ADV Part 2A
Item 1. Cover Page
Facet Wealth, Inc.
Facet Wealth, Inc.
CRD# 285961
Dated: August 1, 2023
Contact: Christopher J. Hufman, Chief Compliance Officer
100 International Drive, 23rd Floor
Baltimore, MD 21202
This brochure provides information about the qualifications and business practices of Facet Wealth, Inc. (Facet). If you have any questions about the contents of this brochure, please contact us at 443-376-6235 or [email protected]. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Additional information about Facet Wealth also is available on the SEC’s website at www.adviserinfo.sec.gov.
References herein to Facet Wealth as a “registered investment adviser” or any reference to being “registered” does not imply a certain level of skill or training.
Item 2. Material Changes
The material changes in this brochure from the last other than annual amendment of Facet Wealth, Inc. on March 15, 2023, are described below. Material changes relate to Facet Wealth, Inc.’s policies, practices or conflicts of interests.
- Facet has updated the following sections
- Total amount of Assets Under Management
- Changed language from Investment Advisory Agreement to Planning Agreement
- Clarified instances of the use of the word “may”
- Clarified language to section 5C
- Planning fees for new Members as of August 1, 2023 will generally range from $2400 to $8000 per year on a flat fee basis.
- Clarified language in section 6, 7, 8, 12
- None of these changes raise to a level of a Material Change.
Item 3. Table of Contents
ADV 2A
Item 1. Cover Page
Item 2. Material Changes
Item 3. Table of Contents
Item 4. Advisory Business
Item 5. Fees and Compensation
Item 6. Performance-Based Fees and Side-by-Side Management
Item 7. Types of Members
Item 8. Methods of Analysis, Investment Strategies and Risk of Loss
Item 9. Disciplinary Information
Item 10. Other Financial Industry Activities and Affiliations
Item 11. Code of Ethics, Participation or Interest in Member: Transactions and Personal Trading
Item 12. Brokerage Practices
Item 13. Review of Accounts
Item 14. Member Referrals and Other Compensation
Item 15. Custody
Item 16. Investment Discretion
Item 17. Voting Client Securities
Item 18 Financial Information
Item 4. Advisory Business
A. General Description of Company
Facet Wealth Inc. is a corporation formed on August 3, 2016 in the State of Delaware. Facet became registered as an Investment Adviser in November 2016. Anders Jones serves as Facet’s Chief Executive Officer and Patrick McKenna serves as Executive Chairperson, and each individually owns more than 5% of the firm. In addition, Durable Capital Partners through one investment fund, has an ownership interest of greater than 10% in the firm and Warburg Pincus, through two investment funds, has an ownership interest of greater than 25% in the firm.
B. Summary of Investment Advisory Services
FINANCIAL PLANNING AND CONSULTING SERVICES
Facet provides Members with the financial planning and/or consulting services as designated by the Member. The services provided depend on the nature and complexity of the Member’s situation and could include some or all of the following: financial goal setting, portfolio design and asset allocation, risk tolerance and capacity analysis, investment management, cash flow and expense planning, debt management and planning, employee benefits planning, employer stock plan analysis, retirement planning, education planning, risk management and insurance planning, estate planning and beneficiary, income tax planning, trust planning, small business planning, and small business retirement plans.
Prior to engaging Facet to provide financial planning and consulting services, the Member will be required to enter into a Financial Planning and Consulting Agreement with Facet setting forth the terms and conditions of the engagement and describing the scope of the services to be provided. Facet and the Member will work together to determine the specific suite of services to be provided. Facet’s financial planning and consulting fees are negotiable, but generally range from $2,400 to $8,000 per year on a flat fee basis, depending upon the level and scope of the services required.
The recommendations provided by Facet are focused solely on the individual needs of the Member. Facet engages in a Member intake process involving communication with prospective Members and the collection of their financial information to help determine each Member’s investment objectives and risk tolerance.
In performing its services, Facet shall not be required to verify any information received from the Member or from the Member’s other professionals and is expressly authorized to rely thereon. If requested by the Member, Facet shall recommend the services of other professionals for implementation purposes.
The Member is under no obligation to engage the services of any such recommended professional. If the Member engages any such recommended professional, and a dispute arises thereafter relative to such engagement, the Member agrees to seek recourse exclusively from and against the engaged professional/firm.
The Member retains absolute discretion over all such implementation decisions and is free to accept or reject any recommendation from Facet. Members are encouraged to renew Facet’s financial planning and consulting services on an annual basis for the purpose of reviewing and updating Facet’s previous recommendations and/or services.
It remains the Member’s responsibility to promptly notify Facet if there is ever any change in their financial situation or investment objectives for the purpose of reviewing, evaluating, or revising Facet’s previous recommendations or services.
- Non-Investment Consulting/Implementation Services. For Members, Facet may provide consulting services regarding non-investment related matters, such as estate planning, tax planning, insurance, etc. or direct services such as tax preparation. Any of those services will be provided under the Financial Planning and Consulting Agreement. Some services may require a separate agreement with Facet or with the third party providing those services. Neither Facet, nor any of its representatives, serves as an attorney and no portion of Facet’s services should be construed as legal services. Accordingly, Facet does not prepare estate planning documents. To the extent requested by a Member, Facet may recommend the services of other professionals for certain non-investment implementation purposes (i.e. attorneys, accountants, insurance, etc.), including certain of Facet’s related persons in their separate registered capacities as discussed below. The Member is under no obligation to engage the services of any such recommended professional. The Member retains absolute discretion over all such implementation decisions and is free to accept or reject any recommendation from Facet. No Member is under any obligation to purchase any securities or insurance commission products from a representative of Facet. Members are reminded that they may purchase securities and insurance products recommended by Facet through other, non-affiliated registered representatives of a custodian and/or insurance agencies.
- Retirement Plan Rollovers — No Obligation / Potential for Conflict of Interest. A Member or prospective Member 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 Member’s age, result in adverse tax consequences). If Facet recommends that a Member roll over their retirement plan assets into an account to be managed by Facet, such a recommendation creates a conflict of interest if Facet will earn a new (or increase its current) advisory fee as a result of the rollover. To the extent that Facet recommends that Members roll over assets from their retirement plan to an IRA managed by Facet, then Facet represents that it and its investment adviser representatives are fiduciaries under the Employment Retirement Income Security Act of 1974 (“ERISA”), or the Internal Revenue Code, or both. No Member is under any obligation to roll over retirement plan assets to an account managed by Facet. Facet’s Chief Compliance Officer, Christopher Hufman, remains available to address any questions that a Member or prospective Member may have regarding the conflict of interest presented by such rollover recommendation.
- ERISA / IRC Fiduciary Acknowledgment. (i) a participant or beneficiary of a Plan subject to Title I of ERISA or described in section 4975(e)(1)(A) of the Internal Revenue Code, with authority to direct the investment of assets in his or her Plan account or to take a distribution; (ii) the beneficial owner of an IRA acting on behalf of the IRA
INVESTMENT MANAGEMENT SERVICES
Facet does not generally offer standalone investment management services. However, the Member can determine to engage Facet to provide discretionary investment management as part of its financial planning and consulting services. The list of such services available to a Member will be denoted on the relevant financial planning and consulting services agreement.
Prior to accepting discretionary authority over a Member’s assets, Facet engages in a Member intake process to determine each Member’s investment objectives and risk tolerance.
C. Tailored Services and Investment Restrictions
Facet shall provide advisory services specific to the needs of each Member. Prior to providing advisory services, an investment adviser representative will ascertain each Member’s investment objective(s). Thereafter, Facet shall recommend that the Member allocate investment assets consistent with the designated investment objective(s). The Member may, at any time, impose reasonable restrictions, in writing, on Facet’s services.
D. Wrap Fee Program
Facet does not participate in a wrap fee program.
E. Assets Under Management
As of March 2023, Facet had $2,078,080,182 in assets under management on a discretionary basis.
Facet considers every aspect of our Member’s financial lives in our approach to financial planning. We use a metric called Total Financial Life Resources (TFLR) which includes but is not limited to investments, cash, home equity, retired debt, and workplace retirement benefits and pensions. As of January 2023, our most recent TFLR calculation is over $15 billion.
Item 5. Fees and Compensation
A. FINANCIAL PLANNING AND CONSULTING SERVICES
Facet provides its Members with varying levels of financial planning and consultation services. Facet’s financial planning and consulting fees are negotiable, but generally range from $2,400 to $8,000 per year on a flat fee basis, depending upon the level and scope of the services required. If a Member determines to engage Facet to provide discretionary investment management services, such services shall be considered in determining the Member’s final financial planning and consulting fee. Other factors considered include, but are not limited to the level and scope of the overall investment advisory services to be rendered and the complexity of the engagement. Facet does charge a $250 enrollment fee.
Facet reserves the right to offer promotions which may include such things as waived enrollment fees, investment account rewards or additional promotional offers. These promotions are subject to change and are bound by separate terms and conditions.
For information on the specific billing schedule that would be applicable to an account, please contact your Planner. Details of current and past promotions can be found on the Facet website under “Promotions”.
Note: Fee Differentials. Facet shall price its financial planning and consulting services, as well as any included asset management services, based upon various objective and subjective factors. As a result, Facet’s Members could pay diverse fees based upon the complexity of the engagement, the anticipated number of meetings and servicing needs, related accounts, future earning capacity, managing assets and the level and scope of the overall services to be rendered. As a result, similar Members could pay different fees. Moreover, the services to be provided by Facet to any particular Member could be available from other advisers at lower fees. All Members and prospective Members should be guided accordingly.
B. Facet typically bills for its financial planning services either; quarterly or annually in advance. However, Members may elect to have Facet’s advisory fees deducted from their custodial account, or charged to their credit card. Both Facet’s Planning Agreement and the custodial/clearing agreement has the authority to authorize the custodian to deduct the account for the amount of Facet’s advisory fee and to directly remit that management fee to Facet in compliance with regulatory procedures. To the extent that the Member elects to have Facet’s investment management fee charged to their credit card, Facet shall use a third party service that provides this form of bill pay service for its Member.
C. For investment accounts for which Facet has discretionary asset management, Facet will generally recommend Apex Clearing, except in certain cases where a recommendation to Fidelity, TD Ameritrade, or Charles Schwab, as the custodian for Member investment management assets may be made. Custodians typically charge brokerage commissions and/or transaction fees for effecting certain securities transactions (i.e. transaction fees are charged for certain no-load mutual funds, commissions are charged for individual equity and fixed income securities transactions). Facet provides administrative services associated with activities such as portfolio accounting, and reporting. The cost for these services can be deducted from the Member’s account. Members subject to these fees will be notified at the time of account opening or by direct notification from Facet.
D. Planning Fees are disclosed at the time the planning agreement is signed and prior to payment. Facet’s non-refundable planning fees will generally range from $2400-$8000 per year for new members on a flat fee non-refundable basis, depending upon the level and scope of the services required and the professional rendering of the service(s) provided. Facet’s investment management services are included in the flat fee quoted and will not result in an increased fee. Facet typically bills quarterly or annually, in advance. Termination does not affect the Member’s obligation to pay these non-refundable fees through the end of the payment period outlined in the subscription. Members will continue to have access to their online Member portal through the terms outlined in their planning agreement.
E. The Member will be solely responsible for accepting or rejecting Planner’s financial planning advice and for implementing any such investment recommendations or advice. Planner will recommend itself, one of its affiliates, or a third party to assist the Member with implementation of Planner’s financial planning advice. A conflict of interest exists where Planner recommends itself or any of its affiliates to implement any such advice. Member understands that Member may choose any advisor, brokerage firm, or other professionals to implement the recommendations and advice given by the Advisor if Member chooses not to use Facet services.
Where Planner introduces to Member a third party to provide services in connection with the implementation Planner’s financial planning advice (such as third party services pertaining to the preparation of estate planning documents or the preparation of tax documents), Planner can charge Member an administrative fee for time and resources incurred by the Planner in facilitating the provision of such services with the third party.
Item 6. Performance-Based Fees and Side-by-Side Management
Performance based fees are fees that are based on a share of a capital gains or capital appreciation of a client’s account. Neither Facet nor any supervised person of Facet accepts performance-based fees.
Item 7. Types of Members
Facet’s Members shall generally include individuals and for those individuals, Facet also manages investment accounts that could include pension and profit sharing plans, business entities, trusts, estates and charitable organizations. Facet, in its sole discretion, may charge lesser planning fees based upon certain criteria. (i.e. anticipated future earning capacity, related accounts, complexity of relationship, etc.). Facet’s investment management services are included in the flat fee quoted and do not increase the planning fee. The minimum to open an investment account is $500.
Item 8. Methods of Analysis, Investment Strategies and Risk of Loss
Facet allocates investment management assets of its Member accounts, on a discretionary basis, among one or more of its asset allocation programs (i.e. Aggressive, Moderately Aggressive, Moderate, and Conservative) which is based on the Member’s investment profile developed with the Member’s financial planner. Facet’s asset allocation strategies have been designed to comply with the requirements of Rule 3a-4 of the Investment Company Act of 1940. Rule 3a-4 provides similarly managed investment programs, such as Facet’s asset allocation programs, with a non-exclusive safe harbor from the definition of an investment company. Facet primarily allocates Member investments to exchange traded funds (ETF’s) and if applicable, will manage other existing assets such as various mutual funds, individual equities (stocks) and debt instruments (bonds) the Member has based the Member’s designated investment objective(s).
Facet shall utilize the following methods of security analysis:
- Fundamental – (analysis performed on historical and present data, with the goal of making financial forecasts)
- Technical – (analysis performed on historical and present data, focusing on price and trade volume, to forecast the direction of prices.
- Cyclical – (analysis performed on historical relationships between price and market trends, to forecast the direction of prices)
Investing in securities involves risk of loss that Members should be prepared to bear.
Tax-Optimized Model Implementation
Facet uses an algorithm to incorporate a Member’s legacy assets in taxable accounts into our investment management program in order to disperse/minimize the tax impact of transferring assets to Facet by not immediately selling existing assets that are at a tax gain. Facet’s proprietary algorithm will select the set of our model ETFs that best match the legacy assets the Member owns. These algorithms are developed, overseen, and monitored by Facet’s Head of Investment Strategy.
Facet conducts testing designed to ensure that our algorithm continues to function as intended when new code is introduced and existing code is updated. Although such testing is intended to ensure that code changes do not create unintended consequences, Members should understand that testing, no matter how comprehensive, cannot guarantee the absence of code-related issues with our algorithms
Tax-Loss Harvesting (“TLH”)
TLH is a technique designed to help appropriately reduce a Member’s taxes while maintaining the expected risk and return profile of the Member’s portfolio. It harvests previously unrecognized investment losses to offset taxes due on the Member’s other gains and income by selling a security at a loss to accelerate the realization of capital loss and investing the proceeds in a security with closely correlated risk and return characteristics. The realized loss can be applied to reduce the Member’s tax liability and the tax savings can be reinvested to grow the value of the Member’s portfolio. Facet’s TLH strategy, which is only applied to ETFs, is available to all Members with a taxable Managed Account.
- Facets tax-loss harvesting strategy is not intended as tax advice, and does not represent in any manner that the tax consequences described will be attained or that Facet’s investment strategy will result in any particular tax consequence. The tax consequences of this strategy and other Facet strategies are complex and may be subject to challenge by the IRS. This strategy was not developed to be used by, and it cannot be used by, any investor to avoid penalties or interest. Members and their personal tax advisors are responsible for how the transactions in the Member’s account are reported to the Internal Revenue Service (“IRS”) or any other taxing authority. Facet assumes no responsibility to you for the tax consequences of any transaction, including any capital gains and/or wash sales that may result from the tax-loss harvesting strategy.
- When Facet replaces investments with “similar” investments as part of the tax-loss harvesting strategy, it is a reference to investments that are expected, but are not guaranteed, to perform similarly and that might reduce a Member’s tax bill while maintaining a similar expected risk and return on the Member’s portfolio. Expected returns and risk characteristics are no guarantee of actual performance.
- The performance of the new securities purchased through the tax-loss harvesting service could be better or worse than the performance of the securities that are sold for tax-loss harvesting purposes.
- If a Member has accounts outside of Facet containing the same securities (or options contacts) as their Facet account(s), they cannot sell the same securities, 30 days before or after Facet executes the sale of those securities in the Member’s facet account(s). This will ensure the losses are usable by the Member and avoid possible wash sale rule violations. Wash sales can diminish the effectiveness of tax-loss harvesting by deferring a tax loss to a future year rather than using it to offset income or capital gains in the current year. For more information on the wash sale rule, please read IRS Publication 550.
Short Term Strategy
Facet’s Short-Term Strategy is designed for investments that need to remain highly stable, over short periods of time, usually 1-3 years. Our strategy consists of a set of Exchange-Traded Funds (ETFs) that invest in very short-term, high-quality bonds. This is not a money market fund or bank account. It is an investment strategy held in a brokerage account. Rates will fluctuate over time and some small volatility and or losses are possible.
Environmental, Social and Governance (ESG)
ESG investing is a strategy that keeps a sharp focus on a company’s impact on the planet and society when prioritizing your investments. Facet’s ESG philosophy empowers you to express your beliefs and values through your money while working toward your financial goals. Our ESG portfolio is designed to have a similar risk and profit profile as our traditional portfolio, but avoids profiting from activities not aligned with your beliefs. When directed by the Member, ESG investments may be included in the Member’s portfolio. An exclusionary approach for equities is used, which allows our strategy to avoid certain companies with involvement in certain activities. ESG investments have subjective qualities and characteristics and may or may not align with your beliefs, values, or desired investment performance. There are risks specific to ESG investing that should be considered before making an investment. These include a lack of long term investment history, industry and business standards that are generally undefined, a limited investment universe, and fees and expenses that have the potential to be higher than traditional investments.
Tax-Sensitive Fixed Income Strategy (TSFI)
Facet uses ETFs to create a diversified portfolio consisting of equity and fixed income positions. The Tax-Sensitive Fixed Income Strategy is applied to the fixed income portion of our models and tailors a Member’s allocation between tax-free municipal bonds and taxable bonds. These allocations are based on market conditions and the Member’s own marginal tax rate. Our standard fixed income program separates Members into three tax bracket groups: “high” (32% bracket and higher), “middle” (22% and 24% brackets), and “low” (12% or lower bracket). This model consists of either taxable bonds or municipal bonds in each grouping depending on the optimal allocation at that time.
For Members in New York or California, the model will consist of ETFs in those states instead of a national muni fund.
Long and Short Term Purchases
Long Term Purchases and Short- Term Purchases are fundamental investment strategies. However, every investment strategy has its own inherent risks and limitations. For example, longer term investment strategies require a longer investment time period to allow for the strategy to potentially develop. Shorter term investment strategies require a shorter investment time period to potentially develop but, as a result of more frequent trading, could incur higher transaction costs when compared to a longer-term investment strategy. Please see attached (Investment White Paper) for additional information regarding our investment strategy.
Exchange Traded Funds
Exchange traded funds are available directly to the public. Thus, a prospective Member can obtain many of the funds that may be utilized by Facet independent of engaging Facet as an investment advisor. However, if a prospective Member determines to do so, he/she will not receive Facet’s initial and ongoing investment advisory services. In addition to Facet’s investment advisory fee and transaction fees, Members will also incur, relative exchange traded fund purchases, charges imposed at the fund level (e.g. management fees and other fund expenses). ETF performance typically does not exactly match the performance of the index or market benchmark that the ETF is designed to track because 1) the ETF will incur expenses and transaction costs not incurred by any applicable index or market benchmark; 2) certain securities comprising the index or market benchmark tracked by the ETF can, from time to time, temporarily be unavailable; and 3) supply and demand in the market for either the ETF and/or for the securities held by the ETF may cause the ETF shares to trade at a premium or discount to the actual net asset value of the securities owned by the ETF.
Item 9. Disciplinary Information
Facet has not been the subject of any disciplinary actions.
Item 10. Other Financial Industry Activities and Affiliations
A. Neither Facet nor any management persons of Facet are registered, or have an application pending to register as broker-dealer or a registered person of a broker-dealer.
B. Neither Facet nor any management person of Facet are registered, or have an application pending to register, as a futures commission merchant, commodity pool operator, a commodity trading advisor, or an associated person of the foregoing entities.
C. Facet does not have any relationships or arrangements that would create a material conflict of interest with Members.
D. Facet does not recommend or select other investment advisors for Members.
Item 11. Code of Ethics, Participation or Interest in Member: Transactions and Personal Trading
A. Facet maintains an investment policy relative to personal securities transactions. This investment policy is part of Facet’s overall Code of Ethics, which serves to establish a standard of business conduct for all of Facet’s Representatives that is based upon fundamental principles of openness, integrity, honesty and trust, a copy of which is available upon request.
In accordance with Section 204A of the Investment Advisers Act of 1940, Facet also maintains and enforces written policies reasonably designed to prevent the misuse of material non-public information by Facet or any person associated with Facet.
B. Neither Facet nor any related person of Facet recommends, buys, or sells for Member accounts, securities in which Facet or any related person of Facet has a material financial interest.
C. Facet and/or representatives of Facet can buy or sell securities that are also recommended to Members. This practice can create a situation where Facet and/or representatives of Facet are in a position to materially benefit from the sale or purchase of those securities. Therefore, this situation creates a conflict of interest. Practices such as “scalping” (i.e., a practice whereby the owner of shares of a security recommends that security for investment and then immediately sells it at a profit upon the rise in the market price which follows the recommendation) could take place if Facet did not have adequate policies in place to detect such activities. In addition, this requirement can help detect insider trading, “front-running” (i.e., personal trades executed prior to those of Facet’s Members) and other potentially abusive practices. To assist in mitigating this potential conflict, Facet has instituted a firm wide personal securities transactions blackout period that remains in effect during any portfolio changes.
Facet has a personal securities transaction policy in place to monitor the personal securities transactions and securities holdings of each of Facet’s “Access Persons.” Facet’s securities transaction policy requires that Access Persons of Facet must provide the Chief Compliance Officer or his designee with a written report of their current securities holdings within ten (10) days after becoming an Access Person. Additionally, each Access Person must provide the Chief Compliance Officer or his designee with a written report of the Access Person’s current securities holdings at least once each twelve (12) month period thereafter on a date Facet selects.
D. Facet and/or representatives of Facet can buy or sell securities, at or around the same time as those securities are recommended to Members. This practice creates a situation where Facet and/or representatives of Facet are in a position to materially benefit from the sale or purchase of those securities. Therefore, this situation creates a conflict of interest. As indicated above in Item 11.C, Facet has a personal securities transaction policy in place to monitor the personal securities transaction and securities holdings of each of Facet’s Access Persons.
Item 12. Brokerage Practices
Soft Dollars
In the event that the Member requests that Facet recommend a custodian for execution and/or custodial services, Facet generally recommends that investment management accounts be maintained at a custodian such as Apex Clearing, Fidelity, TD Ameritrade, or Charles Schwab. Facet’s planning agreement will set forth the terms and conditions under which Facet shall manage the Member’s assets and the Member will be required to sign a separate custodial/clearing agreement with each designated custodian.
Factors that Facet considers in recommending Apex, Fidelity TD Ameritrade, Charles Schwab, (or any other custodian to Members) include historical relationship with Facet, financial strength, reputation, execution capabilities, pricing, research, and service. Although the commissions and/or transaction fees paid by Facet’s Members shall comply with Facet’s duty to obtain best execution, a Member may pay a commission that is higher than another qualified custodian might charge to effect the same transaction where Facet determines, in good faith, that the commission/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 custodial services, including the value of research provided, execution capability, commission rates, and responsiveness. Accordingly, although Facet will seek competitive rates, it may not necessarily obtain the lowest possible commission rates for Member account transactions. The brokerage commissions or transaction fees charged by the designated custodian are exclusive of, and in addition to, Facet’s investment management fee.
Facet’s best execution responsibility is qualified if securities that it purchases for Member accounts are mutual funds that trade at net asset value as determined at the daily market close.
Non-Soft Dollar Research and Additional Benefits
Although not a material consideration when determining whether to recommend that a Member utilize the services of a particular custodian, Facet receives from Apex, Fidelity, TD Ameritrade, Charles Schwab, (or another custodian, investment platform, unaffiliated investment manager, vendor, unaffiliated product/fund sponsor, or vendor) support services and/or products, certain of which assist Facet to better monitor and service Member accounts maintained at such institutions. Included within the support services that may be obtained by Facet may be investment-related research, pricing information and market data, software and other technology that provide access to Member account data, compliance and/or practice management-related publications, discounted or gratis consulting services, discounted and/or gratis attendance at conferences, meetings, and other educational and/or social events, marketing support, computer hardware and/or software and/or other products used by Facet in furtherance of its investment advisory business operations.
As indicated above, certain of the support services and/or products that may be received may assist Facet in managing and administering Member accounts. Others do not directly provide such assistance, but rather assist Facet to manage and further develop its business enterprise.
Facet’s Members do not pay more for investment transactions effected and/or assets maintained at Apex, Fidelity, TD Ameritrade, or Charles Schwab as a result of this arrangement. There is no corresponding commitment made by Facet to TD Ameritrade, Charles Schwab, Fidelity, or any other entity to invest any specific amount or percentage of Member assets in any specific mutual funds, securities or other investment products as a result of the above arrangement.
Facet’s Chief Compliance Officer, Christopher Hufman, remains available to address any questions that a Member or prospective Member may have regarding the above arrangement and any corresponding conflict of interest such arrangement may create.
Facet does not engage in any formal soft dollar practices.
Brokerage for Client Referrals
Facet does not receive referrals from broker-dealers. To the extent that Facet provides investment management services to its Members, the transactions for each Member account generally will be affected independently, unless Facet decides to purchase or sell the same securities for several Members at approximately the same time. Facet may (but is not obligated to) combine or “bunch” such orders to obtain best execution, to negotiate more favorable commission rates or to allocate equitably among Facet’s Members differences in prices and commissions or other transaction costs that might have been obtained had such orders been placed independently. Under this procedure, transactions will be averaged as to price and will be allocated among Members in proportion to the purchase and sale orders placed for each Member account on any given day. Facet shall not receive any additional compensation or remuneration as a result of such aggregation.
Directed Brokerage
For investment accounts for which Facet has discretionary asset management, Facet will generally recommend a custodian such as Apex Clearing, except in certain cases where a recommendation to Fidelity, TD Ameritrade, or Charles Schwab, as the custodian for Member investment management assets may be made. Facet generally does not accept directed brokerage arrangements (when a client requires that account transactions be affected through a specific broker-dealer).
Block Trading
Facet will (but is not obligated to) combine or “bunch” such orders to obtain best execution, to negotiate more favorable commission rates or to allocate equitably among Facet’s Members’ differences in prices and commissions or other transaction costs that might have been obtained 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. Facet shall not receive any additional compensation or remuneration as a result of such aggregation.
Item 13. Review of Accounts
A. For those Members to whom Facet provides investment supervisory services, account reviews are conducted on a periodic basis by Facet’s Principal, at least annually. All investment supervisory Members are advised that it remains their responsibility to advise Facet of any changes in their investment objectives and/or financial situation. All Members are encouraged to review financial planning issues (to the extent applicable), investment objectives and account performance with Facet on an annual basis.
B. Facet may conduct account reviews on a more than periodic basis upon the occurrence of a triggering event, such as a change in Member investment objectives and/or financial situation, market corrections and Member request.
C. Members are provided, at least quarterly, with written transaction confirmation notices and regular written summary account statements directly from the custodian and/or program sponsor for the Member accounts. Facet may also provide a written periodic report summarizing account activity and performance.
Item 14. Member Referrals and Other Compensation
As referenced in Item 12.A.1 above, Facet receives an economic benefit from Apex, TD Ameritrade, Charles Schwab, and Fidelity since Facet, without cost (and/or at a discount), receives support services and/or products from TD Ameritrade, Charles Schwab, or Fidelity.
Facet’s Members do not pay more for investment transactions effected and/or assets maintained at Apex, Fidelity, TD Ameritrade, or Charles Schwab. There is no corresponding commitment made by Facet to Apex, Fidelity, TD Ameritrade, Charles Schwab, or any other entity to invest any specific amount or percentage of Member assets in any specific mutual funds, securities or other investment products as a result of the above arrangement.
Facet’s Chief Compliance Officer, Christopher Hufman, remains available to address any questions that a Member or prospective Member may have regarding the above arrangement and the conflict of interest any such arrangement may create.
We have entered into and are currently a party to certain referral agreement(s) whereby we pay and/or receive a referral fee in the form of both cash and non-cash compensation related to the solicitation of Members, in accordance with the requirements of Rule 206(4)-1(b) of the Advisers Act and any corresponding state securities law requirements. All such cash referral fees paid by us shall be paid solely from our planning fee. For Members who are introduced to us by an unaffiliated promoter, the Member is given, prior to or at the time of solicitation, (1) a copy of a written disclosure statement which meets the requirements of Rule 206(4)-1(b) of the Advisers Act and include a statement addressing any material conflicts resulting from Facet’s relationship with the promoter.
We will enter into agreements with third parties who will promote Facet’s services in exchange for both cash and non-cash compensation, which may include free or discounted planning services or other referral benefits. In addition, Facet may use Member testimonials in marketing and advertising and those testimonials could include compensation. If compensation is provided, it will be disclosed with the testimonial.
Item 15. Custody
Facet shall have the ability to have its advisory fee for each Member deducted by the custodian on a quarterly, or annual basis. Members are provided, at least quarterly, with written transaction confirmation notices and regular written summary account statements directly from the custodian and/or program sponsor for the Member accounts. Facet may also provide a written periodic report summarizing account activity and performance typically through its application.
To the extent that Facet provides Members with periodic account statements or reports, the Member is urged to compare any statement or report provided by Facet with the account statements received from the account custodian. The account custodian does not verify the accuracy of Facet’s advisory fee calculation.
Custody is also disclosed in Form ADV because Facet Wealth, Inc. has authority to transfer money from Member account(s), which constitutes a standing letter or authorization (SLOA). Accordingly, Facet Wealth, Inc. will follow the safeguards specified by the SEC rather than undergo an annual audit.
Item 16. Investment Discretion
The Member can determine to engage Facet to provide investment advisory services on a discretionary basis. Prior to Facet assuming discretionary authority over a Member’s account, Member shall be required to execute an Planning Agreement, naming Facet as Member’s attorney and agent in fact, granting Facet full authority to buy, sell, or otherwise effect investment transactions involving the assets in the Member’s name found in the discretionary account.
Item 17. Voting Member Securities
A. Facet does not vote Member proxies. Members maintain exclusive responsibility for:
- directing the manner in which proxies solicited by issuers of securities beneficially owned by the Member shall be voted, and
- making all elections relative to any mergers, acquisitions, tender offers, bankruptcy proceedings or other type events pertaining to the Member’s investment assets.
B. Members will receive their proxies or other solicitations directly from their custodian. Members may contact Facet to discuss any questions they may have with a particular solicitation.
Item 18. Financial Information
Facet collects advisory fees in excess of $1,200 more than six months in advance and is therefore required to provide Members with an audited balance sheet annually. We deliver this to our Members as part of our annual mailing. A copy of the audited balance sheet will be available upon request as required.
A. Facet is unaware of any financial condition that is reasonably likely to impair its ability to meet its contractual commitments relating to discretionary authority over certain client accounts.
B. Facet has not been the subject of a bankruptcy petition.
Per Item 18 attached please find our audited balance sheet.
ANY QUESTIONS: Facet’s Chief Compliance Officer, Christopher Hufman, remains available to address any questions that a Member or prospective Member may have regarding the above disclosures and arrangements.