Item 1. Cover Page
Facet Wealth, Inc.
Facet Wealth, Inc.
Dated: March 15, 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 on March 3, 2023 are described below. Material changes relate to Facet’s policies, practices or conflicts of interests.
Facet has updated Item 8 Methods of Analysis, Investment Strategies and Risk of Loss to include investment management upgrades such as a Short-Term Strategy model, an enhancement to our ESG (Environmental, Social and Governance) model and Tax Sensitive Fixed Income allocations.
Item 3. Table of Contents
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 Clients
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 of Interest in Client Transactions and Personal Trading
Item 12 Brokerage Practices
Item 13 Review of Accounts
Item 14 Client Referrals and Other Compensation
Item 15 Custody
Item 16 Investment Discretion
Item 17 Voting Client Securities
Item 18 Financial Information
Item 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 clients with the financial planning and/or consulting services as designated by the client. The services provided depend on the nature and complexity of the client’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 client 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 client 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 $2,000 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 client. Facet engages in a client intake process involving communication with prospective clients and the collection of their financial information to help determine each client’s investment objectives and risk tolerance.
In performing its services, Facet shall not be required to verify any information received from the client or from the client’s other professionals and is expressly authorized to rely thereon. If requested by the client, Facet shall recommend the services of other professionals for implementation purposes.
The client is under no obligation to engage the services of any such recommended professional. If the client engages any such recommended professional, and a dispute arises thereafter relative to such engagement, the client agrees to seek recourse exclusively from and against the engaged professional/firm.
The client retains absolute discretion over all such implementation decisions and is free to accept or reject any recommendation from Facet. Clients 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 client’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 clients, 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 client, 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 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 Facet. No client is under any obligation to purchase any securities or insurance commission products from a representative of Facet. Clients 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 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). If Facet recommends that a client 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 clients 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 client 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 client or prospective client 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 client 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 client will be denoted on the relevant financial planning and consulting services agreement.
Prior to accepting discretionary authority over a client’s assets, Facet engages in a client intake process to determine each client’s investment objectives and risk tolerance.
C. Tailored Services and Investment Restrictions
Facet shall provide advisory services specific to the needs of each client. Prior to providing advisory services, an investment adviser representative will ascertain each client’s investment objective(s). Thereafter, Facet shall recommend that the client allocate investment assets consistent with the designated investment objective(s). The client 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 15, 2023, Facet had $1,654,740,782 in assets under management on a discretionary basis.
Facet considers every aspect of our client’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 clients with varying levels of financial planning and consultation services. Facet’s financial planning and consulting fees are negotiable, but generally range from $2,000 to $8,000 per year on a flat fee basis, depending upon the level and scope of the services required. If a client determines to engage Facet to provide discretionary investment management services, such services shall be considered in determining the client’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; however if the Client opts for an annual pre-payment, the enrollment fee will be waived.
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 clients 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 clients could pay different fees. Moreover, the services to be provided by Facet to any particular client could be available from other advisers at lower fees. All clients and prospective clients should be guided accordingly.
B. Facet typically bills for its financial planning services either; quarterly or annually in advance. However, clients may elect to have Facet’s advisory fees deducted from their custodial account, or charged to their credit card. Both Facet’s Investment Advisory Agreement and the custodial/clearing agreement may authorize the custodian to debit 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 client 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 client.
C. As discussed below, unless the client directs otherwise or an individual client’s circumstances require, Facet shall generally recommend a custodian such as Apex Clearing, Fidelity, TD Ameritrade, or Charles Schwab, as the custodian for client investment management assets. 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 may be debited from the Client’s account. Clients 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 generally range from $2000-$8000 per year on a flat fee 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 client’s obligation to pay these non-refundable fees through the end of the payment period outlined in the subscription. Clients will continue to have access to their online client portal through the terms outlined in their planning agreement.
E. The Client will be solely responsible for accepting or rejecting Planner’s financial planning advice and for implementing any such investment recommendations or advice. Planner may recommend itself, one of its affiliates, or a third party to assist the Client 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. Client understands that Client may choose any advisor, brokerage firm, or other professionals to implement the recommendations and advice given by the Advisor.
Where Planner introduces to Client 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 Client 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
Item 7. Types of Clients
Facet’s clients shall generally include individuals and for those individuals, Facet may manage 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 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 may allocate investment management assets of its client accounts, on a discretionary basis, among one or more of its asset allocation programs (i.e. Aggressive, Moderately Aggressive, Moderate, and Conservative) as designated on the Investment Advisory Agreement. 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 client investments to exchange traded funds (ETF’s) and may manage other existing assets such as various mutual funds, individual equities (stocks) and debt instruments (bonds) the client has based the client’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 clients should be prepared to bear.
Tax-Optimized Model Implementation
Facet uses an algorithm to incorporate a client’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 client 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, Clients 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 Client’s taxes while maintaining the expected risk and return profile of the Client’s portfolio. It harvests previously unrecognized investment losses to offset taxes due on the Client’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 Client’s tax liability and the tax savings can be reinvested to grow the value of the Client’s portfolio. Facet’s TLH strategy, which is only applied to ETFs, is available to all Clients 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 obtained 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. Clients and their personal tax advisors are responsible for how the transactions in the Client’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 Client’s tax bill while maintaining a similar expected risk and return on the Client’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 may be better or worse than the performance of the securities that are sold for tax-loss harvesting purposes.
- Be aware that if the Client and/or the Client’s spouse have other taxable or non-taxable investment accounts, and the Client holds in those accounts any of the securities (including options contracts) held in the Client’s account at Facet, the Client cannot trade any of those securities 30 days before or after Facet trades those same securities as part of the tax-loss harvesting strategy to avoid possible wash sales and, as a result, a nullification of any tax benefits of the strategy. Not all the losses may be used to offset gains in the year they were recognized due to wash sales. Thus, wash sales can diminish the effectiveness of tax-loss harvesting by deferring to a future year a tax loss that could have been used to offset income or capital gains in the current year. For more information on the wash sale rule, please read IRS Publication 550. Additionally, transactions outside of accounts at Facet may affect whether a loss is successfully harvested and, if so, whether that loss is usable by the Client in the most efficient manner.
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, may 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 client can obtain many of the funds that may be utilized by Facet independent of engaging Facet as an investment advisor. However, if a prospective client 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 and/or administrative fees, clients will also incur, relative exchange traded fund purchases, charges imposed at the fund level (e.g. management fees and other fund expenses). ETF performance may 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 may, 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 clients.
D. Facet does not recommend or select other investment advisors for clients.
Item 11. Code of Ethics, Participation or Interest in Client: 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 client accounts, securities in which Facet or any related person of Facet has a material financial interest.
C. Facet and/or representatives of Facet may buy or sell securities that are also recommended to clients. This practice may 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 clients) and other potentially abusive practices.
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 may buy or sell securities, at or around the same time as those securities are recommended to clients. 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
A. In the event that the client requests that Facet recommend a custodian for execution and/or custodial services (exclusive of those clients that may direct Facet to use a specific custodian), 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 client’s assets and the client 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 clients) 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 clients shall comply with Facet’s duty to obtain best execution, a client 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 client 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 client accounts are mutual funds that trade at net asset value as determined at the daily market close.
- Research and Additional Benefits
Although not a material consideration when determining whether to recommend that a client 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 client 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 client 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 client accounts. Others do not directly provide such assistance, but rather assist Facet to manage and further develop its business enterprise.
Facet’s clients do not pay more for investment transactions effected and/or assets maintained at Apex, Fidelity, TD Ameritrade, C 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 client 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 client or prospective client may have regarding the above arrangement and any corresponding conflict of interest such arrangement may create.
- Facet does not receive referrals from broker-dealers.
To the extent that Facet provides investment management services to its clients, the transactions for each client account generally will be affected independently, unless Facet decides to purchase or sell the same securities for several clients 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 clients 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 clients 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 clients are advised that it remains their responsibility to advise Facet of any changes in their investment objectives and/or financial situation. All clients 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 client investment objectives and/or financial situation, market corrections and client request.
C. Clients 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 client accounts. Facet may also provide a written periodic report summarizing account activity and performance.
Item 14. Client Referrals and Other Compensation
As referenced in Item 12.A.1 above, Facet receives an economic benefit from 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 clients 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 client 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 client or prospective client 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 related to the solicitation of clients, in accordance with the requirements of Rule 206(4)-1(b) of the Advisers Act and any corresponding state securities law requirements. All such referral fees paid by us shall be paid solely from our advisory fee. For clients who are introduced to us by an unaffiliated promoter, the client 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 party influencers or endorsers who will promote Facet’s services in exchange for compensation which may include free or discounted planning services. In addition, Facet may use client 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 client debited by the custodian on a quarterly, or annual basis. Clients 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 client accounts. Facet may also provide a written periodic report summarizing account activity and performance typically through its application.
To the extent that Facet provides clients with periodic account statements or reports, the client 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 client 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 client can determine to engage Facet to provide investment advisory services on a discretionary basis. Prior to Facet assuming discretionary authority over a client’s account, client shall be required to execute an Investment Advisory Agreement, naming Facet as client’s attorney and agent in fact, granting Facet full authority to buy, sell, or otherwise effect investment transactions involving the assets in the client’s name found in the discretionary account.
Item 17. Voting Client Securities
A. Facet does not vote client proxies. Clients maintain exclusive responsibility for:
- directing the manner in which proxies solicited by issuers of securities beneficially owned by the client shall be voted, and
- making all elections relative to any mergers, acquisitions, tender offers, bankruptcy proceedings or other type events pertaining to the client’s investment assets.
B. Clients will receive their proxies or other solicitations directly from their custodian. Clients 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 clients with an audited balance sheet annually. We deliver this to our clients 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 client or prospective client may have regarding the above disclosures and arrangements.