certification requirements:. Bachelor.s degree from an accredited college or university.. Completion of the financial planning education requirements set by the CFP Board ( Successful completion of the 10-hour CFP Certification Exam.. Three-year qualifying full-time work experience.. Successfully pass the Candidate Fitness Standards and background check. 15

19 Holly K. Nicholson, Certifications Education & Business Background Holly K. Nicholson. Born: 1955 Education: B.A. (Business/Personnel) 1977 University of Kansas Doctorate - Law 2003 UNC Chapel Hill Professional Designations: CFP, JD NAPFA Registered Financial Advisor Business Background: 1989 present Financial Planning Services, Inc. Raleigh, NC President Carolina Power & Light Co. (now Duke Energy) Human Resources Disciplinary Information: None Other Business Activities: None Additional Compensation: None Supervision: Self Contact Information: hollyknick@gmail.com Arbitration Claims: None Self-Regulatory Organization or Administrative Proceeding: None Bankruptcy Petition: None 16