82731.00002\41812753.4
CITY OF SIMI VALLEY
MEMORANDUM
December
4, 2023
TO: City Co
uncil
Board of Directors, Ventura County Waterworks District No. 8 FROM: Off
ice of the City Manager
SUBJECT
: ADOPTION OF A RESOLUTION AWARDING A CONTRACT FOR
PROFESSIONAL CONSULTANT INVESTMENT SERVICES –
DEFERRED COMPENSATION PLANS TO BENEFIT FINANCIAL
SERVICES GROUP, LLC AND AUTHORIZE THE CITY MANA GER TO
APPROVE AND EXECUTE ANY SUBSEQUENT CONTRACT
EXTENSIONS
STAFF RECOMMENDATION
Staff recommends the City Counc il adopt Resolution No. 2023- 47 (page 6) awarding a five-ye ar pr ofessional services contract with one two-year renewal option to Benefit Financial Services Group for an amount not-to-exceed $30,000 per year for professional consultant investment services in conjunction with the City’s deferred compensation plans and authorize the City Manager to approve and exec ute any contract extensions.
BACKGROUND AND OVERVIEW
The City provides participant-directed deferred compensation plans which allow employees to defer compensation into a personalized retirem ent plan. Currently, the City maintains two plans which hold approximately $99.8 million in assets as of November 27, 2023:
1. A section 401(k) plan, which provides for employee deferrals and employer contributions. The current recordkeeper is The Vanguard Group, Inc. The following employee groups are eligible to participate in the plan: sworn personnel, sworn management, and unrepresented management. The 401(k) plan has about 456 employee accounts/participants with approximately $64.9 million in assets.
2. A section 457(b) eligible deferred compensation plan, which provides for employee deferrals and employer contributions. The current recordkeeper is Empower Financial Services. All employees are eligible to participate in the 457(b) plan. The 457(b) has 642 participants with approximately $34.9 million in assets.
AGENDA ITEM NO.
Consent (3)
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2 As a plan sponsor, the City has certain fiduciary duties and responsibilities under Internal Revenue Code section 401(a) and State law (California State Constitution, Article XVI Section 17) . These duties and responsibilities focus on ensuring the operation and investment of the public retirement plan is for the exclusive purpose of providing benefits to participants and beneficiaries. Specifically, fiduciary responsibilities include:
1) investing the assets of the plan; 2) administering the plan; and 3) engaging in a prudent process for making all decisions related to the operation of the plan, including decisions related to the plan’s investments and related services.
S
taff researched how other public entities manage their deferred compensation plans and engaged an outside legal counsel, who has extensive experience in the financial investment industry. It was determined that the services of a fiduciary investment consultant would provide a dedicated resource to improve the management of the City’s two plans and mitigate the legal liability of the City’s fiduciary responsibilities. Additionally, an investment consultant would also improve services and lower overall costs to participants. To facilitate this service, the City Manager’s Office sent a Request for Qualifications (RFQ) for Deferred Compensation Investment Services in May 2023 to seven fiduciary consultant firms. Benefit Financial Services Group presented the lowest cost, was the most responsive to the RFQ, and has worked with other local jurisdictions in the State.
Staff is recommending that the City Council adopt a resolution approving a five - year professional services contract (January 1, 2023 through December 31, 2028) with one two-year renewal option with Benefit Financial Services Group, LLC for a not-to-exceed amount of $30,000 per year.
FINDINGS AND ALTERNATIVES
Du
e to the increasing complexity of the investment process and associated responsibilities, staff sought to learn more about trends affecting the employer-sponsored retirement plans and laws governing fiduciary requirements for the operation of the City’s sponsored plans. S taff researched how other public entities manage their deferred compensation plans, commonly referred to as recordkeepers in the financial investment industry, and engaged with outside legal counsel who is well experienced and educated in this area. The results of this research indicated that many public entities contract with an investment advisor to negotiate contract terms, plan fees, investments, and RFPs with recordkeepers to reduce plan fees, and enhance investment funds and participant services. Additionally, many public entities contract with an investment advisor/consultant to provide 3(21) co-fiduciary services or 3(38) discretionary fiduciary services.
N
amed for the sections of the Employee Retirement Income Security Act of 1974 (ERISA) which define them, 3(21) and 3(38) fiduciaries services include either individuals, or entities, that provide investment expertise to plan sponsors. Under the 3(21) structure, the City Council, specified City staff, and the consultant serve as co -fiduciaries, sharing liability for plan operation and investments. Under the 3(38) model, the consultant acts as the sole fiduciary, removing liability from the City Council and City staff for selecting the investments of the plan. In effort to improve the management of the City’s two plans 82731.00002\41812753.4
3 and mitigate the legal liability of the City’s fiduciary responsibilities, s taff sought City Manager approval to move forward in the process of selecting a deferred compensation investment service, who would provide 3(38) discretionary fiduciary services.
A R
equest for Qualifications (RFQ) for Deferred Compensation Investment Services was released on May 17, 2023. The RFQ was sent to several fiduciary consultant firms, with responses due by 5:00 PM on June 30, 2023. The City received six responses. The firms that responded to the RFQ, listed in alphabetical order, were:
1. B
enefit Financial Services Group ($30,000 annually)
2. Fiduciary Experts ($30,000 annually)
3. Hyas Group ($34,000 - $42,000 annually for 3(21) services; 4-5 basis points annually for 3(38) services)
4. Pensionmark ($55,000 - $70,000 or 5-7 basis points)
5. SageView ($41,000 - 47,000 annually)
6. Shuster Advisory Group ($47,000 - $52,000 annually)
A
ll proposals were evaluated for qualifications by Best Best & Krieger, an outside legal firm, who recommended four of the six deferred compensation consultants for the City’s Selection Committee to evaluate proposals. Through this evaluation process, the four firms were interviewed and rated by the Selection Committee (comprised of City employees from represented and unrepresented groups). The Selection Committee unanimously recommended the selection of Benefit Financial Services Group (BFSG) based on a combination of factors including client references, experience with public entities, the comprehensiveness of the BFSG’s proposal, cost, interview, its understanding of similarly sized public entities, the ability to provide educational support to employees, the Deferred Compensation Committee, and the City Council, investment portfolio diversification, and oversight of the plan recordkeepers (Empower and Vanguard).
B
FSG is a registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC), specializing in fiduciary support and investment services exclusively to retirement plans, with a niche specialization with public entities. As of December 31, 2022, BFSG, a local Irvine, California firm, managed over $976 million in retirement plan assets on a discretionary basis (over $13 billion in assets under consultation), and is dedicated solely to retirement plan fiduciary services without selling product or having any affiliation to a broker-dealer. To that end, BFSG does not sell financial products or earn commissions.
B
FSG will serve as an investment fiduciary as defined under section 3(38) of the ERISA and will provide the City and its plan participants the following services:
• D
iscretionary Plan Investment Services: assist in editing, reviewing, and updating an investment policy statement as warranted.
• Participant Planning: provide basic or comprehensive financial planning and consulting services to the plan participants (City employees). 4 • F
iduciary Processes: provide information on fiduciary best practices including the establishment and formalization of a Retirement Plan Committee to oversee the plan and implementation of various policies and procedures to reduce or eliminate actual or perceived conflicts of interest.
• Annual Report: deliver an Annual Report outlining Committee actions taken during the prior year.
• Cost Benchmarking: provide periodic benchmarking of certain plan costs. • Vendor Search and Selection: assist in conducting a request for proposal for plan administration and recordkeeping services.
• Participant Education: provide plan participants with informational seminars and materials designed to help participants identify appropriate investment strategy.
B
FSG’s fee is a flat annual rate of $30,000 per year and is billed to the plan on a pro-rata basis each quarter . T here is no fiscal impact to the City. The administration and investment fees for the 457(b) and 401(a) plans are paid by the employees that opt to participate in these programs. The plan investment consultant services rendered by BFSG will be paid from these fees and from anticipated cost recovery savings as part of renegotiating fees with the deferred compensation providers (recordkeepers).
Additionally, employees who participate in the plans will see lower overall costs as a result of the elimination of certain administration and/or management fees. Staff is proposing a five-year contract with an option to extend for one additional two-year period with BFSG.
T
he following alternatives are available to the City Council:
1. A
ward a five-year professional services contract (January 1, 2023 through December 31, 2028) with one two- year renewal option to Benefit Financial Services Group, LLC for an amount not -to-exceed $30,000 per year for professional consultant investment services in conjunction with the City’s deferred compensation plans;
2. M
ake no change to the City’s deferred compensation plans;
3. P
rovide staff with other direction.
S
taff recommends Alternative No. 1.
SUGGESTED CITY COUNCIL MOTION
I move to adopt Resolution No. 2023-47 awarding a five-y ear professional services contract with one two-year renewal option to Benefit Financial Ser vices Group for an amount not-to-exceed $30,000 per year for professional consultant investment services in conjunction with the City’s deferred compens ation plans and authorize the City Manager to execute any contrac t extensions.
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82731.00002\41812753.4
5 SUMMARY
T
he City provides participant -directed deferred compensation plans , which allows employees to defer compensation into a personalized retirement plan. Currently, the City maintains two plans. As staff learned about the trends affecting the employer-sponsored plans and the affiliated complexities, it was determined that the services of a fiduciary investment consultant would provide a dedicated resource to improve the management of the two plans and mitigate the legal liability of the City’s fiduciary responsibilities.
Additionally, a n investment consultant would also improve services and lower overall costs to participants. Staff sent an RFQ to several fiduciary consultant firms and BFSG was found to the most responsive and is responsible. Staff recommends approval that the City Council adopt a five- year professional services contract with one two- year renewal options for a not-to-exceed amount of $30,000.
___
_________________________________
Trevor Earle
Risk Manager
INDEX Page
R
esolution No. 2023-47 .................................................................... 6 Contract with BFSG.......................................................................... 8
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6 RESOLUTION NO. 2023-47
A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SIMI VALLEY AUTHORIZING ENTERING INTO AN
CONTRACT WITH BENEFIT FINANCIAL SERVICES
GROUP, LLC FOR DEFERRED COMPENSATION
INVESTMENT SERVICES
W
HEREAS, Government Code section 53060 authorizes the City of Simi Valley (“City”) to contract with persons to furnish service and advice on City financial, economic, accounting, engineering, legal, or administrative matters if such persons are specially trained, experienced, and competent to perform the special services required; and
W
HEREAS, the City is in need of Plan Fiduciary Investment Services (“Services”) for the City’s 457(b) and 401(k) deferred compensation plans; and W
HEREAS, the City sought , and received proposals , for the Services in May 2023; and
W
HEREAS, staff has reviewed the proposals, and recommends awarding the contract for the Services to Benefit Financial Services Group, LLC (“Consultant”); and W
HEREAS, Consultant represents that they are specially trained, experienced, and competent to provide the Services, as provided in the contract, attached as Exhibit A (“Contract”); and
W
HEREAS, City has determined that the Services of outside consultants are necessary for the special services and advice described in the Contract; and W
HEREAS, the Consultant’s fee for services, which are not to exceed $30,000 per year for a five -year period, will be paid by the 457(b) and 401(k) deferred compensation plans (“Plans”).
NO
W, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS:
S
ECTION 1. The Contract with the Consultant for Deferred Compensation Investment Services, attached to the staff report , for an amount not to exceed $ 30,000 per year for a five-year period, is approved.
S
ECTION 2. T he Consultant’s fee in an amount not to exceed $30,000 per year will be paid by the Plans.
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7 SECTION 3. The Mayor is hereby authorized to execute the Contract and related documents and the City Manager is authorized to execute any Contract extensions, or amendments and related documents on behalf of the City.
S
ECTION 4. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk.
PASSED
and ADOPTED this 4th day of December, 2023.
A
ttest:
Lucy Blanco, City Clerk Fred D. Thomas, Mayor of the City of Simi Valley, California
A
pproved as to Form: Approved as to Content:
Algeria R. Ford, City Attorney Brian Paul Gabler, City Manager RES. NO. 2023-47
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2 CONTRACT FOR PROFESSIONAL SERVICES BETWEEN
THE CITY OF SIMI VALLEY AND BENEFIT FINANCIAL
SERVICES GROUP (BFSG, LLC) FOR DEFERRED
COMPENSATION INVESTMENT SERVICES
THIS CONTRACT is made and entered into in the City of Simi Valley on this 4 th day of December 2023, (“Effective Date”) by and between the CITY OF SIMI VALLEY, a municipal corporation, hereinafter referred to as CITY, and Benefit Financial Services Group (BFSG, LLC) , a Registered Investment Advisor, hereinafter referred to as CONSULTANT, each a “Party” and collectively, “Parties”.
RECITALS
WHEREAS, on May 17, 20 23, CITY requested qualifications/proposals for investment services for the City’s 401(k) and 457(b) plans; and
WHEREAS, pursuant to s uch request, CONSULTANT submitted a proposal, which was accepted by CITY for the services.
NOW, THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the Parties hereto agree as follows:
AGREEMENT
1. Recitals. The foregoing recitals are true and correct and are a part of this CONTRACT.
2. Term. The term of this CONTRACT shall be from the Effective Date through December 31, 2028. This Contract may be extended one (1) additional time for a two (2) year period, upon mutual written consent of the Parties. The City Manager shall have the authority to execute any Contract extension.
3. Incorporation: Precedence of Contract Documents
. The documents
listed in this Section 3 are hereby incorporated into this Contract. If there is a conflict between the Contract documents, the document highest in precedence shall control. The precedence shall be (from highest to lowest):
First: This Contract and amendments to the Contract.
Second: BFSG, LLC Retirement Plan Services Agreement (Exhibit A) Third: BFSG, LLC 2023 Disclosures (Exhibit B)
4. Description of Services . The s ervices to be performed by CONSULTANT shall include the following:
• Provide investment services, and support to the City (i.e. City Council and Deferred Compensation Committee) in meeting obligations as plan fiduciaries.
8 82731.00002\41772170.2
3 • Provide investment services to City’s deferred compensation plans under Internal Revenue Code (Code) section 457(b) or 401(k).
• Provide a range of competitive investment choices for plan participants and willingness to agree contractually to serve as an ERISA section 3(38) investment manager (as though ERISA applied) for purposes of selecting and monitoring the investment offered under the plan to participants as well as for any pooled (nonparticipant-directed assets).
• Customize or provide access to investment options (e.g., target date funds or lifestyle funds) specific to the needs of City's employee population.
• Ability to work with City and all recordkeepers to ensure that participants have access to effective investment education materials and help ensure compliance under the rules under ERISA section 404(c) to the extent applicable under Government Code section 53213.5.
• Assi st in reviewing and ensuring the City and participants receive any and all information required under ERISA sections 404(a)(1) and 408(b)(2) and the regulations thereunder, including but not limited to Department of Labor regulations sections 2550.404a-5 and 2550.408b-2 (as though ERISA applied).
• Service included in Exhibit “A”, Retirement Plan Services Agreement, Schedule A, Advisor’s Services.
5. Compensation and Payment
.
A. The total compensation payable to CONSULTANT by CITY for services under this CONTRACT shall not exceed an annual fee of thirty thousand dollars ($30,000) (the “Not-To-Exceed Amount”), for a total not to exceed amount of one hundred and fifty thousand ( $150,000) for the initial Term and shall be earned as the work progresses.
Payment will be made based on the rates contained in the “Schedule of Fees” as set forth in Exhibit “A” attached hereto and incorporated herein. CONSULTANT acknowledges that CONSULTANT is not guaranteed to receive the Not-To-Exceed Amount or any particular or minimum amount of compensation or work under this CONTRACT.
B. After CONSULTANT has performed the services as specified in this CONTRACT, CITY shall be obligated to pay CONSULTANT based upon the actual CITY-authorized services received by CITY at the rates established as a part of this CONTRACT. In no event shall the total amount paid exceed the CONTRACT Not-to-Exceed Amount unless otherwise agreed to by the Parties in writing.
C. CONSULTANT shall provide CITY with written verification of the actual compensation earned, which written verification will be in a form satisfactory to CITY. Invoices shall include the work performed including a list of hours worked by personnel.
6. CONSULTANT’s Representations and Obligations
.
A. CONSULTANT shall perform as required by this CONTRACT.
CONSULTANT also warrants on behalf of itself and all subcontractors engaged for the 9 82731.00002\41772170.2
4 performance of this CONTRACT that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of the work hereunder.
B. CONSULTANT shall obey all Federal, State, local, and special district laws, ordinances, and regulations.
C. CONSULTANT agrees to abide by CITY’s Business Tax
Ordinance, of which proof of payment must be obtained prior to performance of this CONTRACT.
D. CONSULTANT acknowledges CITY may contract with other Parties for the performance of services or supplemental services as they relate to the work during the term of this CONTRACT.
7. Audit
.
A. At any time during normal business hours and as often as the CITY may deem necessary, CONSULTANT shall make available to CITY for inspection its records pertaining to this CONTRACT. CONSULTANT shall permit CITY to audit, examine and/or reproduce such records. CONSULTANT will retain such financial records, time sheets, work progress reports, invoices, bills and project records for at least two (2) years after termination or final payment under this CONTRACT. This paragraph shall survive for two (2) years after termination of this CONTRACT.
B. CITY shall have the option of inspecting and/or auditing all records and other written materials used by CONSULTANT in preparing its statements to CITY as a condition precedent to any payment to CONSULTANT.
8. Hold Harmless and Indemnification
. CONSULTANT shall defend,
indemnify, and hold harmless CITY, its agents, officials, officers, representatives, and employees, from and against all claims, lawsuits, liabilities or damages of whatever nature arising out of or in connection with, or relating in any manner to any act or omission of CONSULTANT, its agents, employees, and subcontractors, and employees thereof, pursuant to the performance or non- performance of this CONTRACT. The CONSULTANT shall thoroughly investigate any and all claims and indemnify the CITY and do whatever is necessary to protect the CITY, its agents, officials, officers, representatives, and employees as to any such claims, lawsuits, liabilities, expenses, or damages arising out of this CONTRACT. The CITY shall be included as an Additional Insured in the automobile/ liability insurance policies and endorsements of the CONSULTANT. The CONSULTANT must select an attorney acceptable to the CITY who will defend such proceeding and the CITY will control any litigation thereof. Such approval by the CITY will not be unreasonably withheld. This paragraph shall survive the termination of this CONTRACT.
9. Amendments. Any amendment, modification, or variation from the provisions of this CONTRACT and its accompanying Exhibits shall be in writing and shall be effective only upon mutual written approval by the City Manager and CONSULTANT. The provisions of this Section 9 shall not affect CONSULTANT’S ability to amend the 2023 Disclosures in accordance with their respective terms and conditions. 10 82731.00002\41772170.2
5 10. Anti-Discrimination. In the performance of the terms of this CONTRACT, CONSULTANT shall not engage in, nor permit subcontractors to engage in, discrimination in employment of persons because of the age, race, color, religious creed, sex, sexual orientation, national origin, ancestry, physical disability, mental disability, medical condition, or marital status of such persons. Violation of this provision may result in the imposition of penalties referred to in Labor Code Section 1735.
11. Personal Services. This Agreement is for professional services, which are personal to CITY. Darren Stewart, Vice President & Secretary is deemed to be specially experienced and is a key member of CONSULTANT’S firm, and shall be directly involved in performing, supervising, or assisting in the performance of this work. This key person shall communicate with, and periodically report to, CITY on the progress of the work. Should any such individual be removed from assisting in this contracted work for any reason, CITY may terminate this CONTRACT.
12. Termination. If, during the term of this CONTRACT, CITY determines that CONSULTANT is not faithfully abiding by any term or condition contained herein, CITY may notify CONSULTANT in writing of such defect or failure to perform. The notice must give to the CONSULTANT a ten (10) day period of time thereafter in which to perform the work or cure the deficiency. If CONSULTANT has not performed the work or cured the deficiency within the ten (10) days specified in the notice, such failure shall constitute a breach of this CONTRACT, and CITY may terminate this CONTRACT immediately by written notice to CONSULTANT. In addition, CITY, if it terminates this CONTRACT for cause, may withhold as an offset from payments due CONSULTANT damages occasioned by such breach, including liquidated damages, if so provided herein. The CITY shall be liable to the CONSULTANT only for those fees accrued by the CONSULTANT to the date CONSULTANT receives the notice of termination. In no event, however, shall CONSULTANT be entitled to receive in excess of the CONTRACT amount.
Upon termination of this Agreement, CONSULTANT shall issue reports to City detailing the status of Plan assets (total value of plan and participant detail) no later than twenty (20) business days after the end of the month in which termination becomes effective. The report will indicate the Plan balances at the end of the termination month.
13. Delivery of Reports in Cases of Termination
. If this CONTRACT is
terminated pursuant to any of the provisions contained hereinabove, and if requested to do so in writing by the CITY, the CONSULTANT shall, within fourteen (14) calendar days after receipt of such written request, deliver and turn over to the CITY all of its preparation and work on the project which were done to the date of the receipt of the notice of termination.
The terms "preparation" and "work" as used in this paragraph, shall refer to and include all data and materials of whatever type that have been gathered by the CONSULTANT, and contemplated to be used or actually used, in the provision of the services as specified in this CONTRACT.
14. Complete CONTRACT . This CONTRACT and its accompanying exhibits shall constitute the complete CONTRACT between the Parties hereto. No verbal agreement, understanding, or representation not reduced to writing and specifically 11 82731.00002\41772170.2
6 incorporated herein shall be o f any force or effect, nor shall any such verbal agreement, understanding, or representation be binding upon the Parties hereto.
15. Independent Contractor . It is expressly understood between the Parties to this CONTRACT that no employee/employer relationship is intended.
CONSULTANT is an independent contractor.
16. Time of Performance. Time is of the essence in this CONTRACT.
17. Insurance. CONSULTANT shall, at CONSULTANT’S sole cost and expense, provide insurance as contained in Exhibit “D”, incorporated herein.
CONSULTANT shall not commence work on the Services to be performed, until it submits proof of all insurance coverage as required.
18. Ownership of Reports and Data
. The originals of all studies, reports,
exhibits, documents, data and other work or materials prepared for, or used to comply with any term of this CONTRACT, plus any copies of same required by this CONTRACT to be furnished to the CITY by any of the other Party(ies) with whom the CONSULTANT may have contract(s) pertaining to this project, shall be deemed to be public records open to inspection by the public and, as such, to be and remain the property of the CITY.
19. Conflict of Interest . Neither CONS ULTANT nor any employees, agents, or subcontractors of CONSULTANT who will be assigned to this project, to the best of CONSULTANT'S knowledge, own any property or interest in properties, business relationships, or sources of income which may be affected by the performance of this CONTRACT. Should one Party hereto learn of any such interest, income source, or business relationship, such fact shall immediately be brought to the attention of the other Party hereto.
If the Parties thereupon cannot mutually agree upon a means to eliminate the conflict, CITY may terminate the CONTRACT immediately for non- performance pursuant to Section 1 1 herein.
In accordance with California Government Code Section 87306, CONSULTANT shall provide, if requested by CITY, a Conflict of Interest Statement, Form 700 no later than 30 days after execution of this CONTRACT, and annually thereafter prior to April 1st of each year for the duration of the CONTRACT. Failure to file any of the required statements will result in withholding payment for services rendered.
20. Successors and Assigns
. The terms hereof shall be binding upon and
inure to the benefit of the successors and assigns of the Parties hereto; provided, however, that no Party hereto shall assign any of the benefits and burdens hereunder, whether voluntarily or by operation of law, without the prior written consent of the other Party, and any such assignment without said consent shall be void.
21. Authority to Execute CONTRACT. Both CITY and CONSULTANT do covenant that each individual executing this CONTRACT on behalf of each Party is a person duly authorized and empowered to execute contracts for such Party.
12 82731.00002\41772170.2
7 22. Jurisdiction and Venue. Jurisdiction is in an appropriate court in the State of California and venue lies in Ventura County, and the Parties do not consent to arbitration. In the event of any dispute, each Party shall bear its own fees and costs (including attorneys’ fees). This CONTRACT shall be governed by California law, without regard to conflict of law principles.
23. Non-Appropriation of Funds
. If applicable, payments due and
payable to CONSULTANT for current services are within the current budget and within an available, unexhausted and unencumbered appropriation of CITY. In the event CITY has not appropriated sufficient funds for payment of CONSULTANT services beyond the current fiscal year, this CONTRACT shall cover only those costs incurred up to the conclusion of the current fiscal year.
24. Taxpayer Identification Number. CONSULTANT shall provide CITY with a complete Request for Taxpayer Identification Number and Cert ification, form W -9 (latest revision), as issued by the Internal Revenue Service.
25. Permits and Licenses. CONSULTANT, at its sole cost and expense, shall obtain and maintain during the term of this CONTRACT, all appropriate permits, licenses, and certificates that may be required in connection with the performance of this CONTRACT.
26. Waivers. The waiver by one Party of any term or condition of this CONTRACT, or any breach thereof, shall not be construed to be a general waiver by the Party or as a waiver of any other term or breach.
27. Statement of Experience. CONSULTANT warrants that it will perform its Services with at least the due care, diligence and expertise generally accepted in its industry. CONSULTANT also understands and agrees that it is being employed to perform the Services provided for by this CONTRACT because of CONSULTANT’S professed expertise and experience in performing such Services . In addition, CONSULTANT understands and agrees that while CITY or CITY’S officers, employees, agents or volunteers may elect to do so, they have no duty to review, inspect, monitor, or supervise the work performed by CONSULTANT pursuant to this CONTRACT. As a consequence, CONSULTANT waives any right of contribution against CITY or any of CITY ’S officers, employees, agents, or volunteers arising out of such failure to inspect, review, monitor, or supervise the work performed by CONSULTANT pursuant to this CONTRACT.
28. Notices. All written notices required by, or related to this CONTRACT shall be sent by Certified Mail, Return Receipt Requested, postage prepaid and addressed as listed below. Neither Party to this CONTRACT shall refuse to accept such mail; the Parties to this CONTRACT shall promptly inform the other Party of any change of address.
All notices required by this CONTRACT are effective on the day of receipt, unless otherwise indicated herein. The mailing address of each Party to this CONTRACT is as follows:
CITY City of Simi Valley
2929 Tapo Canyon Road
Simi Valley, CA 93063
13 82731.00002\41772170.2
8 Attn: Risk Manager
CONSULTANT BFSG, LLC. (D.B.A. Benefit Financial Services Group 2040 Main Street, Suite 720
Irvine, CA 92614
Attn: Darren Stewart
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be executed the day and year first above written.
Attest: City of Simi Valley, A Municipal Corporation
By:
Lucy Blanco, City Clerk Fred D. Thomas, Mayor of the City of Simi Valley, California
Approved as to Form: BFSG, LLC.
By:
Algeria R. Ford, City Attorney
Print Name:
Approved as to Content: Title:
By:
Brian Paul Gabler, City Manager
Print Name:
Title:
Johanna Medrano,
Deputy Administrative Services Director/
Budget & Purchasing
Trevor Earle, Risk Manager
14 82731.00002\41772170.2
9 EXHIBIT “A”
BFSG. LLC RETIREMENT PLAN SERVICES AGREEMENT
CONTRACT FOR PROFESSIONAL SERVICES
BETWEEN THE CITY OF SIMI VALLEY AND BFSG,
LLC FOR INVESTMENT ADVISORY SERVICES TO THE
CITY’S 401k) AND 457(b) PLANS
15 82731.00002\41771515.2
Retirement Plan Services Agreement
1 This Retirement Plan Services Agreement (this “Agreement”) is made and entered into as of the “Effective Date” of the Main Agreement of which this Agreement/Exhibit A is attached hereto, by and between the City of Simi Valley, having its principal office at 2929 Tapo Canyon Road, Simi Valley, CA 93063 (the “Sponsor”) as the sponsor and responsible fiduciary of the City of Simi Valley 457(b) and 401(k) plans (the “Plan s”), and BFSG, LLC , a Registered Investment Advisor, having its principal office at 2040 Main Street, Suite 720, Irvine, CA 92614 (the “Adviser”).
1. PARTIES / FIDUCIARY STATUS
The Plan s are participant-directed retirement plans offered to employees of the Sponsor. Sponsor is hereby appointing, and Adviser agrees and warrants that subject to the terms and conditions of this Agreement, it will act in the same role as an “investment manager” to the Plan s as defined under ERISA Section 3(38 ) and, as such, shall be solely responsible for the selection, monitoring, removal and replacement of all i nvestment options under the Plans, including the Plans’ default investment option, in accordance with the Plans’ Investment Policy Statements
2. ADVISER SERVICES
Adviser shall provide the Sponsor and the Plan with fiduciary and non-fiduciary services detailed in Schedule “A” (the “Services”). Certain non -fiduciary services may require an additional fee paid for by the Sponsor and not the Plan.
Prior to commencing work on such services, Adviser will submit to Sponsor a proposal and receive written confirma tion of Sponsor’s intent to engage Adviser. Adviser shall disclose to Sponsor any change regarding Adviser’s services no later than 60 days from the date of such change. If disclosure of any such change is precluded due to extraordinary circumstances beyond Adviser’s control, Adviser shall disclose information regarding such change of information as soon as practicable. In the event the Plan’s financial situation or investment objective(s) change, it is the Sponsor’s responsibility to notify the Adviser for the purpose of the Adviser reviewing/evaluating/revising its current services and/or recommendations. This Agreement is entered into upon the understanding that the Plan s are “governmental plan s” as defined in Internal Revenue Code section 414(d) and is n ot subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
3. LIMITATIONS ON ADVISER SERVICES
The Sponsor acknowledges and agrees to the following limitations on Adviser’s services hereunder:
(a) Adviser is neither an “administr ator,” nor the “plan administrator,” as defined by Internal Revenue Code Section 414(g);
(b) Adviser has no discretion or responsibility to interpret the Plan documents, determine eligibility or participation under the Plan, or to take any other action with re spect to the management, administration , or any other aspect of the Plan;
(c) Except to the extent engaged to provide participant -level planning services to Plan participants as detailed in Schedule “A”, Adviser is not responsible for delivery of notifications or other advice to Plan participants or for the Plan’s overall compliance;
(d) Adviser shall have no responsibility or liability with respect to any investment alternatives that it did not recommend or select. If the Sponsor elects to provide investment choic es in addition to the Adviser recommended and/or selected designated investment alternatives and/or Models, Adviser will not manage, rebalance, or provide advice regarding such alternatives; (e) Adviser has no responsibility to provide any services or accept a ny liability with respect to any “Excluded Assets” which include: assets accessed through “brokerage windows,” or any other Plan arrangement allowing Plan participants to allocate investment assets to investments beyond those designated or made available b y the Plan; employer securities; real estate (except for real estate funds and publicly traded REITs); participant loans; non -publicly traded partnership interests; other non -publicly traded securities (other than collective trusts and similar vehicles); or other illiquid securities or assets; (f) Adviser will not serve as custodian of Plan assets; (g) Adviser shall not be responsible for, and shall be held harmless from, any acts or omissions of any other professionals engaged (or who should have been engaged) t o provide services to the Plan and/or its participants (i.e., participant education, Plan administration, recordkeeping, legal and accounting services); (h) Adviser will not provide any Plan administration, legal, or accounting services; (i) Adviser will not vote proxies related to Plan investments; and, (j) Adviser shall not be responsible for the investment decisions made by Plan participants. Each participant is responsible for making the investment decisions for his/her own retirement account.
4. REPRESENTATION AND WARRANTIES OF THE PLAN
The Sponsor hereby represents, warrants, and agrees as follows:
16 82731.00002\41771515.2
Retirement Plan Services Agreement
2 (a) Sponsor is executing this Agreement in its fully authorized capacity for the control and/or management of the Plan assets, and for the selection and monitoring of the Plan’s service providers; (b) The execution of this Agreement and Plan/Sponsor’s obligations under this Agreement are within the scope of the investment authority authorized by the Plan’s governing documents and/or applicable laws; (c) If Sponsor elects to pay Fees from Plan assets, the Plan and its governing documents permit such payment; (d) Sponsor has requested and received all information from Adviser that the Sponsor, after due inquiry, considered relevant in making a decision to retain Adviser. The Sponsor has concluded that the retention of Adviser constitutes an appropriate part of the management of the Plan assets; (e) The Sponsor will notify Adviser in writing of any: termination, substantial contraction, merger or consolidation of the Plan; transfer of its assets to any other employee benefit plan or employer(s); amendment to the organizing documents of the Plan; or any related document that materially affects the activities of Adviser contemplated under this Agreement, the authority of the Sponsor over Plan investments, or retention of investment advisers; and any change in the identity of the Sponsor who has the authority to approve Plan investments;
(f) Adviser may rely on any information provided by the Sponsor and any of its representatives and agents, including, but not limited to the Plan’s third party administrator and/or record keeper. The Sponsor and Adviser acknowledge that each will be relying, and shall be entitled to rely, on the representations, undertakings, and acknowledgments of the other, as set forth in this Agreement. Adviser may rely on any notice or other communication from any person reasonably believed to be genuine and authorized by the Plan to act on its behalf;
(g) The Sponsor agrees to furnish to Adviser , and shall authorize service provide rs to provide Adviser, with information and documentation that Adviser may request, from time to time, in order to carry out its obligations under this Agreement;
(h) Sponsor agrees to review all reports and information provided by Adviser in connection with t he Services provided and promptly advise Adviser of any errors.
5. CONFLICTS OF INTEREST
Other than as may be disclosed on Schedule “ B”, its Brochure described below, or through some other communication provided by Adviser to Sponsor, the Adviser is not subject to any conflicts of interest in conjunction with the services to be provided under this Agreement. Notwithstanding the foregoing, the Adviser is subject to the Conflict of Interest provisions described in Section 19 of the Main Contract.
6. THIRD PARTY FEES
Commissions and/or transaction fees may be charged by the Plan’s designated broker -dealer/custodian for the purchase and/or sale of the Plan investment options. In addition, Plan participants shall also incur charges imposed directly at the mutual fund and exchange traded fund levels (i.e. advisory fees and other fund expenses).
7. BROCHURE / PRIVACY NOTICE / ERISA 408(b)(2) Disclosures The Sponsor hereby acknowledges prior receipt of Adviser’s Brochure as set forth on ADV Part 2A and 2B. The Brochure discusses the scope of the Adviser’s services, fees, and any corresponding conflicts of interest. Sponsor further acknowledges it had a reasonable opportunity to review the Brochure, and to discuss the contents of same with professionals of its c hoosing before the execution of this Agreement. The Sponsor further acknowledges receipt of Adviser’s Privacy Notice . This Agreement, in conjunction with Adviser’s Brochure, fulfill s the disclosure requirements of ERISA 408(b)(2).
8. AGREEMENT TERM
This Agreement shall commence upon the execution of this Agreement by both the Sponsor and the Adviser and shall continue until terminated by either party upon thirty (30) days written notice (the “Termination Date”) . If the Termination Date falls on the 15 th or earlier of a month, the Fee shall be prorated to the last day of the month prior to the month in which the Termination Date occurs. If the Termination Date falls on the 16 th or later of a month, the Fee shall be prorated to the last day of the month in which the Termination Date occurs . Asset-based compensation will be calculated on Plan assets excluding the value of Excluded Assets on the last day the Fee applies.
9. ADVISER FEE
Adviser shall be compensated by the Sponsor and/or the Plan for its servi ces hereunder as determined by Sponsor, in accordance Schedule “B” (the “Fee”). Although Adviser shall not receive any 12b -1, shareholder servicing fees, or other types or revenue sharing associated with the use of an investment vehicle, Adviser may recomm end investment vehicles which provide such payments to assist Sponsor in offsetting all or a portion of Plan expenses at the 17 82731.00002\41771515.2
Retirement Plan Services Agreement
3 request of the Sponsor. The Sponsor acknowledges that investment vehicles paying 12b -1, shareholder servicing fees, or other types of revenue sharing have higher internal expense ratios.
Other than the Fee, Adviser shall not receive any other direct or indirect compensation in conjunction with its services under this Agreement. The Fee shall be paid quarterly in arrears and any asset -based compensation shall be calculated on the Plan’s assets excluding the value of any Excluded Assets, as of the close of business on the last day of the calendar quarter, unless otherwise noted in Schedule “B”.
Sponsor acknowledges and agrees that due to the quarterly nature of Adviser’s services including the preparation, review, and delivery of quarterly reports, the Fee shall apply beginning the first day of the calendar quarter in which the Effective Date occurs.
By entering into this Agreement, t he Sponsor has determined that the compensation to be paid to Adviser under this Agreement is reasonable in light of the services that will be provided by Adviser.
10. ADVISER LIABILITY
Except as may otherwise be provided by law, Adviser will not be lia ble to the Sponsor or Plan for: (i) any loss that the Plan may suffer by reason of any investment recommendation or decision made, or other action taken or omitted in good faith by Adviser with th e degree of care, skill, prudence, and diligence under the c ircumstances that a prudent person acting in a fiduciary capacity would use; or (ii) any loss arising from Adviser’s adherence to the Sponsor’s instructions; or (iii) any error in judgment with respect to the Plan investments, provided such recommendation or other act or failure to act does not constitute a breach of Adviser’s fiduciary duty to the Plan or Adviser’s negligence; or (iv) any a ct or failure to act by the qualified custodian, third party administrator, record keeper, any broker -dealer that und ertakes transactions for the Plan assets, or by any other service provider to the Plan.
The Sponsor shall indemnify and defend Adviser and its members, employees, and affiliates, and hold them harmless from and against any and all claims, losses, damage s, liabilities and expenses, as they are incurred, by reason of any act or omission of the Sponsor, broker-dealer/custodian, agent or other third party selected by the Plan, except to the extent that it arises from Adviser’s breach of fiduciary duty to the Plan or Adviser’s negligence. No portion of the above shall constitute a waiver or limitation of any rights which the Sponsor may have under any federal or state securities laws, ERISA, or under the rules promulgated by the Employee Benefits Security Admi nistration and/or the Department of Labor.
11. SPONSOR LIABILITY
If discretionary services are included in this Agreement, Adviser shall indemnify and defend Sponsor and its directors, officers, employees and affiliates , and hold them and the Plans harmless from and against any and all claims, losses, damages, liabilities and expenses, as they are incurred arising from Adviser’s breach of fiduciary duty, willful misconduct, or material breach of this Agreement or applicable law and directly related to onl y the Services Adviser provides in a discretionary capacity and unrelated to any commissions, transaction fees, 12b-1 fees, shareholder servicing fees, and other forms of revenue sharing paid to the Plan or other third parties. This indemnification shall o nly apply if Sponsor qualifies for protection under California Government Code Section 53213.5 or that it would have qualified for protection under California Government Code Section 53213.5 , had the Adviser offered an appropriate menu of investment options to Plan participants in accordance with ERISA section 404(c) (as if applicable to the Plans)
If participant financial planning services are included in this Agreement, Adviser shall indemnify and defend Sponsor and its officers, employees, and affiliat es, and hold them and the Plans harmless from and against any and all claims, losses, damages, liabilities and expenses, as they are incurred directly and related solely to personalized advice offered to Plan participants during the planning process.
12. [Reserved]
13. APPLICABLE LAW / VENUE
Applicable law and venue shall be in accordance with Section 22 of the Main Contract
14. CONFIDENTIAL INFORMATION
The Adviser will preserve as confidential all information pertaining to Plan accounts and shall only disclose such information to prospective vendors after identifying said vendors to the Sponsor and receiving Sponsor’s permission to disclose. Adviser will not use the Plan’s account information for any purpose other than services disclosed under this Agreement. Furthermore, both Adviser and Sponsor agree to maintain shared information in strictest confidence and shall not copy, reproduce, or use for any other purpose other than the stated use in this Agreement. Neither party shall disclose 18 82731.00002\41771515.2
Retirement Plan Services Agreement
4 shared information without writt en consent from the other party, except as allowed by law which shall include the Public Records Act, Government Code Sections 7920.000 et.seq..
15. COUNTERPART AGREEMENTS
This Agreement may be executed in one or more counterparts, eac h of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
16. SEVERABILITY
If a provision of the Agreement is or becomes invalid or unenforceable in any jurisdiction, it shall not affect the viability or enforceability of any other provision in this Agreement.
17. RISK ACKNOWLEDGEMENT
Adviser does not guarantee the future performance of the Plan’s assets or any specific level of performance.
Sponsor understands that investment options in the Plan a re subject to various market, currency, economic, political, and business risks.
18. [Reserved]]
19. DISCLOSURE STATEMENT
Sponsor acknowledges receipt of this Agreement and Adviser’s Form ADV Part 2 A and 2B reasonably in advance of entering into this Agreement.
20. ELECTRONIC DELIVERY
The Sponsor authorizes the Adviser to deliver, and the Sponsor agrees to accept, all required regulatory notices and disclosures via electronic mail and/or via the Adviser’s internet web site, as well as all other corre spondence from the Adviser. Adviser shall have completed all delivery requirements upon the forwarding of such document, disclosure, notice and/or correspondence to the Sponsor’s last provided email address (or upon advising the Sponsor via email that such document is available on the Adviser’s web site and/or in the Plan’s portal). Please Note: It is the Sponsor’s obligation to notify the Adviser, in writing, of any changes to the Sponsor’s email address. Until so notified, the Adviser shall rely on the last provided email address. The Sponsor acknowledges that the Sponsor has the ongoing ability to receive and open standard electronic mail and corresponding electronic documents. If, at any time, the Sponsor’s electronic delivery situation changes, or the Sponsor is unable to open a specific document, the Sponsor agrees to immediately notify the Adviser so that the specific issue can be addressed and resolved.
19 82731.00002\41771515.2
Retirement Plan Services Agreement
5 SCHEDULE “A”
ADVISER’S SERVICES
FIDUCIARY SERVICES
Discretionary Plan Investment Services: Adviser shall assist Sponsor in editing, reviewing, and updating an Investment Policy Statement as warranted. Sponsor retains absolute discretion as to the contents of the Investment Policy Statement.
On a discretionary basis, the Ad viser shall select the diversified investment options for the Plan from which Plan participants may choose in accordance with the Investment Policy Statement . Adviser shall deliver a detailed Quarterly Investment Review outlining economic and market condit ions and evaluating performance of the Plan and the designated investment alternatives. Evaluation shall include quantitative and qualitative factors as pertinent and outlined in the Investment Policy Statement. In its discretion, Adviser shall remove or r eplace designated investment alternatives. Any actions, and rationale for such actions, taken by Adviser shall be documented and provided to Sponsor prior to implementation. Adviser shall be responsible for ensuring the Plan offers broad range of investmen t alternatives necessary to meet such requirement of California Government Code 53213.5.
Participant Planning: Adviser shall provide basic or comprehensive financial planning and consulting services to the Plan participants, to the extent Plan participan ts elect to obtain such services from Adviser (“Additional Services”). These additional services will require Plan participants to provide Adviser with additional information as requested by Adviser.
Adviser is under no obligations to provide such Addition al Services to any Plan participant if such Plan participant does not provide Adviser with the additional information requested. These Additional Services are subject to the terms, conditions, and limitations contained in the enclosed Schedule “ C,” which S chedule “ C” must be executed by a Plan participant before these Additional Services are rendered to that Plan participant.
NON-FIDUCIARY SERVICES (COMPLIANCE AND ADMINISTRATION)
Fiduciary Processes: Adviser shall provide Sponsor with information on fiduc iary best practices including the establishment and formalization of a Retirement Plan Committee (the “Committee”) to oversee the Plan and implementation of various Committee policies and procedures to reduce or eliminate actual or perceived conflicts of interest. When pertinent, Adviser may provide educational sessions to Committee to provide members with a conceptual understanding of law governing retirement plans as well as specific legislative, judicial, or industry updates. Upon request, Adviser will p rovide draft meeting minutes to Sponsor to document Plan decisions and assist in developing meeting agendas. When pertinent and upon request, Adviser will assist Sponsor in compliance with various regulatory requirements including the review of required participant disclosures.
Annual Report: Upon Request, Adviser shall deliver to Sponsor an Annual Report outlining Committee actions taken during the prior year and providing a high -level update on the Plan including demographics and investment performance for delivery to the City Council or other oversight body.
Cost Benchmarking: Adviser will provide Sponsor with periodic benchmarking of certain Plan costs based on information Adviser receives from conducting vendor search and selection processes for Adv iser’s clients. Upon Request, but not more often than every three (3) years, Adviser will assist in benchmarking Plan administration and recordkeeping costs by distributing an anonymous request for information (“RFI”) to a limited number of vendors providi ng services similar to those offered by the Plan’s current vendor. The RFI will provide vendors with general Plan demographics and seek information about key services and approximate costs. Adviser will provide a summary of the responses for Sponsor’s review and, upon request and when pertinent, engage in negotiations with Plan’s current vendor to reduce fees or increase services. Sponsor shall retain sole authority, responsibility, and liability associated with entering into an agreement for Plan services.
Vendor Search and Selection: Upon Request, but not more often than every five (5) years, Adviser will assist Sponsor in conducting a request for proposal (“RFP”) for Plan administration and recordkeeping services . Adviser will distribute the customized RFP seeking detailed information on proposed services and costs to current and alternative vendors, compile the responses, prepare a summary for review with Sponsor, and if applicable and upon request, assist in coordinating vendor interviews and or engage in contract negotiations.
Participant Education: Upon request, Adviser shall provide Plan participants with up to two (2) days of annual general informational seminars, to include materials which describe the various investment alternatives available unde r the Plan, 20 82731.00002\41771515.2
Retirement Plan Services Agreement
6 information about investing generally, including information about different types of investments, information different investment allocation strategies, including information about historical returns, and interactive materials designed to hel p participants identify appropriate investment strategy. Adviser may also offer participants one -on-one consultations to answer questions and provide additional education and guidance. C ontent of participant education, including any materials distributed, shall be educational in nature and not constitute investment advice unless Participant Planning services are offered.
NON-FIDUCIARY SERVICES (SETTLOR CONSULTING)
Sponsor Assistance: Upon request, Adviser will assist Sponsor with voluntary corrections, o ptional plan amendments, or merging, diverging, and acquiring plans. As required by law, these service s may require an additional fee that may not be paid by the Plan. When applicable, Adviser will provide a service and fee proposal and receive Sponsor’s w ritten consent prior to initiating work.
21 82731.00002\41771515.2
Retirement Plan Services Agreement
7 SCHEDULE “B”
COMPENSATION SCHEDULE
ADVISER ANNUAL FEE
The Adviser shall be paid an annual fee of $30,000.
OTHER FEES / COSTS:
Participant Education: The Adviser shall be compensated $1,000 per day for participant education days in excess of the number detailed in Schedule “A”.
BILLING PROCEDURES
Adviser shall provide an invoice to Sponsor within 30 days following the end of the quarter for services rendered . Fee shall be due within 30 days of Sponsor’s r eceipt of the invoice. Any questions regarding compensation and Fee, or any other issues pertaining to Adviser’s services should be addressed the Investment A dviser Representative Assigned to your Plan. Please direct unresolved questions to the Adviser’s C hief Compliance Officer, Michael Allb ee at [email protected] or (714) 282-1566.
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8 EXHIBIT C
FINANCIAL PLANNING AND CONSULTING AGREEMENT
In connection with the agreement entere d into, between Benefit Financial Services Group, an SEC registered investment adviser having a principal mailing address of 2040 Main Street, Suite 720, Irvine, California 92614 (the “PLANNER”) and the City of Simi Valley (the “EMPLOYER”), I, _________________________ (the “CLIENT”), as a prerequisite to receiving the services contemplated under the Agreement, acknowledge and agree to the following:
PLANNER agrees to provide basic financial planning and consulting services to CLIENT. Per the terms of the Ag reement described above, such services are to be provided only to the extent requested by CLIENT. CLIENT will not incur any separate or additional fee as a result of electing to receive the PLANNER’s financial planning and consulting services.
CLIENT acknowledges that recommendations provided by PLANNER are not endorsed or reviewed by EMPLOYER.
PLANNER’s financial planning and consulting services shall conclude upon PLANNER’s communication of its recommendations to CLIENT. It is expressly understood by CL IENT that these services do not create an ongoing relationship between PLANNER and CLIENT.
PLANNER will remain available to review and update any recommendations provided to CLIENT upon CLIENT’s request.
PLANNER’s recommendations (i.e. investments, estat e planning, retirement planning, taxes, insurance, etc.) shall be discussed by the PLANNER with CLIENT and may be implemented, at CLIENT’s sole discretion, with the corresponding professional advisors (i.e. broker, accountant, attorney, etc.) of CLIENT’s c hoosing. In respect to estate planning matters, PLANNER’s role shall be that of a facilitator between CLIENT and CLIENT’s corresponding professional advisors. No portion of PLANNER’s services should be interpreted as legal or accounting advice. CLIENT shou ld defer to CLIENT’s attorney or accountant.
CLIENT agrees to provide information and/or documentation requested by PLANNER as pertains to CLIENT’s objectives, needs, and goals. PLANNER shall not be required to verify any information obtained from the C LIENT, CLIENT’s attorney, accountant , or other professionals, and is expressly authorized to rely thereon. CLIENT is free at all times to accept or reject any recommendation from PLANNER, and CLIENT acknowledges that he has the sole authority with regard to the implementation, acceptance, or rejection of any recommendation or advice from PLANNER.
CLIENT is free to obtain legal, accounting, and brokerage services from any professional source to implement the recommendations of PLANNER. CLIENT will retain absolute discretion over all implementation decisions.
PLANNER’s financial planning and consulting services do not include investment implementation, supervisory, management, or reporting services, nor the regular reviewing, updating, or monitoring of CLIEN T’s investment portfolio or financial plan. In the event CLIENT desires that PLANNER provide investment supervisory or management services, CLIENT may request that PLANNER do so under the terms of a separate Investment Advisory Agreement between PLANNER and the CLIENT, for which services PLANNER shall be paid a separate and additional fee.
PLANNER, acting in good faith, shall not be liable for any action, omission, investment recommendation/decision, or loss in connection with its services. The federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which CLIENT may have under any federal or state securitie s laws, ERISA, or under the rules promulgated by the Employee Benefits Security Administration and/or the Department of Labor. In no event shall PLANNER be responsible to CLIENT for any special, indirect, incidental, exemplary, punitive, or consequential d amages in connection with or otherwise arising out of this Agreement.
CLIENT hereby acknowledges prior receipt of a copy of the PLANNER’s written Disclosure Statement as set forth on Part 2A of Form ADV and PLANNER’s Privacy Notice.
Subject to the condit ions and exceptions noted below, and to the extent not inconsistent with applicable law, in the event of any dispute pertaining to PLANNER’s services, both PLANNER and CLIENT agree to submit the dispute to arbitration in accordance with the auspices and ru les of the American Arbitration Association (“AAA”), provided that the AAA accepts jurisdiction. PLANNER and CLIENT understand that such arbitration shall be final and binding, and that by agreeing to arbitration, both PLANNER and CLIENT are waiving their respective rights to seek remedies in court, including the right to 23 82731.00002\41771515.2
Retirement Plan Services Agreement
9 a jury trial. CLIENT acknowledges that he/she/it has had a reasonable opportunity to review and consider this arbitration provision prior to execution.
Agreed to and accepted by:
____________________________________ _____________________________ Signature Date
24 82731.00002\41772170.2
10 EXHIBIT “B”
BFSG, LLC 2023 DISCLOSURES
CONTRACT FOR PROFESSIONAL SERVICES
BETWEEN THE CITY OF SIMI VALLEY AND BFSG,
LLC FOR INVESTMENT ADVISORY SERVICES TO THE
CITY’S 401k) AND 457(b) PLANS
25 2023
Disclosures
Institutional Services
Contact Information
Michael Allbee, CFP®
Chief Compliance Officer
Phone: (714) 282-1566
Email: [email protected]
26 BFSG Privacy Notice…………………….............................................................................................53-54 BFSG Privacy Notice
Form ADV Part 2A – Fi
rm Brochure …………................................................................................ 3-52 F
orm AD
V Part 2A – F
irm Brochure
Table o
f Cont
ents
27 1
Form ADV Part 2A – Firm Brochure
2040 Main Street, Suite #720
Irvine, CA 92614
BFS Institutional Services: 949-955-2552
BFS Wealth Management Services: 714-282-1566
1643 E. Bethany Home Road
Phoenix, AZ 85016
BFS Wealth Management Services: 602-997-8882
www.bfsg.com
Dated September 25, 2023
This Brochure provides information about the qualifications and business practices of BFSG, LLC doing business as Benefit Financial Services Group , “BFSG”. If you have any questions about the contents of this Brochure, please contact us at 714-282-1566. 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.
BFSG, LLC is registered as an Investment Adviser with the Securities and Exchange Commission. Registration of an Investment Adviser does not imply any certain level of skill or training.
Additional information about BFSG is available on the SEC’s website at www.adviserinfo.sec.gov which can be found using the firm’s identification number 143617.
28 2
Item 2: Material Changes
Since our last annual update, dated March 25, 2023, there have been the following material changes:
On August 31, 2023, funds affiliated with Clayton, Dubilier & Rice, LLC (“CD&R”) and Stone Point Capital LLC (“Stone Point”) completed an acquisition of Focus Financial Partners Inc. (“Focus Inc.”). This transaction resulted in funds affiliated with CD&R collectively becoming majority owners of Focus Inc. and funds affiliated with Stone Point collectively becoming owners of Focus Inc. Because BFSG is an indirect, wholly-owned subsidiary of Focus Inc., the CD&R and Stone Point funds are indirect owners of BFSG. Items 4 and 10 have been revised to reflect this new ownership structure.
This summary does not conta in detail about every revision to this Brochure; clients are encouraged to review the Brochure in its entirety. A complete brochure may be obtained by contacting [email protected] or (714) 282-1566. You may request such brochure at any point during the year, and it will be provided to you without charge. Additional information about BFSG, LLC is also available on the SEC’s website at www.adviserinfo.sec.gov.
29 3
Item 3: Table of Contents
Contents
Item 2: Material Changes ................................ ................................ ................................ ............2 Item 3: Table of Contents ................................ ................................ ................................ ............3 Item 4: Advisory Business ................................ ................................ ................................ ............4 Item 5: Fees and Compensation ................................ ................................ ................................ 15 Item 6: Performance-Based Fees and Side-By-Side Management ................................ .............. 22 Item 7: Types of Clients ................................ ................................ ................................ .............22 Item 8: Methods of Analysis, Investment Strategies and Risk of Loss................................ .........23 Item 9: Disciplinary Information ................................ ................................ ................................ 31 Item 10: Other Financial Industry Activities and Affiliations................................ ....................... 31 Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading ..36 Item 12: Brokerage Practices ................................ ................................ ................................ .....37 Item 13: Review of Accounts ................................ ................................ ................................ .....44 Item 14: Client Referrals and Other Compensation ................................ ................................ ...46 Item 15: Custody ................................ ................................ ................................ ....................... 48 Item 16: Investment Discretion ................................ ................................ ................................ .49 Item 17: Voting Client Securities ................................ ................................ ............................... 49 Item 18: Financial Information ................................ ................................ ................................ ..50
30 4
Item 4: Advisory Business
Description of Advisory Firm
BFSG, LLC, doing business as Benefits Financial Services Group (“BFSG”), is a limited liability company formed in the State of Delaware. BFSG, LLC has been in business as an investment adviser, registered with the Securities and Exchange Commission since 2007.
BFSG is part of the Focus Financial Partners, LLC (“Focus LLC”) partnership. Specifically, BFSG is a wholly-owned subsidiary of Focus Operating, LLC (“Focus Operating”), which is , directly and indirectly, a wholly-owned subsidiary of Focus LLC. Focus Financial Partners Inc. (“Focus Inc.”) is the sole managing member of Focus LLC and has 100% of its governance rights. Accordingly, all governance is conducted through the voting rights and the Board of Directors at Focus Inc. Focus Inc. is the managing member of and owns, directly and indirectly, approximately 99% of the economic interests in Focus LLC.
Focus Inc. is majority-owned, indirectly and collectively, by funds affiliated with Clayton, Dubilier & Rice, LLC (“CD&R”). Funds affiliated with Stone Point Capital LLC (“Stone Point”) are indirect owners of Focus Inc. Because BFSG is an indirect, wholly -owned subsidiary of Focus Inc., CD&R and Stone Point funds are indirect owners of BFSG.
Focus LLC also owns other registered investment advise rs, broker-dealers, pension consultants, insurance firms, business managers and other firms (the “Focus Partners”), most of which provide wealth management, benefit consulting and investment consulting services to individuals, families, employers, and institutions. Some Focus Partners also manage or advise limited partnerships, pr ivate funds, or investment companies as disclosed on their respective Form ADVs.
BFSG has two divisions that offer separate advisory services : BFS Wealth Management and BFS Institutional Services.
BFSG is managed by John Campbell, Darren Stewart, Christopher Rowey, Tina Schackman, Grace Lau, Patrick Powers, Steven Yamshon, and Michael Allbee (“BFSG Principals”), pursuant to a management agreement between Retirement Plan Consultant Group (“ RPCG, LLC”) and BFSG.
The BFSG Principals serve as officers and leaders of BFSG and are responsible for the management, supervision, and oversight of BFSG.
As of December 31, 2022, our assets under management are $976,609,474 managed on a discretionary basis and $ 357,007 managed on a non -discretionary basis and our assets under consultation are $13,556,162,203. Assets under consultation are assets for which we provide ongoing recommendations based upon the needs of the retirement plan sponsor client, as to 31 5
which specific securities or other investments to ma ke available to its plan participants , as well as other services set forth in the Consulting Agreement.
Our Advisory Services
BFS Wealth Management
At BFS Wealth Management , we believe that through hard work, decades of experience, and precise attention to detail we can help our clients achieve their financial goals. Wealth management is a more holistic service than just offering investment management and may include financi al planning, pension consulting, and advising on estate planning and insurance needs. Our commitment is to create fundamentally sound, well -constructed, diversified portfolios tailored to each client’s needs and goals. We monitor the investments to evalua te performance against appropriate market-based benchmarks and modify each portfolio strategy as needed to support a measurable outcome.
Individual investors, employer -directed retirement plans, corporations, trust estates, and charitable trusts have all benefitted from our expertise. Through our client focused approach, we offer our clients the following advisory services:
Financial Planning
To the extent requested by the client, BFSG will generally provide financial planning and related consulting services regarding non-investment related matters, such as tax and estate planning, insurance, etc. BFSG will generally provide such consulting services inclusive of its advisory fee set forth at Item 5 below, as specified in our contract with you (exceptions do occur based upon assets under management, certain investment offerings such as our Automated Investment Program services, special projects, stand-alone planning engagements, etc., for which BFSG may charge a separate or additional fee).
Financial planning is a comprehensive evaluation of your current and future financial state by using currently known variables based on information you disclose to predict future cash flows, asset values and withdrawal plans. The key defining aspect of fin ancial planning is that through the financial planning process, all questions, information, and analysis will be considered as they impact and are impacted by your entire financial and life situation. You will receive a written or an electronic report, providing a detailed financial plan designed to achieve your stated financial goals and objectives. Please remember to contact us, in writing, if there are any changes in your personal/financial situation so that we can review whether the changes impact our previous recommendations.
Please Note: BFSG does not serve as an attorney, accountant, or insurance agent, and no portion of our services should be construed as same. Accordingly, BFSG does not prepare legal documents, prepare tax returns, or sell insuran ce products. To the extent requested by a client, we may recommend the services of other professionals for non -investment implementation 32 6
purpose (i.e., attorneys, accountants, insurance, etc.). The client is under no obligation to engage the services of any such recommended professional. The client retains absolute discretion over all such implementation decisions and is free to accept or reject any recommendation from BFSG and/or its representatives. If the client engages any recommended professional, and a dispute arises thereafter relative to such engagement, the client agrees to seek recourse exclusively from and against the engaged professional. At all times, the engaged unaffiliated licensed professional[s] (i.e. , attorney, accountant, insurance agent, etc.), and not BFSG, shall be responsible for the quality and competency of the services provided.
Investment Portfolio Management
We offer discretionary and nondiscretionary investment management services in accordance with your individual needs. Through personal discussions about your investment history, financial circumstances, and goals, we determine your investment objectives and develop an asset allocation plan which will guide the management of your portfolio. Target asset allocations range from 100% equities to 100% fixed income and may include private investments.
Our investment recommendations are not limited to any specific product or service offered by a broker-dealer or i nsurance company and will generally include advice regarding the following securities:
• Exchange-listed securities
• Securities traded over-the-counter
• Foreign issuers
• Warrants
• Corporate debt securities (other than commercial paper) • Certificates of deposit
• Municipal securities
• Mutual fund shares
• United States governmental securities
• Interests in partnerships investing in real estate
• Interests in partnerships investing in private equity • Non-public real estate investment trusts
• Private investments
• Annuities
• Tradable carbon credits
• Stock options
Our investment strategies typically focus on multi -capitalization publicly listed stocks (ranging from small- to large-sized companies), as well as exchange traded funds and/or mutual funds.
When appropriate (i.e., depending on advisory account size or selected investment offering ) or when preferred by you, our investment strategies will utilize only exchange traded funds and/or mutual funds. We offer Environmental, Social, and Governance (“ESG”) investment portfolios (“BFSG Climate Change & Green Portfolios”) investing in securities of environmentally 33 7
responsible and sustainable global companies that make an environmental contribution. In addition, when an opportunity arises, the various ESG portfolios may include tradable carbon credits and other environmentally related commodities.
Most mutual funds and exchange traded funds are available directly to the public. Thus, a prospective client can obtain many of the funds that may be utilized by BFSG independent of engaging BFSG as an investment advisor. However, if a prospective client d etermines to do so, he/she will not receive BFSG’s initial and ongoing investment advisory services. In addition to BFSG’s investment advisory fee described below, and transaction and/or custodial fees discussed below, clients will also incur, relative to all mutual fund and exchange traded fund purchases, charges imposed at the fund level (i.e., management fees and other fund expenses).
BFSG may recommend that the client allocate a portion of the client’s investment assets among unaffiliated independent investment managers in accordance with the client’s designated investment objective(s). In such situations, the Independent Manager[s] shall have day -to- day responsibility for the active discretionary management of the allocated assets. BFSG shall continue to render investment supervisory services to the client relative to the ongoing monitoring and review of account performance, asset allocation and client investment objectives. Factors that BFSG shall consider in recommending Independent Manager[s] incl ude the client’s designated investment objective(s), advisory account size, management style, performance, reputation, financial strength, reporting, pricing, and research. The client is under no obligation to engage an Independent Manager[s] . You should r efer to the selected independent third-party money manager’s Form ADV Part 2A or other disclosure document for a full description of the services offered.
Cryptocurrency: For clients who want exposure to cryptocurrencies, including Bitcoin, BFSG will advise the client to consider a potential investment in corresponding exchange traded securities, or an allocation to separate account managers and/or private funds that provide cryptocurrency exposure. Crypto is a digital currency that can be used to buy goods and se rvices, and uses an online ledger with strong cryptography (i.e., a method of protecting information and communications through the use of codes) to secure online transactions. Unlike conventional currencies issued by a monetary authority, cryptocurrencies are generally not controlled or regulated, and their price is determined by the supply and demand of their market. Because cryptocurrency is currently considered to be a speculative investment, BFSG will not exercise discretionary authority to purchase a cryptocurrency investment for client accounts. Rather, a client must expressly authorize the purchase of the cryptocurrency investment. Please Note:
BFSG does not recommend or advocate the purchase of, or investment in, cryptocurrencies.
BFSG considers such an investment to be speculative. Please Also Note: Clients who authorize the purchase of a cryptocurrency investment must be prepared for the potential for liquidity constraints, extreme price volatility and complete loss of principal.
Unaffiliated Private Investment Funds : BFSG also provides investment advice regarding unaffiliated private investment funds. BFSG, on a non-discretionary basis, may recommend that certain qualified clients consider an investment in unaffiliated private inv estment funds, the 34 8
description of which (the terms, conditions, risks, conflicts and fees, including incentive compensation) is set forth in the fund’s offering documents. BFSG will only recommend private funds to those clients for whom it reasonably belie ves such an investment to be suitable, given the client’s total portfolio, risk parameters and liquidity needs. BFSG’s role relative to unaffiliated private investment funds shall be limited to its initial and ongoing due diligence and investment monitoring services. If a client determines to become an unaffiliated private fund investor, the amount of assets invested in the fund(s) shall be included as part of “assets under management” for purposes of BFSG calculating its investment advisory fee. BFSG’s fee shall be in addition to the fund’s fees. BFSG shall not exercise any discretion as to whether or not a client shall invest in any private fund. Rather, the ultimate investment decision shall remain with the client. BFSG’s clients are under absolutely no obligation to consider or make an investment in any private investment fund(s).
Please Note: Private investment funds generally involve various risk factors, including, but not limited to, potential for complete loss of principal, liquidity constraints and lack of transparency, a complete discussion of which is set forth in each fund’s offering documents, which will be provided to each client for review and consideration. Unlike liquid investments that a client may own, private investment funds do not provide daily liquidity or pricing. Each prospective client investor will be required to complete a Subscription Agreement, pursuant to which the client shall establish that he/she is qualified for investment in the fund and acknowledges and accepts the various risk factors that are associated with such an investment.
Please Also Note: Valuation. In the event that BFSG references private investment funds owned by the client on any supplemental account reports prepared by BFSG, the value(s) for all private investment funds owned by the client shall reflect the most recent valuation provided by the fund sponsor. However, if subsequent to purchase, the fund has not provided an updated valuation, the valuation shall reflect the initial purchase price. If subsequent to purchase, the fund provides an updated valuation, then the statement will reflect that updated value. The updated value will continue to be reflected on the report until the fund provides a further updated value. Please Also Note : As result of the valuation process, if the valuation reflects initial purchase price or an updated value subsequent to purchase price, the current value(s) of an investor’s fund holding(s) could be significantly more or less than the value reflected on the report. Unless otherwise indicated, BFSG shall calculate its fee based upon the latest value provided by the fund sponsor.
Please Note: Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommen ded or undertaken by BFSG) will be profitable or equal any specific performance level(s).
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Automated Investment Program
We offer an automated investment program (“Wealth Accumulator”) to individuals which gives clients access to our investment strategies, with limited personalized service and no financial planning services, for a discounted fee. Through Wealth Accumulator, account(s) are invested in a range of investment strategies constructed and m anaged, each consisting of a portfolio of exchange-traded funds (“ETFs”) and a cash allocation. We also offer Environmental, Social, and Governance (“ESG”) Wealth Accumulator portfolios that focus on ETFs with ESG attributes.
Clients utilizing Wealth Accu mulator may instruct us to exclude up to three ETFs from the portfolio.
Portfolios in Wealth Accumulator are held in a brokerage account opened by the client at Charles Schwab & Co., Inc. (“ Schwab”). We use the Institutional Intelligent Portfolios® pla tform (“Platform”), offered by Schwab Performance Technologies (“SPT”), a software provider to independent investment advisors and an affiliate of Schwab, to operate Wealth Accumulator.
We are independent of and not owned by, affiliated with, or sponsored or supervised by SPT, Schwab, or their affiliates (together, “Schwab”).
We, and not Schwab, are the investment advisor and primary point of contact with respect to the automated investment program. We are solely responsible, and Schwab is not responsi ble, for determining the appropriateness of Wealth Accumulator for our c lients, choosing a suitable investment strategy and portfolio for each client’s investment needs and goals, and managing that portfolio on an ongoing basis.
We have contracted with SPT to provide us with the Platform, which consists of technology and related trading and account management services for Wealth Accumulator . The Platfo rm enables us to make Wealth Accumulator available to clients online and includes a system that automates certain key parts of our investment process (the “System”). The System includes an online questionnaire that helps us determine each c lient’s investment objectives and risk tolerance and select an appropriate investment strategy and portfolio. We will recommend a portfolio via the System in response to client answers to the online questionnaire. The client may then indicate an interest in a portfolio that is one level less or more conservative or aggressive than the recommended portfolio, but we then make the final decision and select a portfolio based on all the information we have about the client. The System also includes an automated investment e ngine through which we manage client portfolios on an ongoing basis through automatic rebalancing and tax-loss harvesting (if the client is eligible and elects).
We charge clients a fee for our services as described under Item 5 Fees and Compensation. Our fees are not set or supervised by Schwab. Clients do not pay brokerage commissions or any other fees to Schwab as part of Wealth Accumulator. Schwab does receive other revenues, including (i) the profit earned by Charles Schwab Bank, a Schwab affiliate, on the allocation to the Schwab Intelligent Portfolios Sweep Program described in the Schwab Intelligent Portfolios Sweep Program Disclosure Statement; (ii) investment advisory and/or administrative service fees (or unitary fees) received by Charles Schwab Investment Management, Inc., a Schwab affiliate, from 36 10
Schwab ETFs™, Schwab Funds® and Laudus Funds® that we select to buy and hold in the client’s brokerage account; (iii) fees received by Schwab from third -party ETFs that participate in the Schwab ETF OneSource™ program and mutual funds in the Schwab Mutual Fund Marketplace® (including certain Schwab Funds and Laudus Funds) in the client’s brokerage account for services Schwab provides; and (iv) remuneration Schwab may receive from the market centers wh ere it routes ETF trade orders for execution.
Focus Treasury & Credit Solutions
We offer clients the option of obtaining certain financial solutions from unaffiliated third -party financial institutions with the assistance of our affiliate, Focus Treasury & Credit Solutions, LLC (“FTCS”), a wholly owned subsidiary of our parent company, Focus Financial Partners, LLC. Please see Items 5 and 10 for a fuller discussion of these services and other important information.
Focus Risk Solutions
We help our clients obtain certain insurance solutions from unaffiliated, third -party insurance brokers by introducing clients to our affiliate, Focus Risk Solutions, LLC (“FRS”), a wholly owned subsidiary of our parent company, Focus Financial Partners, LLC. Please see Items 5 and 10 for a fuller discussion of this service and other important information.
Services to Retirement Plans
BFS Wealth Management advises certain retirement plan sponsors on the selection and monitoring of mutual funds offered to participant-directed retirement plans. Most of our Firm’s services to retirement plans are offered through BFS Institutional Services. The range of services we provide to retirement plans and our fiduciary responsibilities under ERISA are summarized in the BFS Institutional Services section below.
Client Tailored Services and Client Imposed Restrictions
We offer the same suite of services to all of our clients. However, specific client services and their implementation are dependent upon your Investment Policy Statement, or suitability questionnaire, which outlines your current situation (income, tax levels, and risk tolerance levels) and is used to construct a specific plan to aid in the selection of a portfolio that matches your restrictions, needs, and targets. You can also receive investment advice on a more focused basis.
This may include advice on only an isolated area(s) of concern such as estate planning, specific consultation regarding investment and financial concerns, or any other specific topic.
Furthermore, the independent third-party money managers may have asset minimums imposed.
You may impose reasonable restrictions on investing in a particular security, a type of security, or industry sectors. You must notify us in writing of specific restrictions.
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In performing our services, BFSG shall not be required to verify any information rec eived from the client or from the client’s other professionals and is expressly authorized to rely thereon.
Moreover, it remains each client’s responsibility to promptly notify BFSG if there is ever any change in his/her/its financial situation or investme nt objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.
Miscellaneous
Retirement Rollovers (Potential for Conflict of Interest): A client or prospective client leaving an employer typically has four options regarding an existing retirement plan (and may engage in a combination of these options): (i) leave the money in the former employer’s plan, if permitted, (ii) roll over the assets to the new employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the client’s age, result in adverse tax consequences and penalties). If BFSG recommends that you roll over your retirement plan assets into an account to be managed by BFSG, such a recommendation creates a conflict of interest if BFSG will earn new (or increase its current) compensation as a result of the rollover. When acting in such capacity, BFSG serves as a fiduciary under the Employee Retirement Income Security Act (ERISA) , or the Internal Revenue Code (the “Code”), or both. BFSG’s investment professionals will document and disclose the reasons that a recommendation to roll over assets is in your best interest. No client is under any obligation to roll over retirement plan assets to an account managed by BFSG. BFSG maintains policies and procedures designed to ensure adherence with the provisions unde r ERISA or the Code, or both. BFSG’s Chief Compliance Officer, remains available to address any questions that a client or prospective client may have regarding the potential for conflict of interest presented by such rollover recommendation.
Portfolio Activity: BFSG has a fiduciary duty to provide services consistent with the client’s best interest. As part of its investment advisory services, BFSG will review client portfolios on an ongoing basis to determine if any changes are necessary based upon vario us factors, including, but not limited to, investment performance, market conditions, fund manager tenure, style drift, account additions/withdrawals, and/or a change in the client’s investment objective. Based upon these factors, there may be extended per iods of time when BFSG determines that changes to a client’s portfolio are neither necessary nor prudent. Clients remain subject to the fees described in Item 5 below during periods of account inactivity. Of course, as indicated below, there can be no assurance that investment decisions made by BFSG will be profitable or equal any specific performance level(s).
Held-Away Accounts: We implement investment advice on behalf of certain clients in held-away accounts that are maintained at independent third -party custodians. These held-away accounts are often 401(k) accounts, 529 plans and other assets that are not held at our primary custodian(s). We have the capability to review, monitor, and manage these held -away accounts in a fashion similar to the way in wh ich we review, monitor, and manage accounts that are not held away.
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Custodian Charges /Additional Fees: As discussed below in Item 12 below, when requested to recommend a broker -dealer/custodian for client accounts, BFSG generally recommends that Fidelity, Schwab, and/or Apex serve as the broker -dealer/custodian for client investment management assets. Broker-dealers such as Fidelity, Schwab, and Apex charge transaction fees for effecting certain securities transactions. In addition to BFSG’s investment advisory fee referenced in Item 5 below, the client will also incur transaction fees to purchase securities for the client’s acco unt ( i.e. primarily certain mutual funds ). BFSG’s Chief Compliance Officer, remains available to address any questions that a client or prospective client may have regarding the above.
BFS Institutional Services
Using the standards set forth in governing law, such as the Employee Retirement Income Security Act (ERISA), California Constitution, Government Code, and the Uniform Prudent Management of Institutional Funds Act (UPMIFA), BFS Institutional Services advises plan sponsors, committees, and fiduciaries in understanding and addressing responsibilities to their plan, participants, and beneficiaries.
We emphasize the development and implementation of proactive prudent processes which help fiduciaries provide participants an effective retirement tool, while lowering or limiting their liability. Our team-based approach ensures each of our clients has access to the knowledge and expertise of our experienced retirement and investment professionals. We realize that the retirement plan and i nstitutional marketplace is constantly changing, and therefore keeping clients informed is of critical importance.
Pension Consulting Services
We offer the following services to retirement plan sponsors:
Investment & Compliance Consulting
We offer on going investment and compliance consulting servic es, which include, but are not limited to, formalizing committee processes, reviewing and recommending investment managers, quarterly investment reviews, annual review of plan costs/revenues and fiduciary education. Unless our discretionary service is used, t he retirement plan sponsor retains and exercises, the final decision -making authority for implementing or rejecting our recommendations with respect to investment selection and de-selection. We acknowledge that we are a fiduciary within the meaning of Section 3(21) of ERISA (but only with respect to the provision of services described in the Consulting Agreement with you).
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Vendor Search & Selection/Benchmarking
We assist retirement plan sponsors with vendor search and selection processes, including:
▪ Customize Request for Proposal (RFP) based upon client’s needs and objectives ▪ Develop list of vendor candidates to send RFP
▪ Prepare provider analysis with proprietary scoring methodology
Fiduciary Structure & Cost Assessment
We review service provider arrangements, fiduciary procedural prudence and benchmark plan costs and revenues.
▪ Outline all plan-related costs and revenues back to service providers ▪ Provide comparison on Plan costs and revenues for benchmarking purposes ▪ Review plan design and features
▪ Provide options for potential revenue recapture options, if applicable
Discretionary Fiduciary Services
We accept discretionary fiduciary responsibility within the meaning of Section 3(38) of ERISA for the investment selection and monitoring process of investment options in a retirement plan (with the exception of company stock) consistent with the investment objective designated by the Plan trustees. In such engagements, BFSG will serve as an investment fiduciary as that term is defined under The Employee Retirement Income Security Act of 1974 (“ERISA”) and make the investment decisions in its sole discretion without the retirement plan sponsor’s prior approval . BFSG will generally provide services on an “assets under management” fee basis per the terms and conditions of a written agreement between the Plan and the Firm.
Participant Education/Communication
We c reate and deliver educational workshops and enrollment meetings for plan partic ipants under the terms of the Consulting Agreement.
• Create and deliver educational workshops for plan participants • Prepare customized participant communications
• Conduct enrollment meetings
• One-on-one participant consultations and financial planning (t he range of financial planning services we provide to plan participants are summarized in the BFS Wealth Management Services section above and as specified under the terms of the Consulting Agreement with you)
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Fiduciary Services
BFSG is a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) with respect to investment management services and investment advice provided to ERISA plan clients, including plan participants. BFSG is also a fiduciary under section 4975 of the Internal Revenue Code (the “IRC”) with respect to investment management services and investment advice provided to ERISA plans, ERISA plan participants, individual retirement accounts (“IRAs”), and IRA owners (collectively, “Retiremen t Account Clients”). As such, BFSG is subject to specific duties and obligations under ERISA and the IRC that include, among other things, prohibited transaction rules which are intended to prohibit fiduciaries from acting on conflicts of interest. When a fiduciary gives advice in which it has a conflict of interest, the fiduciary must either avoid or eliminate the conflict or rely upon a prohibited transaction exemption (a “PTE”).
As a fiduciary, we have duties of care and of loyalty to you and are subject to obligations imposed on us by the federal and state securities laws. As a result, you have certain rights that you cannot waive or limit by contract. Nothing in our agreement with you should be interpreted as a limitation of our obligations under the federal and state securities laws or as a waiver of any unwaivable rights you possess.
Participant Directed Retirement Plans
BFSG can also provide investment advisory and consulting services to participant directed retirement plans per the terms and conditions of a written agreement bet ween BFSG and the plan. For such engagements, BFSG shall assist the Plan sponsor with the selection of an investment platform from which Plan participants shall make their respective investment choices (which may include investment strategies devised and m anaged by BFSG), and, to the extent engaged to do so, may also provide corresponding education to assist the participants with their decision-making process.
Managed Account Service
Under our Managed Account Service, we are responsible for managing retir ement plan participant accounts until the individual elects to discontinue the Managed Account Service.
Eligible participants are enrolled in the Managed Account Service in accordance with rules established by the retirement plan sponsor. Based on personal criteria and financial information provided by the plan sponsor or by each participant, we select investment allocations on a discretionary basis using the investment options that are available within the retirement plan, as defined by the retirement plan sponsor. Company stock, brokerage account holdings, and certain specific other investments may be excluded from our recommendations. Excluded investments are taken into account when making allocation recommendations. Transaction instructions are then sent to the plan provider to implement our recommended retirement strategy in the participant’s plan account. A participant can elect to discontinue participating in the Managed Account Service at any time.
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Client Tailored Services and Client Imposed Restrictions
For clients in our Managed Accounts Service, spe cific participant services and their implementation are dependent upon the participant’s current situation (years until retirement and risk tolerance levels) and is used to construct a participa nt-specific portfolio that matches restrictions, needs, and targets. For clients in our Pension Consulting, we offer general investment advice. For clients using our Discretionary Fiduciary Services, we usually allow clients to impose restrictions on investing in certain asset classes.
Item 5: Fees and Compensation
How we are paid depends on the type of advisory service we are performing.
Investment Portfolio Management Fees
Our annual fees for Investment Portfolio Management Services are based upon a percentage of assets under management and generally range from 0.25% to 1.25% depending on the scope of the services to be provided , the investment strategies implemented (individual publicly listed stocks versus exchange traded funds and/or mutual fund only strategies) and the complexity of your financial situation. A total minimum fee of up to $5,500/year is required for this service.
The specific annual fee schedule and minimum fee is identified in the contract between us and you. In a few situations , the fees can exceed 1. 25% due to the minimum fee charged as a percentage of the assets under management.
For certain clients, we charge an advisory fee for services provided to the held -away accounts mentioned above in Item 4, just as we do with client accounts held at our primary custodians(s).
The specific fee schedule charged by us is provided in the client’s investment advisory agreement with us.
Certain clients are charged fixed fees ranging from $300 to $3,000 . This fixed fee depends on account size (i.e., small accounts such as 529 educational plans) and the complexity of the needs of the client (i.e., deferred retirement plan accounts). The specific fixed fee is identified in the contract between us and you. We will not increase our fee without giving prior written notification to you.
Limited Negotiability of Advisory Fees: We retain the discretion to negotiate fees on a client-by- client basis and to waive minimum fees. Client facts, circumstances and needs are considered in determining the fee schedule. These include the complexity of the client, assets to be placed under management, anticipated future additional assets, related accounts, portfolio style, account composition, and reports, among other factors. Discounts and/or fee waivers , not generally available to our advisory clients, are offered to family members and friends of associated persons of our firm. We retain the discretion to group certain related client accounts 42 16
for the purposes of determining the annualized fee and to give fee breakpoints based on the amount of total assets in the group. BFSG seeks to develop and maintain a strong culture of client service and responsiveness. As such, BFSG may from time to time refund the entirety, or a portion, of a client’s fee at its discretion due to a variety of issues that fall outside of what would be considered a trading error. Advisory fees will vary among clients.
Fees are payable as specified in our contract with you , within the first 10 business days of the calendar quarter. Fees are billed quarterly in advance or quarterly in arrears as specified in our contract with you. You will be given an invoice at the end of each quarter for investment portfolio management services provided. Fees are typically automatically deducted from your account each quarter. In certain instances, such as when your account is a r etirement plan, we may bill you so as not to use assets in deferred tax accounts for fees. Fees are prorated for accounts opened during the quarter based on the number of days that the account was open during the quarter as specified in the contract between us and you.
We determine fees based on the market value of your account's assets as of the last business day of the prior calendar quarter. We will make a good faith determination of the market value of any security which does not have a readily ascertainable market value. In such cases, we generally rely on valuations provided by the Fund sponsor in making our fair value determination. If no subsequent valuation post purchase is provided by the Fund sponsor, then the valuation shall reflect initial purchase price (and/or a value as of a previous date), the current value(s) (either the initial purchase price and/or the most recent valuation provided by the Fund sponsor). If the valuation reflects initial purchase price (and/or a value as of a previous date), the current value(s) (to the extent ascertainable) could be significantly more or less than original purchase price.
Cash and cash equivalents, accrued but unpaid interest, and margin balances are included in the market value on which fees are assessed, unless otherwise specified in writing between us and you. We consider cash and cash equivalents to be an asset class and cash balances are included in the calculation of our fee. Our fees will be calculated based on the higher margin value of the assets under management. (Potential for Conflict of Interest): At times your fee will exceed the yield of various cash and cash equivalent investments. We have a disincentive to encourage you to trim or eliminate the margin balance because we earn a higher fee. BFSG has a fiduciary duty to provide advice consistent with your best interest.
The market value reflected on periodic account statements issued by the account custodian may differ from the value used by BFSG for its advisory fee billing process. BFSG includes the accrued value of certain month or quarter-end interest and/or dividend payments when calculating client advisory fees, which amounts may not yet be reflected on the custodian statement as having been received by the account.
If any portion of your assets is managed by independent third-party money managers, you will be responsible for the fees of those managers, in addition to our fees. We do not control the fees or the billing arrangements of certain selected independent third -party money managers.
For a complete description of the fee arrangement including billing practices, minimum account 43 17
requirements, and account termination provi sions, you should review the selected manager’s Form ADV Part 2A or other disclosure document.
Automated Investment Program Fees
Annual fees for our Automated Investment Program (“Wealth Accumulator”) are based upon a percentage of assets under management and generally range from 0.50% to 0.85%. The specific annual fee schedule and minimum fee is identified in the contract between us and you. We will not increase our fee without giving prior written notification to you. The minimum investment required to open an account in Wealth Accumulator is $5,000/year. The minimum account balance to enroll in the tax-loss harvesting feature is $50,000. Our fees are not set or supervised by Schwab.
As described in Item 4 Advisory Business, clients do not pay fees to SPT or brokerage commissions or other fees to Schwab as part of Wealth Accumulator. Schwab does receive other revenues, including (i) the profit earned by Charles Schwab Bank, a Schwab affiliate, on the allocation to the Schwab Intelligent Portfolios Sweep Program described in the Schwab Intelligent Portfolios Sweep Program Disclosure Statement; (ii) investment advisory and/or administrative service fees (or unitary fees) received by Charles Schwab Investment Management, Inc., a Schwab affiliate, from Schwab ETFs ™, Schwab Funds ® and Laudus Funds ® that we select to buy and hold in the client’s brokerage account; (iii) fees received by Schwab from third-party ETFs that participate in the Schwab ETF OneSource ™ program and mutual fu nds in the Schwab Mutual Fund Marketplace® (including certain Schwab Funds and Laudus Funds) in the client’s brokerage account for services Schwab provides; and (iv) remuneration Schwab may receive from the market centers where it routes ETF trade orders f or execution. Brokerage arrangements are further described below in Item 12 Brokerage Practices.
Limited Negotiability of Advisory Fees: We retain the discretion to negotiate fees on a client -by- client basis. Client facts, circumstances and needs are con sidered in determining the fee schedule. These include the complexity of the client, assets to be placed under management, anticipated future additional assets, related accounts, portfolio style, account composition, and reports, among other factors. Disco unts and/or fee waivers , not generally available to our advisory clients, are offered to family members and friends of associated persons of our firm. We retain the discretion to group certain related client accounts for the purposes of determining the annualized fee and to give fee breakpoints based on the amount of total assets in the group .
BFSG seeks to develop and maintain a strong culture of client service and responsiveness. As such, BFSG may from time to time refund the entirety, or a portion, of a client’s fee at its discretion due to a variety of issues that fall outside of what would be considered a trading error.
Advisory fees will vary among clients.
Cash and cash equivalents are included in the market value on which fees are assessed, unless otherwise specified in writing between us and you. We consider cash and cash equivalents to be an asset class and cash balances are included in the calculation of our fee. (Potential for Conflict 44 18
of Interest) : At times your fee will exceed the yield of various cash and cash equivalent investments.
The market value reflected on periodic account statements issued by the account custodian may differ from the value used by BFSG for its advisory fee billing process. BFSG includes the accrued value of certain month or quarter-end interest and/or dividend payments when calculating client advisory fees, which amounts may not yet be reflected on the custodian statement as having been received by the account.
Fees are payable as specified in our contract with you, within the first 10 business days of the calendar quarter. Fees are billed quarterly in advance or quarterly in arrears as specified in our contract with you. You will be given an invoice at the end of each quarter for investment portfolio management services provided. Fees are automatically deducted from your account each quarter. Fees are prorated for accounts opened during the quarter based on the number of days that the account was open during the quarter as specified in the contract between us and you.
We determine fees based on your account's asset value as of the last business day of the prior calendar quarter.
Focus Treasury & Credit Solutions
We offer clients the option of obtaining certain financial solutions from unaffiliated third -party financial institutions with the assistance of our affiliate, Focus Treasury & Credit Solutions (“FTCS”). F TCS does not receive any compensation from such th ird-party institutions from serving our clients. Further information on this conflict of interest is available in Item 10 of this Brochure.
Focus Risk Solutions
We help our clients obtain certain insurance solutions from unaffiliated, third -party insurance brokers by introducing clients to our affiliate, Focus Risk Solutions, LLC (“FRS”), a wholly owned subsidiary of our parent company, Focus Financial Partners, LLC. FRS has arrangements with certain third-party insurance brokers (the “Brokers”) under w hich the Brokers assist our clients with regulated insurance sales activity. FRS does not receive any compensation from such third- party insurance brokers from serving our clients. Further information on this service is available in Item 10 of this Brochure.
Financial Planning Hourly Fee
As discussed above, basic financial planning services are included, for no additional fee, in the services we offer to our clients who engage us to provide portfolio management services (exceptions do occur based upon assets under management, certain investment offerings such 45 19
as our Automated Investment Program services, special projects, stand -alone planning engagements, etc., for which BFSG may charge a separate or additional fee).
When we do offer financial planning on a standalone basis, our Financial Planning fee rates are negotiable and generally range from $50-$350 per hour , depending on the complexity of the Financial Plan and the experience level of the financial planner . Fees are agreed upon and specified in the financial planning contract with you. Although the length of time it will take to provide a Financial Plan will depend on your personal situation, we will provide an estimate for the total hours at the start of the advisory relationship. A $1000 deposit or a deposit equal to half of the total fees may be required depending on the amount of necessary up -front work to be completed (data gathering, interviews, etc.) as specified in the contract with you . We consider fees for financial planning to be earned as progress is reali zed toward creation of the plan or completion of the service. You will be billed monthly in arrears based on actual hours expended.
Any balance is due 30 days after completion of the service.
If you are not a client engaged in our portfolio management se rvices, we reserve the discretion to reduce or waive the hourly fee if you choose to engage us for our portfolio management services.
Pension Consulting Fees
Fees for our pension consulting arrangements are asset -based, fixed or hourly . BFS Wealth Management typically charges asset -based pension consulting fees, and BFS Institutional Services typically charges fixed or hourly pension consulting fees.
Asset-based fees are determined on a case-by-case basis, after considering various facto rs such as our fiduciary responsibility, complexity of the client, assets to be placed under management, anticipated future additional assets, related accounts, account composition, and reports to be provided as part of our services. Fees generally range from 0.35% to 0.55% on plan assets per year. Asset-based fees are payable in the manner specified in our contract with the retirement plan sponsor, and generally are monthly or quarterly in arrears. BFS Wealth Management’s fees for Pension Consulting ser vices are paid to us by the retirement plan sponsor, who shares with our firm a percentage of the fees received from you.
Fixed fees and hourly fees are determined on a case -by-case basis, after considering various factors such as the complexity of the client, assets to be placed under management, anticipated future additional assets, related accounts, account composition, financial planning services, and reports to be provided as part of our services. The total estimated fee, as well as the ultimate fee that we charge clients, is based on the scope and complexity of our engagement with each client. How clients pay their respective fees is determined on a case-by-case basis. Clients will be invoiced directly for the fees.
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Retirement plan participants will receive a separate disclosure document describing the fee paid to us by such retirement plan sponsor. Participants should refer to the retirement plan sponsors’ disclosure document for information regarding its fees, billing practices, minim um required investments and termination of pension consulting agreements.
Investment & Compliance Consulting
The annual fixed fee ranges from $5,000 to $200,000, paid quarterly in arrears; and asset-based fees range from 0.01% to 0.75% of average annual plan assets paid quarterly in arrears.
In addition, an hourly rate of $100 may be charged for any consulting services provided in a settlor capacity, which would be billed quarterly in arrears.
Vendor Search & Selection/Benchmarking
Fees range from $5,000 to $50,000 per project. Half of the fee is due up-front and the rest upon completion as specified in the contract with you.
Fiduciary Structure & Cost Assessment
Fees range from $2,500 to $5,000 per project and are paid upon completion.
Discretionary Fiduciary Services
Fees range from 0.01% to 0.50% on plan assets per year and are paid quarterly in arrears.
Participant Education/Communication
Fees range from $500 to $2,000 per meeting day and are paid upon completion. Please note:
These services may be outsourced to an independent third-party.
Basic financial planning services to plan participants may be included in the services we offer to our clients who engage us to provide pension consulting services as specified in the contract between us and you.
Managed Account Service
The Managed Account Service fee is part of an overall service contract with the plan sponsor and is typically between 0.02% and 0.10% on plan assets per year, billed quarterly in arrears. Certain clients are charged fixed annual fees upward to $25,000. The specific fixed fee is identified in the contract between us and you.
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Fees are determined on a case -by-case basis, after considering various factors such as our fiduciary responsibility, complexity of the client, assets to be placed under management, anticipated future additional assets, related accounts, account composition, and reports to be provided as part of our services. It is not charged on an individual basis or affected by the number of people who enroll in the Service.
Termination of the Advisory Relationship
You will have a period of five (5) business days from the date of signing the client agreement to terminate the agreement and receive a full refund of all fees. Thereafter, a client agreement may be canceled at any time, by either pa rty, for any reason upon receipt of 30 days written notice.
In the event of termination, all fees for services rendered shall be due and payable by you, including the notification period from the receipt of the written termination notice. If your account is billed in advance, any prepaid, unearned fees will be promptly refunded. In calculating a reimbursement of fees, we will pro rate the reimbursement according to the number of days remaining in the billing period plus the notification period from the rec eipt of the written termination notice.
You will have a period of five (5) business days from the date of signing a financial planning agreement to terminate the agreement and receive a full refund of all fees. Thereafter, a financial planning agreement may be canceled at any time, by either party, for any reason upon receipt of written notice. In the event of termination, all fees for bona -fide financial planning services rendered shall be due and payable by you.
Other Types of Fees and Expenses
Our fees are exclusive of brokerage commissions, transaction fees, and ot her related costs and expenses that may be incurred by the client. Clients may incur certain charges imposed by custodians, brokers, and other third parties such as custodia l fees, deferred sales charges, odd - lot differentials, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities transactions. In addition to our fee, clients are responsible for the fees of any independent third-party money managers engaged to manage a portion of their assets. Mutual fund and exchange traded funds also charge internal management fees, which are disclosed in a fund’s prospectus. Such charges, fees and commissions are exclusive of and in addition to our fee, and we shall not receive any portion of these commissions, fees, and costs.
Item 12 further describes the factors that we consider in selecting or recommending broker - dealers for client’s transactions and determining the reasonableness of their compensation (i.e., commissions).
We do not accept compensation for the sale of securities or other investment products including asset-based sales charges or service fees from the sale of mutual funds. We do not offer 48 22
proprietary prod ucts or receive third party payments with respect to the investment advice provided.
Item 6: Performance-Based Fees and Side -By-
Side Management
We do not offer performance-based fees.
Item 7: Types of Clients
BFSG primarily serves individuals, trusts, charitable organizations, private funds, and corporate entities, including ERISA retirement plans. BFSG may charge a lesser investment advisory fee, charge a flat fee, waive or modify its minimum fee, or waive it s fee entirely based upon certain criteria (i.e. , anticipated future earning capacity, anticipated future additional assets, dollar amount of assets to be managed, related accounts, account composition, complexity of the engagement, grandfathered fee sched ules, BFSG employees and family members, courtesy accounts, competition, negotiations with client, etc.). Please Note : As result of the above, similarly situated clients will pay different fees. In addition, similar advisory services may be available from other investment advisers for similar or lower fees. BFSG’s Chief Compliance Officer, remains available to address any questions that a client or prospective client may have regarding advisory fees.
Clients eligible to enroll in the Automated Investment P rogram (“Wealth Accumulator”) include individuals, IRAs, and revocable living trusts. Clients that are organizations (such as corporations and partnerships) or government entities, and clients that are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), are not eligible for the Program.
As previously disclosed in Item 5, for Wealth Accumulator, the minimum investment required to open an account is $5,000. The minimum account balance to enroll in the tax -loss harvesting feature is $50,000.
In addition, as specified in our contract with you, we may have a minimum account fee that could make smaller-sized accounts less economical for clients based on the nature of the service(s) being provided.
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Item 8: Methods of Analysis, Investment
Strategies and Risk of Loss
Overview
We invest client assets primarily in open -end mutual funds , exchange-traded funds (“ETFs”) , collective inv estment trusts (“CITs”), equity securities of individual companies of all market capitalizations, and individual bonds . Our firm has an investment committee, and each division has an investment committee overseeing our investment management processes . Within BFS Wealth Management, there are various sub -investment committees depending on the overall investment management strategy being implemented. The divisions have the same methodology for ranking mutual funds, and the sub-investment committees share information, but at present have separate decision -making processes. BFS Wealth Management manage s client assets to investment models. BFS Institutional consultants work with clients to develop a customized Investment Policy Statement (“IPS”) to provide structural guidance on the selection and de - selection of investment offerings and also provides recommendations as an ERISA 3(21) Fiduciary or ERISA 3(38) Fiduciary.
Methods of Analysis
Fundamental analysis involves analyzing individual companies and their industry groups, such as a company’s financial statements, details regarding the company’s product line, the experience, and expertise of the company’s management, and the outlook for the company’s industry . The resulting data is used to measure the true value of the company’s stock (“intrinsic value”) compared to the current market value. The risk of fundamental analysis is that information obtained may be incorrect and the analysis may not provide an accur ate estimate of earnings, which may be the basis for a stock’s value. If securities prices adjust rapidly to new information, utilizing fundamental analysis may not result in favorable performance.
Quantitative analysis uses mathematical models in an atte mpt to obtain more accurate measurements of a company’s quantifiable data, such as the value of share price or earnings per share and predict changes to that data. A risk in using quantitative analysis is that the models used may be based on assumptions that prove to be incorrect.
Qualitative analysis involves subjective evaluation of non-quantifiable factors such as quality of management, labor relations, and strength of research and development factors not readily subject to measurement and predict chan ges to share price based on that data. A risk in using qualitative analysis is that our subjective judgement may prove incorrect.
Technical analysis involves using chart patterns, momentum, volume, and relative strength in an effort to pick sectors that may outperform market indices. However, there is no assurance of accurate forecasts or that trends will develop in the markets we follow. In the past, there have 50 24
been periods without discernible trends and similar periods will presumably occur in the futu re.
Even where major trends develop, outside factors like government intervention could potentially shorten them.
Furthermore, one limitation of technical analysis is that it requires price movement data, which can translate into price trends sufficient to dictate a market entry or exit decision. In a trendless or erratic market, a technical method may fail to identify trends requiring action. In addition, technical methods may overreact to minor price movements, establishing positions contrary to overall price trends, which may result in losses. Finally, a technical trading method may underperform other trading methods when fundamental factors dominate price moves within a given market.
Mutual Fund, Collective Investment Trusts (“CIT”) and Exchange-Traded Fund (“ETF”) analysis involves analyzing funds from both a qualitative and quantitative perspective based on historical and present data. Quantitative criteria may include analysis of absolute and risk -adjusted performance, style metrics, risk metrics, tracking error, and expenses. Qualitative criteria may include consideration of asset base, average credit quality, individual holding concentration, portfolio turnover, median market capitalization, fund philosophy, firm structure, and fund management. Risks of fund analysis include the risks in the underlying assets they hold, and that, as in all securities investments, past performance does not guarantee future results. There is also a risk that a manager may deviate from the stated investment mandate or strategy of the fund.
Environmental, Social, and Governance (“ESG”) analysis involves analyzing funds (mutual funds and ETFs), equity securities of individual companies, and individual bonds from both a qualitative and quantitative perspective based on historical and present data. Quantitative criteria may include screening of securities /funds with ESG attributes and factors , the avoidance of securities/funds violating certain ESG principles, absolute and risk -adjusted performance, s tyle metrics, risk metrics, tracking error, and expenses. Qualitative criteria may include consideration of asset base, average credit quality, individual holding concentration, portfolio turnover, median market capitalization, fund philosophy, firm structure, and fund management.
A fund's ESG investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the fund may underperform other funds that do not have an ESG focus. A fund's ESG investment strat egy may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds screened for ESG standards. Correspondingly, the number of ESG mutual funds and exchange-traded funds are few when co mpared to those that do not maintain such a mandate. Risks of fund analysis include the risks in the underlying assets they hold, and that, as in all securities investments, past performance does not guarantee future results. There is also a risk that a manager may deviate from the stated ESG investment mandate or strategy of the fund.
Asset Allocation is the attempt to identify an appropriate ratio of equities, fixed income, and cash suitable to your investment goals and risk tolerance. A risk of asset a llocation is that you 51 25
may not participate in sharp increases in the value of a particular security, industry, or market sector. Another risk is that the ratio of equities, fixed income, and cash will change over time due to stock and market movements and, if not corrected, will no longer be appropriate for your goals.
Independent Third-Party Money Manager analysis: As discussed in Item 4, we recommend that certain clients invest a portion of their assets with independent third-party money managers. Our analysis of independent third-party money managers involves the examination of the experience, expertise, investment philosophies, and past performance of the independent third-party money managers in an attempt to determine if that manager has demonstrated an ability to invest over a period of time and in different economic conditions. We monitor the manager’s underlying holdings, strategies, concentrations, and leverage as part of our overall periodic risk assessment.
A risk of investing with an independent third-party money manager who has been successful in the past is that he/she may not be able to replicate that success in the future. In addition, as we do not control the underlying investments in an independent third-party money ma nager’s portfolio, there is also a risk that a manager may deviate from the stated investment mandate or strategy of the portfolio, making it a less suitable investment for our clients. Moreover, as we do not control the manager’s daily business and compliance operations, we may be unaware of the lack of internal controls necessary to prevent business, regulatory, or reputational deficiencies.
Private Investment Funds: As discussed in Item 4, we recommend that certain clients invest a portion of their ass ets with unaffiliated private investment funds. Our analysis of unaffiliated private investment funds involves the type of offering including risks, tim e horizon, use of leverage, and liquidity issues, the examination of the experience, expertise, investment philosophies, and past performance of the unaffiliated private investment fund manager in an attempt to determine if that manager has demonstrated an ability to invest over a period of time and in different economic conditions. A risk of investing with an unaffiliated private investment fund who has been successful in the past is that he/she may not be able to replicate that success in the future. Private investment funds general ly involve various risk factors, including, but not limited to, potential for complete loss of principal, liquidity constraints and lack of transparency, a complete discussion of which is set forth in each fund’s offering documents . BFSG will only recommend private funds to those clients for whom it reasonably believes such an investment to be suitable, given the client’s total portfolio, risk parameters and liquidity needs.
Options Strategies: Upon client request, BFSG may engage in options transactions (or engage an independent investment manager to do so) generally for the purpose of hedging risk and/or generating portfolio income. The use of options transactions as an investment strategy can involve a high level of inherent risk. Option transactions establish a contract between two parties concerning the buying or selling of an asset at a predetermined price during a specific period of time. During the term of the option contract, the buyer of the option gains the rig ht to demand fulfillment by the seller. Fulfillment may take the form of either selling or purchasing a security, depending upon the nature of the option contract. Generally, the purchase or sale of an option contract shall be with the intent of “hedging” a potential market risk in a client’s portfolio and/or generating income for a client’s portfolio. Please Note: Certain options -related strategies (i.e. , 52 26
straddles, short positions, etc.), may, in and of themselves, produce principal volatility and/or risk. Thus, a client must be willing to accept these enhanced volatility and principal risks associated with such strategies. In light of these enhanced risks, client may direct BFSG, in writing, not to employ any or all such strategies for his/her/their/its accounts.
Covered Call Writing.
Covered call writing is the sale of in-, at-, or out-of-the-money call options against a long security position held in a client portfolio. This type of transaction is intended to generate income. It also serves to create partial downside protection in the event the security position declines in value. Income is received from the proceeds of the option sale. Such income may be reduced or lost to the extent it is determined to buy back the option position before its expirat ion. There can be no assurance that the security will not be called away by the option buyer, which will result in the client (option writer) to lose ownership in the security and incur potential unintended tax consequences. Covered call strategies are generally better suited for positions with lower price volatility.
Long Put Option Purchases.
Long put option purchases allow the option holder to sell or “put” the underlying security at the contract strike price at a future date. If the price of the underlying security declines in value, the value of the long-put option can increase in value depending upon the strike price and expiration. Long puts are often used to hedge a long stock position to protect against downside risk. The security/portfolio could still experience losses depending on the quantity of the puts bought, strike price and expiration. In the event that the security is put to the option holder, it will result in the client (option seller) to lose ownership in the security and to incur pot ential unintended tax consequences. Options are wasting assets and expire (usually within months of issuance).
Please Note: There can be no guarantee that an options strategy will achieve its objective or prove successful. No client is under any obligati on to enter into any option transactions.
However, if the client does so, he/she must be prepared to accept the potential for unintended or undesired consequences (i.e., losing ownership of the security, incurring capital gains taxes).
ANY QUESTIONS: BFSG’s Chief Compliance Officer, Michael Allbee, remains available to address any questions that a client or prospective client may have regarding options.
Investment Strategies We Use
We select or recommend mutual funds, CITs, and ETFs after ranking them using manager data from Morningstar and Bloomberg, weighting the data using the Firm’s proprietary criteria and calculating the results in an Excel spreadsheet. In support of the selection of equity securities, we maintain the analysis showing the valuation /technical metrics supporting the investment recommendations of securities we have purchased or sold. We typically purchase equity securities with the idea of holding them in your account for a year or longer. H owever, as 53 27
previously mentioned, certain strategies we use may use technical analysis and the holding period may be shorter.
Wealth Accumulator
With respect to our Automated Investment Program, each client’s investment objectives and risk tolerance is determined through an online questionnaire. Once determined, the client selects an appropriate investment strategy and portfolio, but we then make the final decision and select a portfolio based o n all the information we have about the client. We typically use a long -term purchase strategy, securities held for at least a year, to meet our clients’ objectives and risk tolerance.
Managed Account Service
With respect to our Managed Account Service offered by BFS Institutional Services, each individual retirement plan participant has certain preferences, a time horizon, current investment balances, current savings rates, expected benefits (i.e., Social Security), and tax rates.
Our recommended investment strategy is to provide the investment allocation that enables an individual to reach the retirement income goal with the least amount of risk. Once the risk level is determined, we select the allocation of investments that is expected to match the ri sk level based upon the investment’s style, expected return, and expected risk.
Material Risks Involved
All investing strategies we offer involve risk and may result in a loss of the original investment which clients should be prepared to bear. We ask that you work with us to help us understand your tolerance for risk. Many of these risks apply equally to stocks, bonds, commodities and any other investment or security. Material risks associated with our invest ment strategies are listed below.
Market Risk: Market risk involves the possibility that an investment ’s current market value will fall because of a general market decline, reducing the value of the investment regardless of the operational success of the issuer’s operations or its financial condition.
Strategy Risk: The Adviser’s investment strategies and/or investment techniques may not work as intended.
Small and Medium Cap Company Risk: Securities of companies with small and medium market capitalizations are often more volatile and less liquid than investments in larger companies. Small and medium cap companies may face a greater risk of business failure, which could increase the volatility of the client’s portfolio.
Turnover Risk: At times, the technical analysis strategy may have a portfolio turnover rate that is higher than other strategies. A high portfolio turnover may result in the distribution of 54 28
additional capital gains for tax purposes. These factors may negatively affect the account’s performance.
Limited Markets: Certain securities may be less liquid (harder to sell or buy) and their prices may at times be more volatile than at other times. Under certain market conditions we may be unable to sell or liquidate investments at prices we consid er reasonable or favorable or find buyers at any price.
Concentration Risk: Certain investment strategies focus on particular asset-classes, industries, sectors or types of investment. From time to time these strategies may be subject to greater risks of adverse developments in such areas of focus than a strategy that is more broadly diversified across a wider variety of investments.
Interest Rate Risk: Bond (fixed income) prices generally fall when interest rates rise, and the value may fall below par value or the principal investment . The opposite is also generally true:
bond prices generally rise when interest rates fall. In general, fixed income securities with longer maturities are more sensitive to these price chan ges. Most other investments are also sensitive to the level and direction of interest rates.
Legal or Legislative Risk : Legislative changes or Court rulings may impact the value of investments, or the securities’ claim on the issuer’s assets and finances.
Inflation: Inflation may erode the buying -power of an investment portfolio, even if the dollar value of the investments remains the same.
Aggregated Portfolio Management: When you have more than one account you own or in which you have a material beneficial financial interest, it is generally recommended that the accounts be managed in the context of an aggregated, integrated portfolio, and not as stand -alone individual portfolios. The purpose of this is to attempt to optimize aggregate portfolio results, improve tax efficiency, minimize portfolio turnover, and control expenses. The risk to this strategy includes returns that may vary materially in individual accounts because we will allocate assets to individual accounts as we see fit in your best interest. Aggregated portfolio management is not available for Wealth Accumulator.
Client Inves tment Objectives and Strategies: Clients' investments and investment returns typically will vary due to different client investment objectives and strategies. Conflicts may stem from clients' differing client investment objectives and strategies (i.e., certain client accounts may hold individual stocks while others may hold only mutual f unds). We carefully manage your account based on your investment objective.
Cybersecurity: The computer systems, networks and devices used by BFSG and service providers to us and our clients to carry out routine business operations employ a variety of protections designed to prevent damage or interruption from computer viruses, network failures, computer and telecommunication failures, infiltration by unauthorized persons and security breaches. 55 29
Despite the various protections utilized, systems, networks, or devices potentially can be breached. A client could be negatively impacted as a result of a cybersecurity breach.
Cybersecurity breaches can in clude unauthorized access to systems, networks, or devices; infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cybersecurity breaches may cause disruptions and impact business operations, potentially resulting in financial losses to a client; impediments to trading; the inability by us and other service providers to transact business; violations of applicable pri vacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs; as well as the inadvertent release of confidential information.
Similar adverse consequences could result fr om cybersecurity breaches affecting issuers of securities in which a client invests; governmental and other regulatory authorities; exchange and other financial market operators, banks, brokers, dealers, and other financial institutions; and other parties. In addition, substantial costs may be incurred by these entities in order to prevent any cybersecurity breaches in the future.
COVID: The transmission of COVID and efforts to contain its spread have resulted in border closings and other travel restricti ons and disruptions, market volatility, disruptions to business operations, supply chains and customer activity and quarantines. With widespread availability of vaccines, the U.S. Centers for Disease Control and Prevention has revised its guidance, travel restrictions have started to lift, and businesses have reopened. However, the COVID pandemic continues to evolve and the extent to which our investment strategies will be impacted will depend on various factors beyond our control, including the extent and duration of the impact on economies around the world and on the global securities and commodities markets. Volatility in the U.S. and global financial markets caused by the COVID pandemic may continue and could impact our firm’s investment strategies.
Although currently there has been no significant impact, the COVID outbreak, and future pandemics, could negatively affect vendors on which our firm and clients rely and could disrupt the ability of such vendors to perform essential tasks.
Risks Associated with Securities
Apart from the general risks outlined above which apply to all types of investments, specific securities may have other risks.
Common Stocks may go up and down in price quite dramatically, and in the event of an issuer’s bankruptcy or restructuring could lose all value . A slower -growth or recessionary economic environment could have an adverse effect on the price of all stocks.
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Bonds are debt securities to borrow money. Generally, issuers pay investors periodic interest and repay the amount borrowed either periodically during the life of the security and/or at maturity.
Alternatively, investors can purchase other debt securities, such as zero-coupon bonds, which do not pay current interest, but rather are priced at a discount from their face values and their values accrete over time to face value at maturity. The market prices of debt securities fluctuate depending on such factors as interest rates, credit quality, and maturity. In general, market prices of debt securities decline when interest rates rise and increase when interest rates fall. The longer the time to a bond’s maturity, the greater its interest rate risk.
Bank Obligations including bonds and certificates of deposit may be vulnerable to setbacks or panics in the banking industry . Banks and other financial institutions are greatly affected by interest rates and may be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations.
Municipal Bonds are debt obli gations generally issued to obtain funds for various public purposes, including the construction of public facilities. Municipal bonds pay a lower rate of return than most other types of bonds. However, because of a municipal bond’s tax -favored status, inv estors should compare the relative after -tax return to the after -tax return of other bonds, depending on the investor’s tax bracket. Investing in municipal bonds carries the same general risks as investing in bonds in general. Those risks include interest rate risk, reinvestment risk, inflation risk, market risk, call or redemption risk, credit risk, and liquidity and valuation risk.
Private Investment Funds generally involve various risk factors, including, but not limited to, potential for complete loss of principal, liquidity constraints and lack of transparency, a complete discussion of which is set forth in each fund’s offering documents, which will be provided to you in connection with any private fund investment we recommend. Unlike other liquid investments that a client may maintain, private investment funds do not provide daily liquidity or pricing. You will be required to complete a subscription agreement, pursuant to establishment that you are an accredited investor, and acknowledge and accept the various risk factors that are associated with such an investment as indicated in the offering memoranda.
Investment Companies Risk . When a client invests in open end mutual funds , CITs, interval mutual funds, or ETFs, the client indirectly bears its proportionate share of any fees and expenses payable directly by those funds. Therefore, the client will incur higher expenses, many of which may be duplicative. In addition, the client’s overall portfolio may be a ffected by losses of an underlying fund and the level of risk arising from the investment practices of an underlying fund (such as the use of derivatives). ETFs are also subject to the following risks: (i) an ETF’s shares may trade at a market price that is above or below its net asset value; (ii) the ETF may employ an investment strategy that utilizes high leverage ratios; or (iii) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are de -listed from the exchange, or the activation of market -wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally. The Adviser has no control over the risks taken by the underlying funds in which clients invest.
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Item 9: Disciplinary Information
Criminal or Civil Actions
We have not been involved in any criminal or civil action.
Administrative Enforcement Proceedings
We have not been involved in administrative enforcement proceedings.
Self-Regulatory Organization Enforcement Proceedings
We have not been involved in legal or disciplinary events that are material to a client’s or prospective client’s evaluation of BFSG or the integrity of its management.
Item 10: Other Financial Industry Activities and
Affiliations
Focus Financial Partners, LLC
As noted above in response to Item 4, certain funds affiliated with CD&R collectively are indirect majority owners of Focus Inc., and certain funds affiliated with Stone Point are indirect owners of Focus Inc. Because BFSG is an indirect, wholly-owned subsidiary of Focus Inc., CD&R and Stone Point investment vehicles are indirect owners of BFSG.
BFSG, LLC Management Company
Pursuant to management agreement (the “Management Agreement”) between BFSG, LLC, Focus and Retirement Plan Consulting Group, LLC (the “Management Compan y”), the Management Company has agreed to provide persons to serve as officers and leaders of BFSG, LLC who, in such capacity, will be responsible for the management, supervision and oversight of BFSG, LLC. John Campbell, Patrick Powers, Tina Schackman , Christopher Rowey, Darren Stewart , Steven Yamshon, Michael Allbee, and Grace Lau are the managing members of the Management Company. The Management Company does not provide investment advisory services.
Management of other Focus Partners is not involved in the management of BFSG.
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Pooled Investment Vehicle
Patrick D. Powers, a Managing Principal, is a limited partner in a limited partnership ("LP") formed for investment purposes. The LP was formed for the benefit of the family of Patrick D. Powers.
Clients are not solicited to invest in t he LP. The LP may own an interest in or buy or sell for its account(s), the same securities which may be purchased or sold in the accounts of clients. The LP account(s) may be included within an aggregated order. For purposes of our Code of Ethics, described below in Item 11, we consider the LP an “employee account”. We have established written policies and procedures for employee trading that state clients should be receiving terms as favorable as or better than employees.
Recommendations or Selections of Third-Party Service Providers
Under BFS Wealth Management’s Pension Consulting program, we engage “turnkey” providers of retirement plan services, to be one of several service providers, to client retirement plans. In such circumstances, retirement plan clients remit a single fee to the turnkey service provider, who in turn remits our advisory fee to us. Our fees to participating retirement plans are not increased in any way as a result of this fee arrangement.
Compensation we receive may differ depending on the compensation arrangement with each “turnkey” retirement plan service provider. These compensation arrangements present a conflict of interest because we have a financial incentive to recommend the services of one “turnkey” retirement plan service provider over another and our compensation can vary depending on which “turnkey” retirement plan service provider is used. However, when recommending “turnkey” retirement plan service providers to a client, the client’s best interest will be the main determining factor for us. This relationship is disclosed to the client at the commencement of the Pension Consulting relationship. You are not obligated, contractually or otherwise, to use the services of any third-party service provider we recommend.
National Advisors Trust Company (“NATCO”)
Grace Y. Lau, a Managing Principal, has a minority ownership interest in a savings and loan holding company, National Advisors Holding, Inc., a Delaware Corporation that formed a federally chartered trust company, National Advisors Trust Company (“NATCO”). NATCO is regulated by the Office of Thrift Supervision. The trust company provides a low-cost alternative to traditional trust service providers, and BFS Wealth Management refers clients to NATCO for trust, custody, and brokerage services. Moreover, NATCO uses the services of Fidelity Investments Institutional Brokerage and SunGuard Institutional Brokerage, Inc.’s equity and fixed income platforms to execute client’s securities transactions. Grace Y. Lau maintains less than 5 % ownership interest in National Advisors Holdings, Inc.
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Managed Account Service
We do not have to pay for Morningstar’s Advisor Managed Account Services so long as our clients (“Plan Sponsors”) collectively keep a total of at least $40 million of their assets in Morningstar’s Advisor Managed Account Services. Beyond that, these services are not contingent upon us committing any specific amount of business to Morningstar. The annual min imum fee may give us an incentive to recommend that you maintain your account with Morningstar, based on our interest in receiving their services that benefit our business rather than based on your interest in receiving the best value in model portfolio se rvices. This is a potential conflict of interest. Our selection is primarily supported by the scope, quality, and price of Morningstar’s services.
Focus Treasury & Credit Solutions
We offer clients the option of obtaining certain financial solutions from unaffiliated third-party financial institutions with the assistance of our affiliate, Focus Treasury & Credit Solutions (“FTCS”), a wholly owned subsidiary of our parent company, Focus Financial Partners, LLC. These third-party financial institutions are banks and non-banks (the “Network Institutions”) that offer credit and cash management solutions to our clients. Certain other unaffiliated third parties provide administrative and settlement services to facilitate F TCS’s cash management solutions.
FTCS acts as an intermediary to facilitate our clients’ access to these credit and cash management solutions.
Neither we nor FTCS receives any compensation from the Network Institutions or any other third parties for providing credit or cash management soluti ons to our clients. For services provided by FTCS to clients of other Focus firms, FTCS receives a portion of the revenue earned by the Network Institutions, and such compensation to FTCS is also revenue for our common parent company, Focus Financial Partn ers, LLC. However, this compensation to FTCS does not come from credit or cash management solutions provided to any of our clients. The volume generated by our clients’ transactions does benefit FTCS and Focus in attracting, retaining, and negotiating with Network Institutions. We mitigate this conflict by: (1) fully and fairly disclosing the material facts concerning the above arrangements to our clients, including in this Brochure; and (2) offering FTCS solutions to clients on a strictly nondiscretionary and fully disclosed basis, and not as part of any discretionary investment services. Additionally, we note that clients who use FTCS’s services will receive product -specific disclosure from the Network Institutions and other unaffiliated third-party intermediaries that provide services to our clients.
We have an additional conflict of interest when we recommend FTCS to provide credit solutions to our clients because our interest in continuing to receive investment advisory fees from client accounts giv es us a financial incentive to recommend that clients borrow money rather than liquidating some or all of the assets we manage.
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Credit Solutions from FTCS
For F TCS credit solutions, the interest rate of the loan is ultimately dictated by the lender, although in some circumstances F TCS may have the ability to influence the lender to lower the interest rate of the loan. The final rate may be higher or lower than the prevailing market rate.
We can offer no assurances that the rates offered to y ou by the lender are the lowest possible rates available in the marketplace.
Clients retain the right to pledge assets in accounts generally, subject to any restrictions imposed by clients’ custodians. While the F TCS program facilitates secured loans thr ough Network Institutions, clients are free instead to work directly with institutions outside the F TCS program.
Because of the limited number of participating Network Institutions, clients may be limited in their ability to obtain as favorable loan terms as if the client were to work directly with other banks to negotiate loan terms or obtain other financial arrangements.
Clients should also understand that pledging assets in an account to secure a loan involves additional risk and restrictions. A Network Institution has the authority to liquidate all or part of the pledged securities at any time, without prior notice to clients and without their consent, to maintain required collateral levels. The Network Institution also has the right to call client loans and require repayment within a short period of time; if the client cannot repay the loan within the specified time period, the Network Institution will have the right to force the sale of pledged assets to repay those loans. Selling assets to maintain collateral levels or calling loans may result in asset sales and realized losses in a declining market, leading to the permanent loss of capital.
These sales also may have adverse tax consequences. Interest payments and any other loan - related fees are borne by clients and are in addition to the advisory fees that clients pay us for managing assets, including assets that are pledged as collateral. The returns on pledged assets may be less than the account fees and interest paid by the account. Clients should consider carefully and skeptically any recommendation to pursue a more aggressive investment strategy in order to support the cost of borrowing, particularly the risks and costs of any such strategy.
More generally, before borrowing funds, a client should carefully review the loan agreement, loan application, and other forms and determine that the loan is consistent with the client’s long- term financial goals and presents risks consistent with the client’s financial circumstances and risk tolerance.
Cash Management Solutions from FTCS
For FTCS cash management solutions, as stated above, certain third-party intermediaries provide administrative and settlement services in connection with the program. Those intermediaries each charge a fixed basis point fee on total deposits in the program. Before any interest is paid into client accounts, the Network Institutions and certain unaffiliated third -party service providers take their fees out, and the net interest is then credited to clients’ accounts. Engaging FTCS, the Network Institutions, and these other intermediaries to provide cash management solutions does not alter the manner in which we treat cash for billing purposes.
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Clients should understand that in rare circumstances, depending on interest rates and other economic and market factors, the yields on cash management solutions could be lower than the aggregate fees and expenses charged by the Network Institutions, the intermediaries referenced above, and us. Consequently, in these rare circumst ances, a client could experience a negative overall investment return with respect to those cash investments. Nonetheless, it might still be reasonable for a client to participate in the FTCS cash management program if the client prefers to hold cash at t he Network Institutions rather than at other financial institutions ( i.e., to take advantage of FDIC insurance).
Focus Risk Solutions
We help clients obtain certain insurance products from unaffiliated insurance companies by introducing clients to our affiliate, Focus Risk Solutions, LLC (“FRS”), a wholly owned subsidiary of our parent company, Focus Financial Partners, LLC (“Focus”). F RS acts as an intermediary to facilitate our clients’ access to insurance products. FRS has agreements with certain third -party insurance brokers (the “Brokers”) under which the Brokers assist our clients with regulated insurance sales activity.
Neither we nor FRS receives any compensation from the Brokers or any other third parties for providing insurance solutions to our clients. For services provided by FRS to clients of other Focus firms, FRS receives a percentage of the upfront commission or a perc entage of the ongoing premiums for policies successfully placed with insurance carriers on behalf of referred clients, and such compensation to FRS is also revenue for our common parent company, Focus Financial Partners, LLC. However, this compensation to FRS does not come from insurance solutions provided to any of our clients. The volume generated by our clients’ transactions does benefit FRS and Focus in attracting, retaining, and negotiating with the Brokers and insurance carriers.
We mitigate this conflict by: (1) fully and fairly disclosing the material facts concerning the above arrangements to our clients, including in this Brochure; and (2) offering FRS solutions to clients on a strictly nondiscretionary and fully disclosed basis, and not as part of any discretionary investment services. Additionally, we note that clients who use FRS’s services will receive product-specific disclosure from the Brokers and insurance carriers and other unaffiliated third - party intermediaries that provide services to our clients.
The insurance premium is ultimately dictated by the insurance carrier, although in some circumstances the Brokers or FRS may have the ability to influence an insurance carrier to lower the premium of the policy. The final rate may be higher or lower than the prevailing market rate.
We can offer no assurances that the rates offered to you by the insurance carrier are the lowest possible rates available in the marketplace.
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Item 11: Code of Ethics , Participation or Interest
in Client Transact ions and Personal Trading
We recognize that the personal investment transactions of members and employees of our firm demand the application of a high Code of Ethics and require that all such transactions be carried out in a way that does not endanger the interest of any client. At the same time, we believe that if investment goals are similar for clients and for members and employees of our firm, it is logical and even desirable that there be common ownership of some securities.
Therefore, in order to prevent conflicts of interest, we have in place a set of procedures with respect to transactions effected by our members, officers, and employees for their personal accounts. In order to monitor compliance with our personal trading policy, we hav e quarterly securities transaction reporting for all of our personnel.
Code of Ethics Description
Our firm has established a Code of Ethics which applies to all of our supervised persons. As a fiduciary, it is our responsibility to provide fair and full disclosure of all material facts and to act solely in the best interest of each of our clients at all times. We have a fiduciary duty to all clients.
Our fiduciary duty is considered the core underlying principle for our Code of Ethics, which also includes Insider Trading and Personal Securities Transactions Policies and Procedures. We require all of our supervised persons to conduct business with the highest level of ethical standards and to comply with all federal and state securities laws at all times. U pon employment or affiliation and at least annually thereafter, all supervised persons will sign an acknowledgement that they have read, understand, and agree to comply with our Code of Ethics. Our firm and supervised persons must conduct business in an honest, ethical, and fair manner and avoid all circumstances that might negatively affect or appear to affect our duty of complete loyalty to all clients. This disclosure is provided to give all clients a summary of our Code of Ethics. However, if a client o r a potential client wishes to review our Code of Ethics in its entirety, a copy will be provided promptly upon request. Requests for a copy of our Code of Ethics may be sent to the Chief Compliance Officer at 2040 Main Street, Suite 720, Irvine, CA 92614.
Investment Recommendations Involving a Material Financial Interest and Conflicts of Interest
Neither our firm, its associates or any related person is authorized to recommend to a client, or effect a transaction for a client, involving any security in which our firm or a related person has a material financial interest, such as in the capacity as an underwriter, adviser to the issuer, etc.
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Advisory Firm Purchase of Same Securities Recommended to Clients and Conflicts of Interest
Our firm and its supervised persons may buy or sell securities similar to, or different from, those we recommend to clients for their accounts. In an effort to reduce or eliminate certain conflicts of interest involving the firm or personal trading, our policy requires supervised persons to report their personal securities holdings and transactions to the Firm for compliance monitoring and requires supervised persons to obtain preclearance for certain securities transactions.
Investment Advice Relating to Retirement Accounts
When we provide investment advice to you regarding your retirement plan account or individual retirement account, we are fiduciaries within the meaning of Title I of the Employee Retirement Income Security Act and/or the Internal Reven ue Code, as applicable, which are laws governing retirement accounts. The way we make money creates some conflicts with your interests, so we operate under a special rule that requires us to act in your best interest and not put our interest ahead of yours. Under this special rule’s provisions, we must:
• Meet a professional standard of care when making investment recommendations (give prudent advice);
• Never put our financial interests ahead of yours when making recommendations (give loyal advice);
• Avoid misleading statements about conflicts of interest, fees, and investments; • Follow policies and procedures designed to ensure that we give advice that is in your best interest;
• Charge no more than is reasonable for our services; and • Give you basic information about conflicts of interest.
In addition, and as required by this rule, we provide information regarding the services that we provide to you, and any material conflicts of interest, in this brochure and in your client agreement.
Item 12: Brokerage Practices
Institutional Consulting Services
We do not recommend and/or use broker dealers in connection with the consulting services we provide to institutional clients. This brokerage practices section applies primarily to clients who are individuals.
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Factors Used to Select Custodians and/or Broker -Dealers
In the event that the client requests that BFSG recommend a broker -dealer/custodian for execution and/or custodial services, BFSG generally recommends that investment advisory accounts be maintained at Charles Schwab & Co., Inc. ("Schwab") , Apex Fintech Solutions Inc. (“Apex”), and/or Fidelity Institutional Brokerage Group, Inc. (“Fidelity”) , registered broker - dealers and members SIPC . We are independently owned and operated and are not affiliated with Schwab , Apex or Fidelity. Prior to engaging BFSG to provide investment management services, the client will be required to enter into a forma l Investment Advisory Agreement with BFSG setting forth the terms and conditions under which BFSG shall advise on the client's assets, and a separate custodial/clearing agreement with each designated broker-dealer/custodian.
Factors that BFSG considers in recommending Schwab, Apex and/or Fidelity (or any other broker- dealer/custodian to clients) include historical relationship wi th BFSG, financial strength, reputation, execution capabilities, pricing, research, and service. Although the transaction fees paid by BFSG’s clients shall comply with BFSG’s duty to obtain best execution, a client may pay a transaction fee that is higher than another qualified broker -dealer might charge to effect the same transaction where BFSG determines, in good faith, that the transaction fee is reasonable.
In seeking best execution, the determinative factor is not the lowest possible cost, but whether the transaction represents the best qualitative execution, taking into consideration the full range of a broker -dealer’s services, including the value of research provided, execution capability, transaction rates, and responsiveness. Accordingly, although BFSG will seek competitive rates, it may not necessarily obtain the lowest possible rates for client account transactions. The transaction fees charged by the designated broker -dealer/custodian are exclusive of, and in addition to, BFSG’s investment advisory fee.
In addition , we may recommend the use of National Advisors Trust Company (“NATCO”) for certain trust, custody, and brokerage services. As previously disclosed (see Item 10 – Other Financial Industry Activities and Affiliations ), Grace Y. Lau has a minority ownership interest in National Advisors Holdings, Inc. a Delaware corporation that owns NATCO.
Client accounts enrolled in the Automated Investment Program (“Wealth Accumulator”) are maintained at, and receive the brokerage services of Schwab, a broker-dealer registered with the Securities and Exchange Commission and a member of FINRA and SIPC. We are independently owned and operated and are not affiliated with Schwab.
The qualified custodians will hold your assets in a brokerage account and b uy and sell securities when we instruct them to. While we recommend that you use Schwab , Apex, Fidelity, and/or NATCO as your custodian/broker (s) and while you are required to use Schwab as your custodian/broker to enroll in the Automated Investment Program, you will decide whether to do so and will open your account with the qualified custodian (s) by entering into an account agreement directly with them. We do not open the account for you, although we may assist you in doing so. If you do not wish to place your assets with Schwab for the Automated Investment Program, then we cannot manage your accounts through Wealth Accumulator . Schwab may 65 39
aggregate purchase and sale orders for ETFs across accounts enrolled in the Automated Investment Program, including both accounts for our clients and accounts for clients of other independent investment advisory firms using the Platform.
We may accept directed brokerage arrangements (when you require that account transactions be effected through a spec ific broker-dealer/custodian). In such client directed arrangements, you will negotiate terms and arrangements for your account with that broker-dealer, and we will not seek better execution services or prices from other broker-dealers or be able to "batch" your transactions for execution through other broker-dealers with orders for other accounts managed by us. As a result, you may pay higher commissions or other transaction costs or greater spreads, or receive less favorable net prices, on transactions for the account than would otherwise be the case. Please Note : In the event that you direct us to effect securities transactions for your accounts through a specific broker-dealer, you correspondingly acknowledge that such direction may cause your accounts t o incur higher commissions or transaction costs than the accounts would otherwise incur had you determined to effect account transactions through alternative clearing arrangements that may be available through us. Higher transaction costs adversely impact account performance. Please Also Note: Transactions for directed accounts will generally be executed following the execution of portfolio transactions for non-directed accounts.
Even though your account is maintained at Schwab , Apex, Fidelity, and/or NATCO, we can still use other brokers to execute trades for your account as described below (see "Y our Brokerage and Custody Costs").
Other Compensation
We receive an economic benefit from the brokerage firms (i.e., Schwab, Fidelity, among others) in the form of the support products and services they make available to us and other independent investment advisors whose clients maintain their accounts with them. The availability to us of the brokerage firms’ products and services is not based on us giving particular investment advice, such as buying particular securities for our clients.
Our firm and/or our officers and representatives are eligible to receive gifts and entertainment.
While we endeavor at all times to put the interest of our clients first as part of our fiduciary duty, the possibility of receiving gifts and entertainment creates a confli ct of interest and may affect the judgment of these individuals when making recommendations.
Our firm's Code of Ethics addresses gifts and entertainment and the overriding principle is that supervised persons should not accept inappropriate gifts, favors , entertainment, special accommodations, or other things of material value that could influence their decision-making or make them feel obligated to a person or firm. We require all supervised persons to report gifts and entertainment over certain de minim us amounts to the Chief Compliance Officer or President.
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How We Select Brokers/Custodians
We seek to recommend a custodian/broker who will hold your assets and execute transactions on terms that are, overall, most advantageous when compared to other av ailable providers and their services. We consider a wide range of factors, including, among others:
1. Combination of transaction execution services and asset custody services (generally without a separate fee for custody);
2. Capability to execute, clear, and settle trades (buy and sell securities for your account);
3. Capability to facilitate transfers and payments to and from accounts (wire transfers, check requests, bill payments, etc.);
4. Breadth of available investment products (stocks, bonds, mutual funds, exchange-traded funds, etc.);
5. Availability of investment research and tools that assist us in making investment decisions;
6. Ability to provide necessary performance reporting;
7. Quality of services;
8. Competitiveness of the price of those services (commission rates, margin interest rates, other fees, etc.) and willingness to negotiate the prices;
9. Reputation, financial strength, and stability;
10. Prior service to us and our other clients; and
11. Availability of other products and services that benefit us, as discussed below (see “Products and Services Available to Us”)
Your Brokerage and Custody Costs
For our clients' accounts that Schwab, Apex, Fidelity, and/or NATCO maintains, they generally do not charge you separately for custody services but are compensated by charging you commissions or other fees on trades that are executed or that settle into your account.
Schwab's commission rates and asset -based fees applicable to our clien t accounts were negotiated based on the condition that our clients collectively maintain a total of at least $10 million of their assets in accounts at Schwab. This commitment benefits you because the overall commission rates and asset-based fees you pay are lower than they would be otherwise.
Products and Services Available to Us
Schwab Advisor Services ™ (formerly called Schwab Institutional) , Apex Advisor Solutions, and Fidelity Institutional Wealth Services are the brokerage firms business division s that serves independent investment advisory firms like us. They provide us and our clients with access to its institutional brokerage services: trading, custody, reporting, trust services, charitable services, and related services. Many of these are not ty pically available to retail customers. Schwab and Fidelity also make available various support services. Some of those services help us manage or administer our clients' accounts, while others help us manage or grow our business. 67 41
Schwab's support service s generally are available on an unsolicited basis (we don't have to request them) and at no charge to us as long as our clients collectively maintain a total of at least $10 million of their assets in accounts at Schwab. If our clients collectively have le ss than $10 million in assets at Schwab, Schwab may charge us quarterly service fees of $1,200.
Fidelity's support services generally are available on an unsolicited basis (we don't have to request them) and at no charge to us as long as our clients collectively maintain a total of at least $15 million of their assets in accounts at Fidelity. If our clients collectively have less than $1 5 million in assets at Fidelity, Fidelity may charge us quarterly service fees of $2,500.
The availability to us of Schwab’s, Apex’s, and Fidelity’s products and services is not based on us giving particular investment advice, such as buying particular securities for our clients.
The following is a more detailed description of the brokerage firms support services:
Services That Benefit You. Schwab's, Apex’s, and Fidelity’s institutional brokerage services include access to a broad range of investment products, execution of securities transactions, and custody of client assets. The investment pro ducts available through Schwab , Apex, and Fidelity include some to which we might not otherwise have access or that would require a significantly higher minimum initial investment by our clients. Schwab's , Apex’s, and Fidelity’s services described in this paragraph generally benefit you and your account.
Services That May Not Directly Benefit You. Schwab, Apex, and Fidelity also make available to us other products and services that benefit us but may not directly benefit you or your account.
These products and services assist us in managing and administrating our clients' accounts. They include investment research, Schwab's and Fidelity’s own and that of third parties. We may use this research to service all or a substantial number of our clients' accounts , including accounts not maintained at Schwab , Apex, or Fidelity. We do not seek to allocate the benefits to client’s accounts proportionately. In addition to investment research, Schwab , Apex, and Fidelity also make available software and other technology that:
1. Provide access to client account data (such as duplicate trade confirmations and account statements);
2. Facilitate trade execution and allocate aggregated trade orders for multiple client accounts;
3. Provide pricing and other market data;
4. Facilitate payment of our fees from our clients' accounts; and
5. Assist with back-office functions, recordkeeping, and client reporting Services That Generally Benefit Only Us. Schwab, Apex, and Fidelity also offer other services intended to help us manage and further develop our business enterprise. These services include:
1. Educational conferences and events;
2. Consulting on technology, compliance, legal, and business needs; 68 42
3. Publications and conferences on practice management and business succession; and
4. Access to e mployee benefits providers, human capital consultants, and insurance providers.
Schwab, Apex, and Fidelity may provide some of these services themselves. In other cases, they will arrange for third-party vendors to provide the services to us. Schwab, Apex, and Fidelity may also discount or waive their fees for some of these services or pay all or a part of a third party's fees. Schwab , Apex, and Fidelity may also provide us with other benefits, such as occasional business entertainment for our personnel or in the sponsorship of client events from time to time.
We may also use services from directed brokers/custodians that may or may not directly benefit you and/or benefit us only. The services described above from Schwab, Apex, and Fidelity would be similar to those received from directed brokers/custodians.
Our Interest in Schwab's , Apex’s, and Fidelity’s Services. In evaluating whether to recommend that client’s custody their assets at Schwab, Apex, and/or Fidelity, we may take into account the availability of some of the foregoing products and services and other arrangements as part of the total mix of factors we consider and not solely on the nature, cost or quality of custody and brokerage services provided by them, which may create a pote ntial conflict of interest as you may pay less for these services elsewhere.
The availability of these services from them benefits us because we do not have to produce or purchase them. We don't have to pay for Schwab's services so long as our clients collectively keep a total of at least $10 million of their assets in accounts at Schwab and we don’t have to pay for Fidelity’s services so long as our clients collectively keep a total of at least $15 million of their assets in accounts at Fidelity. Beyond that, these services are not contingent upon us committing any specific amount of business to Schwab or Fidelity in trading commissions or assets in custody.
The minimums may give us an incentive to recommend that you maintain your account with Schwab and/or Fidelity, based on our interest in receiving their services that benefit our business rather than based on your interest in receiving the best value in custody services and the most favorable execution of your transactions. This is a potential conflict of interest.
Our selection is primarily supported by the scope, quality, and price of Schwab's , Apex’s, and Fidelity’s services (see "How We Select Brokers/Custodians") and not Schwab's , Apex’s, and Fidelity’s services that benefit only us. Schwab's, Apex’s, and Fidelity’s brokerage services include the execution of securities transactions, custody, research, and access to mutual funds and other investments that are otherwise generally available only to institutional investors or would require a significantly higher minimum initial investment.
BFSG’s clients do not pay more for investment transactions effected and/or assets maintained at Schwab, Apex, and/or Fidelity a s the result of this arrangement. There is no corresponding commitment made by BFSG to Schwab, Apex, and/or Fidelity, or any other any entity, to invest 69 43
any specific amount or percentage of client assets in any specific mutual funds, securities, or other investment products as result of the above arrangement.
BFSG’s Chief Compliance Officer, remains available to address any questions that a client or prospective client may have regarding the above arrangements and the corresponding conflict of interest presented by such arrangements.
Trade Errors
From time-to-time we may make an error in submitting a trade order on your behalf. When this occurs, we may place a correcting trade with the broker-dealer that has custody of your account.
If an investment gain results from the correcting trade, the gain will remain in your account unless the same error involved other client account(s) that should have received the gain, then it is not permissible for you to retain the gain, or we confer with you and you decide to forego the gain (i.e., due to tax reasons). We may not benefit from trade errors that result in the purchase of securities that increase in value.
If the gain does not remain in your account , your custodian will donate the amount of any gain $100 and over to charity. If Schwab is your custodian, Schwab will maintain the loss or gain (if such gain is not retained in your account) if it is under $100 to minimize and offset its administrative time and expense. If Fidelity, Apex, or NATCO is your custodian, they will maintain the gain (if such gain is not retained in your account) if it is under $100 to minimize and offset its administrative time and expense. If a loss occurs at Fidelity, Apex or NATCO, we will pay for the loss. If a loss occurs at Schwab greater than $100, we will pay for the loss. Generally, if related trade errors result in both gains and losses in your account, they may be netted.
Aggregated Trades
Transactions for each client account generally will be effected independently, unless we decide to purchase or sell the same securities for several clients at approximately the same time. We may (but are not obligated to) combine or “bunch” such orders to obtain best execution, to negotiate more favorable commission rates or to allocate equitably among our client’s differences in prices and commissions or other transaction costs that might have been obt ained had such orders been placed independently. Under this procedure, transactions will be averaged as to price and will be allocated among clients in proportion to the purchase and sale orders placed for each client account on any given day. We shall not receive any additional compensation or remuneration as the result of such aggregation.
The various offices of BFS Wealth Management operate trading desks that are separate from each other and these trading desks do not aggregate or allocate and do not attempt to coordinate or rotate the trades among the groups of clients each office serves.
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Schwab may aggregate purchase and sale orders for ETFs across accounts enrolled in the Wealth Accumulator service, including both accounts for our clients and accounts for clients of other independent investment advisory firms using the Platform.
Trade Away Transactions
Pursuant to the terms of your Schwab or Fidelity b rokerage agreement, we may execute securities transactions with counterparties outside o f Schwab or Fidelity (this activity is broadly referred to as “Trade Away Transactions ”). Your funds are held at Schwab or Fidelity and the counterparty settles trades with the custodian via prime brokerage and/or delivery vs. payment (DVP) accounts. The counterparties are compensated for trade execution only.
Item 13: Review of Accounts
Investment Portfolio Management
Reviews: While the underlying securities within Investment Portfolio Management Services accounts are continually monitored, these accounts are reviewed no less than annually. Accounts are reviewed in the context of your stated investment objectives and guidelines. More frequent reviews may be triggered by material changes in your individual circumstances, frequent deposits or withdrawals from the account(s), or the market, political or economic environments. We may deviate from stated investment objectives and guidelines as market conditions warrant for short periods of time in an effort to improve portfolio performance.
These accounts are reviewed by: Mr. Powers, Managing Principal, Ms. Lau, Managing Principal, Mr. Yamshon, Managing Principal, Mr. Allbee, Senior Portfolio Manager , Mr. Steffanci, Senior Portfolio Manager, Mr. Blom, Senior Wealth Manager, Mr. Masci, Investment Analyst, Mr.
Verdugo, Financial Analyst, and Mr. Nardo, Senior Relationship Manager . There is currently no limit on the number of accounts that can be reviewed by a portfolio manager.
Reports: In addition to the monthly statements and confirmations of transactions that you receive from your broker -dealer, we provide either quarterly or annual written reports summarizing account performance, balances and holding s. We urge you to compare these reports against the account statements they receive from their custodian.
Independent Third-Party Money Manager Reports : In addition to the monthly statements and confirmations of transactions that you receive from the respective broker -dealer, an independent third-party money manager who manages a portion of your assets may provide you with written quarterly performance reports. Unless otherwise contracted for, we do not typically provide additional reports.
Unaffiliated Private Investment Fund Reports: In addition to the monthly statements and confirmations of transactions that you receive from the respective broker -dealer, an 71 45
independent third-party money manager who manages a portion of your assets may provide you with written quarterly performance reports. Unless otherwise contracted for, we do not typically provide additional reports.
Automated Investment Program
Reviews: These accounts are automatically monitored daily for rebalancing. Portfolios are rebalanced when the weighting of any asset class included in the portfolio moves higher or lower than its strategic weighting based on a drift tolerance . Tax-loss harvesting trades are initiated when the amount of the loss captured equals at least 0.5% of the total portfolio value. More frequent rebalancing may be triggered by material changes in your individual circumstances, frequent deposits or withdraw als from the account(s), or the market, political or economic environments, and portfolio model modifications.
These accounts are reviewed by: Mr. Allbee, Senior Portfolio Manager, Mr. Blom, Senior Wealth Advisor, and Mr. Noorani, Retirement Plan Consultant. There is currently no limit on the number of accounts that can be reviewed by a portfolio manager.
Reports: You will receive monthly statements and confirmations of transactions that you receive from Schwab. In addition, you will be able to monitor your account online through Schwab Performance Technologies on a real-time basis.
Financial Planning
Reviews: While reviews may occur at different stages depending on the nature and terms of the specific engagement, typically no formal reviews will be conducted for you unless otherwise agreed upon by you and us.
Reports: You will receive a completed financial plan, according to the scope agreed upon.
Additional reports will not typically be provided unless otherwise agreed upon by you and us.
Pension Consulting
Reviews: BFS Institutional Services Investment Advisor Representatives review client accounts on at least a semi -annual basis. The nature of these reviews is to learn whether client accounts are in line with their investment objectives , and appropriately positioned based on market conditions and investment policies, if applicable. We may review client accounts more frequently. Among the factors which may trigger an off -cycle review are major market or economic events, the client’s circumstances, or requests by the client, etc.
Reports: On at least a semi -annual basis, clients receive a report consisting of a review of the investment options offered in their plan. The review is generally based on an evaluation methodology, which includes an analysis of performance, risk -adjusted perfor mance, style 72 46
consistency, and cost. Plan demographics and asset allocation may also be included in the report, if applicable.
Managed Account Service
With respect to the Managed Account Service offered by BFS Institutional Services, we review accounts q uarterly. The investment allocation of the account is compared to the targeted allocation. If the current investment allocation is outside a threshold, then the account is automatically rebalanced to the targeted allocation. Individuals may review their information and make changes as often as necessary by contacting the retirement plan provider.
Item 14: Client Referrals and Other
Compensation
Client Referrals
BFSG has arrangements in place with certain third parties, called promoters, under which such promoters refer clients to us in exchange for a percentage of the advisory fees we collect from such referred clients. Such compensation creates an incentive for the promoters to refer clients to us, which is a conflict of interest for the promoters. Rule 206(4)-1 of the Advisers Act addresses this conflict of interest by, among other things, requiring disclosure of whether the promoter is a client or a non-client and a description of the material conflicts of interest and material terms of the compensation arrangement with the promoter. Accordingly, we require promoters to disclose to referred clients, in writing: whether the promoter is a client or a non-client; that the promoter will be compensated for the referral; the material conflicts of interest arising from the relationship and/or compensation arrangement; and the material terms of the compensation arrangement, including a description of the compensation to be provided for the referral.
We pay a fee to participate in an online adviser matching program with Zoe Financial Inc, which seeks to match prospective advisory clients who have expressed an interest in finding an investment adviser with investment advisory firms. The adviser matching program provides the name and contact in formation of such persons to the advisory firms as potential leads. For Zoe Financial Inc, w e have agreed to pay the adviser matching program 25 basis points (0.25%) for the first $2 million of assets under management, 10 basis points (0.10%) between $ 2 million to $10 million of assets under management, and 5 basis points (0.05%) for any assets over $10 million of assets under management of the advisory fees we receive from any program participant who ultimately becomes our client. If you are charged a fixed fee for standalone financial planning services that may be separate from or without investment management services, we have agreed to pay the adviser matching program 25% of any revenue that comes in the form of a fixed or hourly payment for services for a term of five (5) years. We also participate in a digital advice platform in partnership with Zoe Financial Inc and Apex. For this program, we have agreed to pay 25 basis points (0.25%) for the first $50,000 of assets under 73 47
management, 20 basis point s (0.20%) between $50,000 and $200,000 of assets under management, 15 basis points (0.15%) between $200,000 to $1 million of assets under management, and 10 basis points (0.10%) for any assets over $1 million of assets under management of the advisory fees we receive from any Zoe participant who ultimately becomes our client.
Other Compensation
As indicated in Item 12 above, BFSG can receive from Schwab, Apex, and/or Fidelity (and others) without cost (and/or at a discount), support services and/or products. BFSG’s clients do not pay more for investment transactions effected and/or assets maintained at Schwab, Apex, or Fidelity (or any other institution) as result of this arrangement. There is no corresponding commitment made by BFSG to Schwab, Apex, or Fidelity, or to any other entity, to invest any specific amount or percentage of client assets in any specific mutual funds, securities or other investment products as a result of the above arrangement. BFSG’s Chief Compliance Officer remains available to address any questions that a client or prospective client may have regarding the above arrangement and the corresponding conflict of interest presented by such arrangement.
BFSG can receive from mutual fund companies (and other vendors) without cost, free (and/or at a discount) attendance to educational conferences/events and publications and conferences on practice management. This could be deemed a conflict as the marketing and education activities conducted and the access granted at such meetings could cause BFSG to focus on those sponsors in the course of its duties. These meetings are first and foremost intended to provide training or education to BFSG’s employees . There is no corresponding commitment made by BFSG to any specific provider to invest any specific amount or percentage of client assets in any specific mutual funds, securities, or other investment products as a result of the above arrangement.
BFSG reviews all mutual funds at the Investment Committee to ensure mutual fund selections are suitable and selected for appropriate reasons. BFSG’s Chief Compliance Officer remains available to address any questions that a client or prospective client may have reg arding the above arrangement and the corresponding conflict of interest presented by such arrangement.
BFSG’s parent company is Focus Financial Partners, LLC (“Focus”). From time to time, Focus holds partnership meetings and other industry and best-practices conferences, which typically include BFSG, other Focus firms and external attendees. These meetings are first and foremost intended to provide training or education to personnel of Focus firms, including BFSG. However, the meetings do provide sponso rship opportunities for asset managers, asset custodians, vendors and other third -party service providers. Sponsorship fees allow these companies to advertise their products and services to Focus firms, including BFSG. Although the participation of Focus firm personnel in these meetings is not preconditioned on the achievement of a sales target for any conference sponsor, this practice could nonetheless be deemed a conflict as the marketing and education activities conducted, and the access granted, at such meetings and conferences could cause BFSG to focus on those conference sponsors in the course of its duties. Focus attempts to mitigate any such conflict by allocating the sponsorship fees only to defraying the cost of the meeting or future meetings and n ot as revenue for itself or any affiliate, including 74 48
BFSG. Conference sponsorship fees are not dependent on assets placed with any specific provider or revenue generated by such asset placement.
The BFS Wealth Management division, in the past entered into an agreement with Charles Schwab & Co., Inc., an independent and unaffiliated broker -dealer, to participate in the Schwab Advisor Network (“the Service”), an adviser referral service designed to help investors find an independent personal investment manager in their area. BFS Wealth Management has received client referrals from Schwab through its participation in the Schwab Advisor Network in the past but no longer participates in the Service. BFS Wealth Management pays Schwab a quarterly participation fee on all referred clients’ accounts that are maintained in custody at Schwab and a one-time non-Schwab custody fee on all accounts that are transferred to another custodian .
The fees paid by BFS Wealth Management are a percentage of the value of the asse ts in the clients’ accounts. The fees are paid by BFS Wealth Management and not by the referred client.
Any referral fees incurred are paid solely from BFS Wealth Management’s investment management fee, and do not result in any additional charge to the c lient. The non-Schwab custody fee is higher than the participation fees that BFS Wealth Management would generally pay in a single year. This non-Schwab custody fee creates a potential conflict of interest as BFS Wealth Management has an incentive to recommend that client accounts be held in custody at Schwab. Our firm acknowledges its duty of best execution for all of its clients.
Item 15: Custody
We do not maintain physical custody of client funds or securities; your assets must be maintained in an account at a “qualified custodian ”, generally a broker -dealer or bank. The custody discussion below is applicable primarily to our clients who are indivi duals or are serviced by BFS Wealth Management.
The SEC deems us to have legal custody over your assets if we have the authority to access or withdraw them. BFSG may have the ability to deduct its advisory fee from the client’s custodial account. Most o f our firm’s clients who are individuals authorize us to instruct the qualified custodian(s) to deduct our advisory fees directly from your account and/or give qualified custodians standing authority for us to move money to a third -party without requiring your signature each time.
Clients are provided with written transaction confirmation notices, and a written summary account statement directly from the independent qualified custodian (i.e., Schwab, etc.) at least quarterly.
Please Note: To the extent that BFSG provides clients with periodic account statements or reports, the client is urged to compare any statement or report provided by BFSG with the account statements received from the independent qualified custodian.
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Please Also Note: The account custodian does not verify the accuracy of BFSG’s advisory fee calculation.
Item 16: Investment Discretion
You may hire us to provide discretionary asset management services, in which case we place trades in your account(s) without contacting you prior to each trade to obtain your permission.
Our discretionary authority includes the ability to do the following without contacting you:
• Determine the security to buy or sell; and/or
• Determine the amount of the security to buy or sell.
You give us discretionary authority when you sign a discretionary agreement with our firm and may limit this authority by giving u s written instructions. You may also change/amend such limitations by once again providing us with written instructions. Discretionary accounts and/or trades may be traded first, resulting in a difference in price and execution costs.
If you wish to hold a security against our advice in a discretionary account, we will view these separately, and we will not include their performance in reported performance reports. We may charge management fees on these assets.
When you enter into a non-discretionary arrangement with us, we will obtain your approval prior to the execution of a trade.
Automated Investment Program
We accept discretionary authority to manage the accounts of individuals enrolled in the Wealth Accumulator service. We will monitor the inve stment allocation of the individual’s account.
Based on the information provided to us, we create a personalized asset allocation strategy and select investments that will meet the strategy from investments offered in the automated investment program . As the account moves out of balance, Wealth Accumulator will automatically reallocate back to the targeted allocation. Clients utilizing Wealth Accumulator may instruct us to exclude up to three ETFs from the portfolio. We exercise discretion consistent with the individual’s strategy and within any limitations provided by the c lient in writing .
Investment discretion will be explained to Wealth Accumulator clients in the advisory agreement.
Item 17: Voting Client Securities
BFS Wealth Management votes proxies for some, but not all of our clients , as specified in our contract with you. BFS Institutional Services does not accept proxy voting for institutional clients.
We will only otherwise accept proxy voting authority when you have given us investment discretion over your account. You always have the right to vote proxies yourself. You can exercise this right by instructing us in writing to not vote proxies in your account. With respect to ERISA 76 50
accounts, we will vote proxies unless the plan documents specifically reserve the plan sponsor’s right to vote proxies.
When we accept proxy voting authority, w e will vote proxies in the best interests of our clients and in accordance with our established policies and procedures. We vote proxies in a manner designed to promote shareholders' best interests. Our firm will retain all proxy voting books and records for the requisite period of time, including a copy of each proxy statement received, a record of each vote cast, a copy of a ny document created by us that was material to making a decision how to vote proxies, and a copy of each written client request for information on how our firm voted proxies. If our firm has a conflict of interest in voting a particular action, we will notify you of the conflict and may seek to retain an independent third-party to cast a vote or will abstain from voting the proxy.
You may obtain a copy of our complete proxy voting policies and procedures by contacting our Chief Compliance Officer by telep hone, email, or in writing. You may request, in writing, information on how proxies for your shares were voted. If you request a copy of our complete proxy policies and procedures or how we voted proxies for your account(s), we will promptly provide such information to you. To direct us to vote a proxy in a particular manner, you should contact our Chief Compliance Officer by telephone, email, or in writing.
We will neither advise nor act on behalf of you in legal proceedings involving companies whose securities are held in your account(s), including, but not limited to, the filing of "Proofs of Claim" in class action settlements. If desired, you may direct us to transmit copies of class action notices to you or a third party. Upon such direction, we will make commercially reasonable efforts to forward such notices promptly.
For accounts and securities where we do not vote proxies, our firm may provide investment advisory services relative to your investment assets. You maintain exclusive responsibility for: (1) directing the manner in which proxies solicited by issuers of securities beneficially owned by you shall be voted, and (2) making all elections relative to any mergers, acquisitions, tender offers, bankruptcy proceedings or other type events pertai ning to your investment assets. You are responsible for instructing each custodian of the assets to forward to you copies of all proxies and shareholder communications relating to your investment assets.
Item 18: Financial Information
We have no financial commitment that impairs our ability to meet contractual and fiduciary commitments to clients, and we have not been the subject of a bankruptcy proceeding. We do not require or solicit prepayment of more than $1,200 in fees per client six months in advance.
ANY QUESTIONS: BFSG’s Chief Compliance Officer, Michael Allbee , remains available to address any questions regarding this Part 2A.
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Rev. 03/2022
WHAT DOES BENEFIT FINANCIAL SERVICES GROUP
(BFSG) DO WITH YOUR PERSONAL INFORMATION?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
◼ Social Security number and income
◼ account balances and transaction history
◼ investment experience and risk tolerance
When you are no longer our customer, we continue to share your information as described in this notice.
How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons BFSG chooses to share; and whether you can limit this sharing.
Reasons we can share your personal information Does BFSG share? Can you limit this sharing? For our everyday business purposes—
such as to process your transactions, maintain
your account(s), respond to court orders and legal
investigations, or report to credit bureaus
Yes No
For our marketing purposes—
to offer our products and services to you Yes No
For joint marketing with other financial companies No We don’t share For our affiliates’ everyday business purposes—
information about your transactions and experiences Yes No For our affiliates’ everyday business purposes—
information about your creditworthiness No We don’t share For nonaffiliates to market to you No We don’t share
Questions? Call 949-955-2552 or go to www.bfsg.com
FACTS
78 {00051917;2}
Who we are
Who is providing this notice? BFSG
What we do
How does BFSG protect my personal
information?
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law.
These measures include computer safeguards and secured files and buildings.
How does BFSG collect my personal
information?
We collect your personal information, for example, when you ◼ open an account or deposit money
◼ tell us about your portfolio or seek financial advice ◼ enter into an investment advisory contract
We collect your personal information from others, such as credit bureaus, affiliates or other companies.
Why can’t I limit all sharing? Federal law gives you the right to limit only ◼ sharing for affiliates’ everyday business purposes—information about your creditworthiness
◼ affiliates from using your information to market to you ◼ sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing.
Definitions
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.
◼ Our affiliates include Focus Operating, LLC, Focus Treasury & Credit Solutions, LLC, and Focus Risk Solutions, LLC.
Nonaffiliates Companies not related by common ownership or control. They can be financial and nonfinancial companies.
◼ BFSG does not share with nonaffiliates so they can market to you.
Joint marketing A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
◼ BFSG does not jointly market.
Other important information
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11 EXHIBIT “C”
BFSG, LLC 2023 ANXILIARY SERVICES
CONTRACT FOR PROFESSIONAL SERVICES
BETWEEN THE CITY OF SIMI VALLEY AND BFSG,
LLC FOR INVESTMENT ADVISORY SERVICES TO THE
CITY’S 401k) AND 457(b) PLANS
FINANCIAL PLANNING AND CONSULTING AGREEMENT
In connection with the agreement entered into, between Benefit Financial Services Group, an SEC registered investment adviser having a principal mailing address of 2040 Main Street, Suite 720, Irvine, California 92614 (the “PLANNER”) and the City of Simi Valley (the “EMPLOYER”), I, _________________________ (the “CLIENT”), as a prerequisite to receiving the services contemplated under the Agreement, acknowledge and agree to the following:
PLANNER agrees to provide basic financial planning and consulting services to CLIENT. Per the terms of the Agreement described above, such services are to be provided only to the extent requested by CLIENT. CLIENT will not incur any separate or additional fee as a result of electing to receive the PLANNER’s financial planning and consulting services.
CLIENT acknowledges that recommendations provided by PLANNER are not endorsed or reviewed by EMPLOYER.
PLANNER’s financial planning and consulting services shall conclude upon PLANNER’s communication of its recommendations to CLIENT. It is expressly understood by CLIENT that these services do not create an ongoing relationship between PLANNER and CLIENT.
PLANNER will remain available to review and update any recommendations provided to CLIENT upon CLIENT’s request.
PLANNER’s recommendations (i.e. investments, estate planning, retirement planning, taxes, insurance, etc.) shall be discussed by the PLANNER with CLIENT and may be implemented, at CLIENT’s sole discretion, with the corresponding professional advisors (i.e. broker, accountant, attorney, etc.) of CLIENT’s choosing. In respect to estate planning matters, PLANNER’s role shall be that of a facilitator between CLIENT and CLIENT’s corresponding professional advisors. No portion of PLANNER’s services should be interpreted as legal or accounting advice. CLIENT should defer to CLIENT’s attorney or accountant.
CLIENT agrees to provide information and/or documentation requested by PLANNER as pertains to CLIENT’s objectives, needs, and goals. PLANNER shall not be required to verify any information obtained from the CLIENT, CLIENT’s attorney, accountant , or other professionals, and is expressly authorized to rely thereon. CLIENT is free at all times to accept or reject any recommendation from PLANNER, and CLIENT acknowledges that he has the sole authority with regard to the implementation, acceptance, or rejection of any recommendation or advice from PLANNER.
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12 CLIENT is free to obtain legal, accounting, and brokerage services from any professional source to implement the recommendations of PLANNER. CLIENT will retain absolute discretion over all implementation decisions.
PLANNER’s financial planning and consulting services do not include investment implementation, supervisory, management, or reporting services, nor the regular reviewing, updating, or monitoring of CLIENT’s investment portfolio or financial plan. In the event CLIENT desires that PLANNER provide investment supervisory or management services, CLIENT may request that PLANNER do so under the terms of a separate Investment Advisory Agreement between PLANNER and the CLIENT, for which services PLANNER shall be paid a separate and additional fee.
PLANNER, acting in good faith, shall not be liable for any action, omission, investment recommendation/decision, or loss in connection with its services. The federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which CLIENT may have under any federal or state securities laws, ERISA, or under the rules promulgated by the Employee Benefits Security Administration and/or the Department of Labor. In no event shall PLANNER be responsible to CLIENT for any special, indirect, incidental, exemplary, punitive, or consequential damages in connection with or otherwise arising out of this Agreement.
CLIENT hereby acknowledges prior receipt of a copy of the PLANNER’s written Disclosure Statement as set forth on Part 2A of Form ADV and PLANNER’s Privacy Notice.
Subject to the conditions and exceptions noted below, and to the extent not inconsistent with applicable law, in the event of any dispute pertaining to PLANNER’s services, both PLANNER and CLIENT agree to submit the dispute to arbitration in accordance with the auspices and rules of the American Arbitration Association (“AAA”), provided that the AAA accepts jurisdiction. PLANNER and CLIENT understand that such arbitration shall be final and binding, and that by agreeing to arbitration, both PLANNER and CLIENT are waiving their respective rights to seek remedies in court, including the right to a jury trial. CLIENT acknowledges that he/she/it has had a reasonable opportunity to review and consider this arbitration provision prior to execution.
Agreed to and accepted by:
____________________________________ _____________________________ Signature Date
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13 EXHIBIT “D”
INSURANCE REQUIREMENTS
Consultant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by the Consultant, its agents, representatives, or employees
A. Minimum Scope and Limit of Insurance
Coverage shall be at least as broad as:
1. Commercial General Liability (CGL): Insurance Services Office Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than $2,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit.
2. Automobile Liability: Insurance Services Office Form Number CA 0001 covering, Code 1 (any auto), or if Respondent has no owned autos, Codes 8 (hired) and 9 (non-owned), with limit no less than $1,000,000 per accident for bodily injury and property damage.
3. Workers’ Compensation Insurance as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limit of no less than $1,000,000 per accident for bodily injury or disease. C onsultant hereby certifies that it is aware of the provisions of Section 3700 et seq., of the Labor Code which requires every employer to be insured against liability for Workers' Compensation.
4. Professional Liability (Errors and Omissions) Insurance appropriate to the Consultant’s profession, with limits no less than $2,000,000 per occurrence or claim, and $2,000,000 policy aggregate.
5. Cyber Liability Insurance, with limits not less than $2,000,000 per occurrence or claim, $2,000,000 aggregate. Coverage shall be sufficiently broad to respond to the duties and obligations as is undertaken by Consultant in this agreement and shall include, but not be limited to, claims involving infringement of intellectual property, including but not limited to infringement of copyright, trademark, trade dress, invasion of privacy violations, information theft, damage to or destruction of electronic information, release of private information, alteration of electronic information, extortion and network security.
The policy shall provide coverage for breach response costs a s well as regulatory fines and penalties as well as credit monitoring expenses with limits sufficient to respond to these obligations.
If the Consultant maintains broader coverage and/or higher limits than the minimums shown above, City requires and shall be entitled to the broader coverage and/or the higher limits maintained by the Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available 82 82731.00002\41772170.2
14 to City.
B. Other Insurance Provisions - The insurance policies are to contain, or be endorsed to contain, the following provisions:
1. Additional Insured Status
The City of Simi Valley of Simi Valley, it’s Boards, Officers, Agents, Officials, employees, and volunteers are to be covered as additional insureds on the CGL policy with respect to liability arising out of work or operations performed by or on behalf of the Consultant including materials, parts, or equipment furnished in connection with such work or operations. General liability coverage can be provided in the form of an endorsement to the Consultant ’s insurance (at least as broad as ISO Form CG 20 10 11 85 or both CG 20 10, CG 20 26, CG 20 33, or CG 20 38; and CG 20 37 forms if later revisions used).
2. Primary Coverage
For any claims related to this project/contract, the Consultant ’s insurance coverage shall be primary insurance coverage at least as broad as ISO CG 20 01 04 13 as respects the City of Simi Valley, its Boards, Officers, Agents, Officials, employees, and volunteers. Any insurance or self -insurance maintained by the City of Simi Valley, its Boards, Officers, Agents, Officials, employees, and volunteers shall be excess of the Consultant’s insurance and shall not contribute with it.
3. Notice of Cancellation
Each insurance policy required above shall state that coverage shall not be canceled, except with notice to City.
4. Waiver of Subrogation
Consultant hereby grants to City a waiver of any right to subrogation which any insurer of said Consultant may acquire against City by virtue of the payment of any loss under such insurance. Consultant agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation but this provision applies regardless of whether or not City has received a waiver of subrogation endorsement from the insurer. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of City for all work performed by the Consultant, its employees, agents and subcontractors.
5. Self-Insured Retentions
Self-insured retentions must be declared to and approved by City. City may require the Consultant to provide proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention. The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City. 83 82731.00002\41772170.2
15 6. Acceptability of Insurers
Insurance is to be placed with insurers authorized to conduct business in the state with a current A.M. Best’s rating of no less than A:VII, unl ess otherwise acceptable to City.
7. Claims Made Policies
If any of the required policies provide coverage on a claims-made basis:
a. The Retroactive Date must be shown, and this date must be before the execution date of the contract or the beginning of contract work.
b. Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work.
c. If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a Retroactive Date prior to the contract effective, or start of work date, the Respondent must purchase extended reporting period coverage for a minimum of five (5) years after completion of contract work.
d. A copy of the claims reporting requirements must be submitted to City for review.
8. Verification of Coverage
Consultant shall furnish City with original Certificates of Insurance including all required amendatory endorsements (or copies of the applicable policy language effecting coverage required by this clause) and a copy of the Declarations and Endorsement Page of the CGL policy listing all policy endorsements to City before work begins. However, failure to obtain the required documents prior to the work beginning shall not waive the Consultant’s obligation to provide them. City reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.
9. Subcontractors
Consultant shall require and verify that all subcontract ors maintain insurance meeting all the requirements stated herein, and Consultant shall ensure that City is an additional insured on insurance required from subcontractors. For CGL coverage, subcontractors shall provide coverage with a form at least as broad as CG 20 38 04 13.
10. Special Risks or Circumstance
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16 City reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances.
11. Umbrella or Excess Policy
The Consultant may use Umbrella or Excess Policies to provide the liability limits as required in this agreement. This form of insurance will be acceptable provided that all of the Primary and Umbrella or Excess Policies shall provide all of the insurance coverages herein required, including, but not limited to, primary and non- contributory, additional insured, Self -Insured Retentions (SIRs), indemnity, and defense requirements. The Umbrella or Excess policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying Commercial General Liability insurance. No insurance policies maintained by the Additional Insureds or City, whether primary or excess, and which also apply to a loss covered hereunder, shall be called upon to contribute to a loss until the Consultant’s primary and excess liability policies are exhausted.
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