Item 1: Cover Page
1stTo50th, LLC
1050 Queen Street
Suite 100
Honolulu, HI 96814
(302) 463-9385
Homepage
Form ADV Part 2A – Firm Brochure
Dated: June 14, 2024
Item 1: Cover Page
CRD # 328769
This Brochure provides information about the qualifications and business practices of 1stTo50th LLC. As used in this brochure, the words “1stTo50th”, “we”, “firm”, “Advisor” and “us” refer to 1stTo50th LLC.
If you have any questions about the contents of this Brochure, please contact us at (307) 264-5839 or at questions@1stTo50th.com.
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.
1stTo50th LLC is a Registered Investment Adviser. Registration does not imply a certain level of skill or training.
Additional information about the firm is also available on the SEC’s website at www.adviserinfo.sec.gov, using the firm’s identification number, CRD # 328769.
Item 2: Material Changes
1stTo50th LLC is pleased to provide its clients and prospective clients with this Brochure, which is the firm’s Form ADV Part 2A.
The Brochure contains important information about the firm’s business practices as well as a description of potential risks and conflicts of interest relating to the firm’s advisory business and investment activities that could affect a client’s accounts with us.
This is the initial filing of the Disclosure Brochure. There are no material changes.
It was filed on June 7, 2024 and approved on June 14, 2024.
As used in this brochure, the words “you”, “your” and “Client” refer to you as either a client or prospective client of our firm.
From time to time, we may amend this Disclosure Brochure to reflect changes in our business practices, changes in regulations, and routine annual updates as required by the securities regulators. When that happens due to a material change in our business practices, either a Summary of Material Changes or a complete Disclosure Brochure will be provided.
Item 3: Table of Contents
Item 4: Advisory Business 4 – 8
Item 5: Fees and Compensation 9 – 12
Item 6: Performance-Based Fees and Side-By-Side Management 13
Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss 13 – 18
Item 9: Disciplinary Information 19
Item 10: Other Financial Industry Activities and Affiliations 19
Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading 20
Item 12: Brokerage Practices 21 – 22
Item 13: Review of Accounts 22 – 23
Item 14: Client Referrals and Other Compensation 23
Item 16: Investment Discretion 23 – 24
Item 17: Voting Client Securities 24
Item 18: Financial Information 24
Item 19: Requirements for State-Registered Advisers 25
Form ADV Part 2B – Brochure Supplement 26 – 30
Item 4: Advisory Business
Description of Advisory Firm
1stTo50th LLC is a limited liability company formed in September 2023.
The firm is principally located in the state of Hawaii.
The firm filed to become an Investment Adviser with the State of Hawaii, Department of Commerce and Consumer Affairs, Business Registration Division, Securities Compliance Branch, to comply with the Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 through § 80b-21.
Leonard W. Kingsley is the Chief Compliance Officer (“CCO”).
Leonard W. Kingsley controls 1stTo50th LLC through his role as Managing Member of Kingsley Family Office Limited Liability Company. He personally owns a minority vote and value of the firm. He is also Trustee of family trusts, which own the majority of the vote and value of the firm. The firm is not publicly owned or traded. There are no unrelated indirect owners of the firm or intermediaries who have any ownership interest in the firm.
Types of Advisory Services
1stTo50th LLC is a fee-only firm, meaning the only compensation we will receive will be fees from our Clients for our services.
The firm will not accept commissions or any other payments from third parties.
The firm shall never have actual or constructive custody of client assets, cash, or securities as the professional services of an outside “Qualified Custodian” will be employed.
The firm offers Retirement Services to Plan Sponsors, the firms affiliated with them and their beneficiaries. The firm also offers limited scope Investment Management Services to individuals, businesses, trusts, associations, retirement plans, estate planning, endowments, foundations, and other related profit and not for profit organizations.
These services are described in more detail below in Retirement Services and Investment Management.
From time to time, the firm may work with clients’ third-party professionals such as attorneys, accountants, tax advisors, insurance agents, or other professionals.
From time to time, Clients may request recommendations from the firm for the names and contact information of third-party professionals. Clients are never obligated to utilize any third-party professional we recommend. The firm is not affiliated with, nor receives any compensation from, third-party professionals we may recommend.
Retirement Plans Generally
Our firm provides retirement plan services to employer plan sponsors either on project based engagements or on an ongoing basis. Generally, such services consist of assisting employer plan sponsors or plan named fiduciaries in establishing, monitoring, and reviewing their company’s participant-directed retirement plan. As the needs of the plan sponsor dictate, areas could include help with:
understanding plan governance and compliance,
establishing and documenting plan goals, rules and features,
asset management services,
fiduciary services, including training and research,
design of investment policy statement,
investment lineup selection,
fee analysis,
participant introduction to the plan and education of the process of investment management,
investment review and recommendations,
enrollment and retirement guidance services for participants,
performance monitoring, attribution measurement, and reporting,
risk assessment for the plan and investments,
vendor and manager searches and analysis,
lead service provider transitions,
review and maintain investment lineup,
review and maintain investment policy statement,
compile fiduciary audit files, and
provide ongoing education and support for the plan regarding the above activities.
In providing retirement plan services, our firm does not provide any advisory services with respect to the following types of assets (collectively, “Excluded Assets”):
employer securities,
real estate (excluding real estate funds and publicly-traded REITs), participant loans,
non-publicly traded securities or assets,
other illiquid investments, or
brokerage window programs.
Retirement Plan Consulting
We may provide services to Plan Sponsors, Plans, and Beneficiaries which
are regulated under the Employee Retirement Income Securities Act of 1974 (“ERISA”). The fees charged are set forth in Item 5 of this brochure. The services we provide are advisory in nature. We are not subject to any disqualifications under Section 411 of ERISA. In performing fiduciary services, we are acting as a fiduciary of the plan as defined in Section 3(21)(A)(ii) pursuant to section 402(c)(3) of ERISA.
Retirement Plan Management
At this time, the firm does not provide Section 3(38) discretionary services.
Limited Scope Investment Management Services
Our firm advises on and manages investment portfolios for families, trusts, endowments, foundations, and other clients.
Typically, this requires:
- An open ended process of Goal Finding, Need and Want Discovery, learning the family composition and background, other important persons, organizations, and ideals important to the Client are, and in what context and conditions,
- Completion of Income Statements, Balance Sheets, Cash Flows for each person and organization important to the Client, including off statement liabilities and challenges,
- Development of an Investment Policy Statement, customized for the Time Horizon, Risk Tolerance, and Investment Goals for each account, each person, and each organization,
- Design of an asset allocation for each account tailored to client specific circumstances, focusing on the goals, ideals, objectives, risk tolerance and tax considerations
- Generally, research about investments in real estate, privately owned businesses, and other esoteric assets, liabilities, and cash flows, are excluded from analysis. However, when the firm has accepted Client direction as described in writing agreement, explicitly including such specific assets, liabilities, and cash flows and the nature and extent of such research.
- investment product due diligence, selection and recommendation,
- non-discretionary investment implementation, ongoing supervision, monitoring and portfolio rebalancing activities,
- annual client investment and performance reporting,
- and periodic meetings with the client, either virtually or at other mutually convenient locations.
We primarily advise our Clients regarding investments in stocks, bonds, mutual funds, ETFs, U.S. government and municipal securities, options, futures, commodities, foreign investments, alternative investments, and cash and cash equivalents. We may also provide advice regarding investments held in Client’s portfolio at the inception of our advisory relationship and/or other investment types not listed above, at the Client’s request.
We generally request that clients provide a comprehensive financial plan provided by a qualified Financial Planner within the last three years and an attestation that goals have not markedly changed through life events.
When we provide investment management services, Clients typically have the changes executed directly or grant us limited authority to buy and sell securities on a non-discretionary basis. More information on our trading authority is explained in Item 16 of this Brochure. Clients may impose reasonable restrictions on investing in certain securities, types of securities, or industry sectors.
Client Tailored Services and Client Imposed Restrictions
We tailor the delivery of our services to meet the individual needs of our Clients. We consult with Clients initially and on an ongoing basis, through the duration of their engagement with us, to determine risk tolerance, time horizon and other factors that may impact the Clients’ investment and/or planning needs. We ensure that clients’ investment and planning recommendations are suitable for their needs, goals, objectives, and risk tolerance.
Clients are able to specify, within reason, any restrictions or limitations they would like to place as it pertains to individual securities and/or sectors that will be traded in their account. All such requests must be provided to the firm in writing. The firm will notify Clients if they are unable to accommodate any requests.
Wrap Fee Programs
The firm does not participate in wrap fee programs.
Assets Under Management
As of this initial filing, on June 14, 2024, the firm has $0 in discretionary and $0 in non-discretionary assets under management.
Item 5: Fees and Compensation
Please note, unless a Client has received this brochure at least 48 hours prior to signing an Advisory Contract, the Advisory Contract may be terminated by the Client within five (5) business days of signing the Advisory Contract, without penalty.
How we are paid depends on the type of advisory services we perform. Below is a brief description of our fees, however, you should review your executed Advisory Contract for more detailed information regarding the exact fees you will be paying. No increase to the agreed-upon advisory fees outlined in the Advisory Contract shall occur without prior Client consent.
Please note, lower fees for comparable services may be available from other sources.
Retirement Plan Consulting
General
The advisory fee is calculated, charged, and payable upon receipt quarterly in arrears, based on the value of Client’s accounts as of the last day of the closing of the quarter. Subject to the following schedule:
| Assets under Management | Annual Advisory Fee |
| $0 – $3,000,000 | 0.50% |
| $3,000,001 – $20,000,000 | 0.25% |
| $20,000,001 – $50,000,000 | 0.15% |
| $50,000,000+ | 0.10% |
A minimum fee of $25,000 per year is charged. A Plan Sponsor subject to the minimum will require a discussion about the impact of the fee and timing of the fee.
Advisory Agreement
The firm requires each client to enter into an Retirement Plan Consulting Agreement which generally, among other matters, details the nature of the relationship and the services to be provided to the Plan Sponsor, the Plan, and the Beneficiaries.
Fee Components
The firm’s fee generally covers the services it provides to the Plan Sponsor, the Plan, and the Beneficiaries. Exceptional services requested by the Plan Sponsor or Beneficiaries, not covered by the executed Retirement Plan Consulting Agreement will require a separate agreement.
Underlying managers, separate accounts, exchange traded funds, certain mutual funds in which a client invests, among others, also charge insurance premiums or management fees and some additionally charge incentive allocations or performance fees. Clients also generally incur, directly or indirectly, brokerage costs, other transaction costs, custodian fees, accounting and attorney’s fees, and other fees and expenses.
Timing and Methods of Fee Payment and Termination of Our Services
Fee payments generally are due quarterly depending on the terms of each client’s Retirement Plan Consulting Agreement.
In general, a client may terminate its Retirement Plan Consulting Agreement at any time upon thirty days written notice to us.
Upon termination, the client will be issued an invoice for the final advisory fee which will be calculated, charged, and payable upon receipt for the number of days remaining in the period for which services were performed.
Investment Management Services
The annualized fees for investment management services are based on the following fee schedule:
0.50% for accounts comprised only by fixed income and mutual funds or exchange traded funds
-or-
0.75% for accounts which are blended with or solely of individual equities, options, and other investments.
A minimum fee of $5,000, or more, per year per household is typical. Most households which fail this threshold will be declined. Exceptions to the minimum or the rate charged will be explained in their Investment Management Advisory Agreement.
General
The advisory fee is calculated, charged, and paid quarterly in advance based on the value of Client’s accounts as of the last day of the closing of the previous billing period.
When a Client initiates the relationship with us, the fee for the initial quarter will be calculated, charged, and paid when the assets transferred to the Custodian are completed. If delays for delivery are excessive, we may choose to assess a partial fee, with the balance assessed when the delay is resolved.
References to assets under management in the above tables refer to assets for which the firm provides advisory services; for some clients, as agreed upon by the client, the firm provides certain services with respect to additional assets.
Advisory Agreement
The firm requires each client to enter into an Investment Management Advisory Agreement which generally, among other matters, details the nature of the advisory relationship and the nature of non-discretionary investment authority, if any, granted to us. The firm will generally ask the Client to provide authorization to withdraw the fees due each quarter.
Fee Negotiated
The firm may waive all or part of its minimum annual fee, as described in the Investment Management Advisory Agreement. The firm may have negotiated different fee arrangements in certain circumstances for exceptional or held away assets or liabilities.
Fee Components
The firm’s annual fee, when based on assets under management, generally covers the services it provides to clients. Underlying managers, separate accounts, exchange traded funds, certain mutual funds in which a client invests, possibly among others, also charge management fees and some additionally charge incentive allocations or performance fees. Clients also generally incur, directly or indirectly, brokerage costs, other transaction costs, custodian fees, and other fees and expenses.
Timing and Methods of Fee Payment and Termination of Our Services
Fee payments generally are due quarterly in advance depending on the terms of each client’s investment services agreement. In general, a client may terminate its investment services agreement at any time upon written notice to us. Upon termination, no later than thirty days after termination, the client will be issued a pro rata refund of any pre-paid fees based on the number of days remaining in the period for which the fees were paid.
In determining the advisory fee, the Investment Management Advisory Agreement may allow accounts of members of the same household to be aggregated. The firm relies on the valuation as provided by Client’s custodian in determining assets under management. Our advisory fee is prorated for any partial billing periods occurring during the engagement, including the initial and terminating billing periods. Clients may make additions or withdrawals from their accounts at any time.
Fee Payment
For Retirement Plan Consulting and Investment Management Services, most Clients are asked to authorize us to deduct our fees directly from their accounts. If the Client would prefer another payment method, the firm may accommodate the Client’s request on an exceptional basis. For example, Clients may pay by check or electronic funds transfer (EFT). We note that generally we do not have access to the Client’s banking information and do not collect such information. Exceptions of this sort may cause delays to starting the engagement.
Other Types of Fees and Expenses
The firm’s fees are exclusive of brokerage commissions, transaction fees, and other related costs and expenses which may be incurred by the Client.
Clients may incur certain charges imposed by Custodians, Brokers, and other third parties such as custodial fees, deferred sales charges, odd lot differentials, transfer taxes, wire transfers, electronic fund fees, and other fees and taxes on brokerage accounts and securities transactions. Mutual funds and exchange traded funds also charge internal management fees, which are disclosed in a fund’s prospectus. Insurance companies may charge premiums and other fees or taxes. Such charges, fees, and commissions are exclusive of and in addition to our fee, and we do not receive any portion of these commissions, fees, and costs.
Clients may incur fees from third-party professionals such as accountants and attorneys that the firm may recommend, upon Client request. Such fees are separate and distinct from the firm’s advisory fees.
Terminations and Refunds
For Investment Management and Retirement Plan Services, the Advisory Contract may be terminated with at least thirty calendar days notice. Upon termination, no later than thirty days after termination, the client will be issued a pro rata refund of any pre-paid fees based on the number of days remaining in the period for which the fees were paid. Likewise, any outstanding invoice amounts will be due and payable.
Sale of Securities or Other Investment Products
Advisor and its supervised persons 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.
Item 6: Performance-Based Fees and Side-By-Side Management
The firm does not currently offer performance-based fees and does not engage in side-by-side management.
Item 7: Types of Clients
We provide Retirement Plan Consulting services to Plan Sponsors, Plans, and Beneficiaries.
We provide Limited Scope Investment Management services to individuals, high net-worth individuals and businesses and charitable and related estate planning entities.
We do not have a minimum account size requirement. However, we do charge a minimum fee. For households with lower asset balances, it may be imprudent to use the firm’s services given the minimum fee.
Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss
Below is a brief description of our methods of analysis and primary investment strategies.
Methods of Analysis
The firm analyzes many sources of data to develop investment advice. These may be grouped in the following areas:
Macroeconomic Analysis involves global economic and business information as available through the Securities and Exchange Commission, Federal Reserve Board, the twelve regional Reserve Banks, other U.S. government departments such as Treasury, Labor, and Commerce, reputable other sources such as foreign central banks, such as the European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, and reputable data providers such as the Associated Press, Reuters, NPR, The Guardian, BBC, Bloomberg, and Charles Schwab, and other broker/dealers and financial information vendors who provide similar opinion and data services.
Industry Analysis involves microeconomic information and analysis affecting the prospects of an entire industry.
Political Analysis involves sovereign nations, supernational entities, such as the European Union, North Atlantic Treaty Organization, Organization of Economic Development, provincial, state, and municipal governments, and related organizations, such as toll roads, airports, hospital chains and similar entities where acts of war, treaties, economic policies, elections, and the like may change equity, fixed income, and other prices and short term or long term economic conditions.
Fundamental analysis involves analyzing individual companies and their industry groups and related or substituting industries, 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 compared to the current market value. The risk of fundamental analysis is that the information obtained may be incorrect and the analysis may not provide an accurate 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.
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 been periods without discernible trends and similar periods will presumably occur in the future. Even where major trends develop, outside factors like government intervention could potentially shorten them..
Cyclical analysis is a type of technical analysis that involves evaluating recurring price patterns and trends based upon business cycles. Economic/business cycles may not be predictable and may have many fluctuations between long-term expansions and contractions. The lengths of economic cycles may be difficult to predict with accuracy and therefore the risk of cyclical analysis is the difficulty in predicting economic trends and consequently the changing value of securities that would be affected by these changing trends.
Modern Portfolio Theory (MPT)
The underlying principles of MPT are:
- Investors are risk averse. The only acceptable risk is that which is adequately compensated by an expected return. Risk and investment return are related and an increase in risk requires an increased expected return.
- Markets are efficient. The same market information is available to all investors at the same time. The market prices every security fairly based upon this equal availability of information.
- The design of the portfolio as a whole is more important than the selection of any particular security. The appropriate allocation of capital among asset classes will have far more influence on long-term portfolio performance than the selection of individual securities.
- Investing for the long-term (preferably longer than ten years) becomes critical to investment success because it allows the long-term characteristics of the asset classes to surface.
- Increasing diversification of the portfolio with lower correlated asset class positions can decrease portfolio risk. Correlation is the statistical term for the extent to which two asset classes move in tandem or opposition to one another.
Mutual Fund and/or ETF Analysis: We look at the experience and track record of the manager of the mutual fund or ETF 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 also look at the underlying assets in a mutual fund or ETF in an attempt to determine if there is significant overlap in the underlying investments held in other funds in the Client’s portfolio. In addition, we monitor the funds or ETFs in an attempt to determine if they are continuing to follow their stated investment strategy.
A risk of mutual fund and/or ETF analysis is that, as in all securities investments, past performance does not guarantee future results. A manager who has been successful may not be able to replicate that success in the future. In addition, as we do not control the underlying investments in a fund or ETF, managers of different funds held by the client may purchase the same security, increasing the risk to the client if that security were to fall in value. There is also a risk that a manager may deviate from the stated investment mandate or strategy of the fund or ETF, which could make the fund or ETF less suitable for the Client’s portfolio.
Investment Strategies
Asset Allocation
In implementing our Clients’ investment strategy, we begin by attempting to identify an appropriate ratio of equities, fixed income, and cash (i.e. “asset allocation”) suitable to the Client’s investment goals and risk tolerance.
A risk of asset allocation is that the Client may not participate in sharp increases in 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 the Client’s goals. We attempt to closely monitor our asset allocation models and make changes periodically to keep in line with the target risk tolerance model.
Passive Investment Management
Passive investing involves building portfolios that are composed of various distinct asset classes. The asset classes are weighted in a manner to achieve the desired relationship between correlation, risk, and return. Funds that passively capture the returns of the desired asset classes are placed in the portfolio. The funds that are used to build passive portfolios are typically index mutual funds or exchange-traded funds.
Passive investment management is characterized by low portfolio expenses (i.e. the funds inside the portfolio have low internal costs), minimal trading costs (due to infrequent trading activity), and relative tax efficiency (because the funds inside the portfolio are tax efficient and turnover inside the portfolio is minimal).
In contrast, active management involves a single manager or managers who employ some method, strategy or technique to construct a portfolio that is intended to generate returns that are greater than the broader market or a designated benchmark.
Passive and Active Investment Management
We may choose investment vehicles that are considered passive, active, or a combination of both styles.
Passive investing involves building portfolios that are composed of various distinct asset classes. The asset classes are weighted in a manner to achieve a desired relationship between correlation, risk and return. Funds that passively capture the returns of the desired asset classes are placed in the portfolio.
Active investing involves a single manager or managers who employ some method, strategy or technique to construct a portfolio that is intended to generate returns that are greater than the broader market or a designated benchmark. Actively managed funds are also designed to reduce volatility and risk.
We may engage in both passive and active investing in Client’s portfolio. However, we strive to construct portfolios of funds and individual securities that we believe will have the greatest probability for achieving our Clients’ personal financial goals with the least amount of volatility and risk rather than attempt to outperform an arbitrary index or benchmark.
Specific investment selections are based on a number of factors that we evaluate in order to select, what we believe to be, the highest quality funds or individual securities for our Clients. These factors include but are not limited to underlying holdings of funds, percentage weighting of holdings within funds, liquidity, tax efficiency, bid/ask spreads, and other smart/strategic beta factors. These factors may or may not result in the lowest cost ETFs and mutual funds available when utilizing funds in a Client’s portfolio, but we strive to keep internal fund expenses as low as possible.
Socially Responsible Investing
We may utilize various socially conscious investment approaches if a Client desires. The firm may construct portfolios that utilize mutual funds, ETFs, or individual securities with the purpose of incorporating socially conscious principles into a Client’s portfolio. These portfolios may sometimes also be customized to reflect the personal values of each individual, family, or organization. This allows our Clients to invest in a way that aligns with their values.
The firm may rely on mutual funds and ETFs that incorporate Environmental, Social and Governance (“ESG”) research as well as positive and negative screens related to specific business practices to determine the quality of an investment on values-based merits. Additionally, the firm may construct portfolios of individual securities in order to provide Clients with a greater degree of control over the socially conscious strategies they are utilizing. The firm relies on third-party research when constructing portfolios of individual securities with socially conscious considerations.
If you request your portfolio to be invested according to socially conscious principles, you should note that returns on investments of this type may be limited and because of this limitation you may not be able to be as well diversified among various asset classes. The number of publicly traded companies that meet socially conscious investment parameters is also limited, and due to this limitation, there is a probability of similarity or overlap of holdings, especially among socially conscious mutual funds or ETFs. Therefore, there could be a more pronounced positive or negative impact on a socially conscious portfolio, which could be more volatile than a fully diversified portfolio.
Long-term/Short-term purchases
We purchase securities and generally hold them in the Client’s account for a year or longer. Short-term purchases may be employed as appropriate when:
- We believe the securities to be currently undervalued, and/or
- We want exposure to a particular asset class over time, regardless of the current projection for this class.
A risk in a long-term purchase strategy is that by holding the security for this length of time, we may not take advantage of short-term gains that could be profitable to a client. Moreover, if our predictions are incorrect, a security may decline sharply in value before we make the decision to sell.
Material Risks Involved
All investing strategies we offer involve risk and may result in a loss of your original investment which you should be prepared to bear. Many of these risks apply equally to stocks, bonds, commodities, and any other investment or security. Material risks associated with our investment 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: Actively managed mutual funds tend to have a higher turnover rate than passive funds. A high portfolio turnover would result in higher transaction costs and in higher taxes when shares are held in a taxable account. 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 consider 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. These strategies may be subject to greater risks of adverse developments in such areas of focus than those 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 changes. Most other investments are also sensitive to the level and direction of interest rates.
Political Risks: Wars, terrorist attacks, economic embargoes, other forms of political changes and instability may cause prices to fall.
Foreign Currency Risks: Certain adverse macroeconomic, industry problems, commodity shocks, political, or fiscal issues may affect currency markets and make them have problems with respect to trading, settlement, custodial, or otherwise make the market for certain currencies to be limited or demand very large bid ask spreads for an extended period of time.
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 your investment portfolio, even if the dollar value of your investments remains the same.
Risks Associated with Securities
Apart from the general risks outlined above which apply to all types of investments, specific securities may have other risks.
Commercial Paper is, in most cases, an unsecured promissory note that is issued with a maturity of 270 days or less. Being unsecured the risk to the investor is that the issuer may default.
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.
Corporate 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 factors such 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 obligations 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, investors 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.
Options, Index Options, Futures, and other derivatives carry many unique risks, including time-sensitivity, and can result in the complete loss of principal. While covered call writing does provide a partial hedge to the stock against which the call is written, the hedge is limited to the amount of cash flow received when writing the option. When selling covered calls, there is a risk the underlying position may be called away at a price lower than the current market price.
Exchange Traded Funds prices may vary significantly from the Net Asset Value due to market conditions. Certain Exchange Traded Funds may not track underlying benchmarks as expected. ETFs are also subject to the following risks: (i) an ETF’s shares may trade at a market price that is above (premium) or below (discount) their net asset value and an ETF purchased at a premium may ultimately be sold at a discount; (ii) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are delisted 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 the Clients invest.
Mutual Funds When a Client invests in open-end 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 affected 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).
Item 9: Disciplinary Information
Criminal or Civil Actions
The firm and its management persons have not been involved in any criminal or civil action.
Administrative Enforcement Proceedings
The firm has not been involved in administrative enforcement proceedings.
Leonard W. Kingsley was disbarred for the offense of assisting another in the Unauthorized Practice of Law by the Supreme Court of Delaware on June 4, 2008. Mr. Kingsley was not a member of the Delaware Bar. There was no hearing as required by Due Process before the Supreme Court of Delaware, nor any lesser court which was unbiased. In each allegation, an authorized member of the Delaware Bar presented the materials to the client and was not sanctioned.
Similarly, the Supreme Court of Pennsylvania on March 17, 2009 disbarred Leonard W. Kingsley from the practice of law under the concept of Reciprocal Disbarment, also without Due Process. His attorney identification number was 91053.
Self-Regulatory Organization Enforcement Proceedings
The firm and its management persons have not been involved in legal or disciplinary events that are material to a Client’s or prospective Client’s evaluation of the firm or the integrity of its management.
Item 10: Other Financial Industry Activities and Affiliations
Broker-Dealer Affiliation
Neither the firm or its management persons is registered, or have an application pending to register, as a broker-dealer or a registered representative of a broker-dealer.
Other Affiliations
Neither the firm or its management persons is registered, or have an application pending to register, as a futures commission merchant, commodity pool operator, commodity trading advisor, or an associated person of the foregoing entities.
Related Persons
Neither the firm or its management persons have any relationship or arrangement with any related parties.
Leonard W Kingsley is a licensed insurance agent. However, he no longer sells insurance products, and is not appointed with any insurance companies. Leonard W Kingsley does not intend to sell any insurance products to clients or prospective clients within the next twelve months.
Recommendations or Selections of Other Investment Advisers
The firm does not recommend or select other investment advisors for our client.
Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
As a fiduciary, our firm has a duty of utmost good faith to act solely in the best interests of each Client. Our Clients entrust us with their funds and personal information, which in turn places a high standard on our conduct and integrity. Our fiduciary duty is a core aspect of our Code of Ethics and represents the expected basis of all of our dealings. The firm also adheres to the Code of Ethics adopted by the CFP® Board of Standards, and accepts the obligation not only to comply with the mandates and requirements of all applicable laws and regulations but also to take responsibility to act in an ethical and professionally responsible manner in all professional services and activities.
Code of Ethics Description
This Code of Ethics does not attempt to identify all possible conflicts of interest, and compliance with each of its specific provisions will not shield our firm or its access persons from liability for misconduct that violates a fiduciary duty to our Clients. A summary of the Code of Ethics’ Principles is outlined below.
- Integrity – Access persons shall offer and provide professional services with integrity.
- Objectivity – Access persons shall be objective in providing professional services to Clients.
- Competence – Access persons shall provide services to Clients competently and maintain the necessary knowledge and skill to continue to do so in those areas in which they are engaged.
- Fairness – Access persons shall perform professional services in a manner that is fair and reasonable to Clients, principals, partners, and employers, and shall disclose conflict(s) of interest in providing such services.
- Confidentiality – Access persons shall not disclose confidential Client information without the specific consent of the Client unless in response to proper legal process, or as required by law.
- Professionalism – Access persons conduct in all matters shall reflect the credit of the profession.
- Diligence – Access persons shall act diligently in providing professional services.
We annually review and amend our Code of Ethics to ensure that it remains current, and we require all firm access persons to attest to their understanding of and adherence to the Code of Ethics at least annually. Our firm will provide a copy of its Code of Ethics to any Client or prospective Client upon request.
Investment Recommendations Involving a Material Financial Interest and Conflicts of Interest
Neither our firm, its access persons, 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, principal transaction, among others.
Advisory Firm Purchase of Same Securities Recommended to Clients and Conflicts of Interest
From time to time, our firm and related persons may invest in the same securities that we recommend to Clients. In an effort to reduce or eliminate certain conflicts of interest, we will black out employee transactions in any newly recommended securities for three trading days and review any trade by a firm employee contemporaneous with a client transaction either on the same or opposite sides of the transaction within three days.
Item 12: Brokerage Practices
We receive no referrals from a custodian, broker-dealer or third party in exchange for using that custodian, broker-dealer or third party. With no discretion authority, each transaction must be approved prior to entry. When selecting brokers, Client should consider commission rates to be paid, reputation in the securities industry, track record, service, accessibility, and related factors. The firm may recommend brokers to advisory clients.
Item 13: Review of Accounts
Clients who engage us to provide Investment Management Services, will have their accounts reviewed periodically, no less than quarterly, against the Investment Policy Statement, investment policies, and risk tolerance levels by the CCO, Leonard W. Kingsley. The client will also receive a monthly account statement from the “Qualified Custodial Firm.”
Item 14: Client Referrals and Other Compensation
Compensation Received by the Firm
The firm is compensated solely by its Clients. The firm does not receive commissions, other sales-related compensation, or any economic benefit, directly or indirectly, from any third party for advice rendered to our Clients.
We do not directly or indirectly compensate any person who is not advisory personnel for client referrals.
Item 15: Custody
The firm deducts its advisory fee from Client’s accounts, the following safeguards will be applied:
- The client will send a written itemized invoice, by e-mail or US Postal, or other similarly reliable means, to the Client at the same time it instructs the Custodian to debit the advisory fee.
- Itemized invoice will include the formula used to calculate the fee, the amount of assets under management the fee is based on, and the time period covered by the fee.
- The Custodian will send at least quarterly statements to the Client showing all disbursements from the accounts, including the amount of the advisory fee.
- The Client is urged to carefully review custodial statements and compare with account invoices and notify of any discrepancies.
Item 16: Investment Discretion
(Non-Discretion Only) For those Client accounts where we provide Investment Management Services, the firm has non-discretionary authority, meaning we will obtain your approval prior to the execution of any transactions for your account(s). You have an unrestricted right to decline to implement any advice provided by our firm on a non-discretionary basis. Our trading authority is outlined in the Advisory Contract you enter with our firm.
If you enter into non-discretionary arrangements with our firm, we will obtain your approval prior to the execution of any transactions for your account(s). You have an unrestricted right to decline to implement any advice provided by our firm on a non-discretionary basis.
Item 17: Voting Client Securities
As a considered firm policy, we do not vote Client proxies.
Therefore, although the firm may provide investment advisory services, Clients maintain exclusive responsibility for: (1) voting proxies, and (2) acting on corporate actions pertaining to the Client’s investment assets. Corporate actions may include mergers, acquisitions, tender offers, bankruptcy proceedings, or similar events which may impact client assets and performance.
The Client shall instruct the Client’s qualified custodian to forward to the Client copies of all proxies and shareholder communications relating to the Client’s investment assets. If the Client would like our opinion on a particular proxy vote, they may contact us at the number listed on the cover of this brochure.
In most cases, you will receive proxy materials directly from the account custodian. However, in the event we were to receive any written or electronic proxy materials, we would forward them directly to you by mail, unless you have authorized our firm to contact you by electronic mail, in which case, we would forward you any electronic solicitation to vote proxies.
Item 18: Financial Information
We have no financial commitment that impairs our ability to meet contractual and fiduciary commitments to our Clients, nor have we been the subject of any bankruptcy proceeding. We do not have custody of Client funds or securities, or require or solicit prepayment of any fees six months or more in advance.
Item 19: Requirements for State Registered Advisers
Principal Officers
Leonard W. Kingsley serves as the firm’s Chief Compliance Officer
Information about Leonard W. Kingsley’s education, business background, and outside business activities can be found on his ADV Part 2B, Brochure Supplement attached to this Brochure.
Outside Business
All outside business information, if applicable, of the firm is disclosed in Item 10 of this Brochure.
Performance-Based Fees
The firm does not offer performance-based fees and does not engage in side-by-side management. Please refer to Item 6 of this brochure.
Material Disciplinary Disclosures
No management person at the firm has ever been involved in an arbitration, enforcement proceeding, claim of any kind or been found liable in a civil, self-regulatory organization, or administrative proceeding with respect to securities, monies, or any reportable offense.
Leonard W. Kingsley was disbarred for the offense of assisting another in the Unauthorized Practice of Law by the Supreme Court of Delaware on June 4, 2008. Mr. Kingsley was not a member of the Delaware Bar. There was no hearing as required by Due Process before the Supreme Court of Delaware, nor any lesser court which was unbiased. In each allegation, an authorized member of the Delaware Bar presented the materials to the client and was not sanctioned.
Similarly, the Supreme Court of Pennsylvania on March 17, 2009 disbarred Leonard W. Kingsley from the practice of law under the concept of Reciprocal Disbarment, also without Due Process. His attorney identification number was 91053.
Material Relationships That Management Persons Have With Issuers of Securities
Neither the firm nor Leonard W. Kingsley have any relationship or arrangement with issuers of securities.
