As an SEC registered investment advisory firm, we are required to complete two different disclosure documents per year to tell clients and potential clients about our firm, our employees, our processes and our fee structure. Click on the links below to read this year's documents. Should you have any questions, please contact our Chief Compliance Officer, Dwight Ower, at (312) 922-1717 or firstname.lastname@example.org.
Part 2 Brochures
Form CRS Relationship Summary
Index Funds: Groups of stocks, bonds or other securities held in a mutual fund or ETF that meet a statistical criteria (size, sector, country, etc) and may track an existing index. This is considered a passive investment. Groups of stocks, bonds or other securities held in a mutual fund or ETF that meet a statistical criteria (size, sector, country, etc) and may track an existing index. This is considered a passive investment.
Actively Managed Funds: Groups of stocks, bonds or other securities held in a mutual fund or ETF that are selected by the manager both for its statistical criteria and for its ability to add value to the portfolio. The fund manager's goal is to BEAT the target index, not just match it. Groups of stocks, bonds or other securities held in a mutual fund or ETF that are selected by the manager both for its statistical criteria and for its ability to add value to the portfolio. The fund manager's goal is to BEAT the target index, not just match it.
Assets are the types of securities you can buy within your accounts. They are often priced and traded differently from one another and carry varied tax consequences if they are held in a taxable account. We typically use the following types of assets for client accounts.
Bonds: debt securities; the investor is loaning money to the issuer and is paid interest in return. Bonds are most commonly issued by governments and corporations to raise money for projects. Bonds are bought and sold at auction or bidding. Investors may pay varied prices for the same bond. An increase in interest rates may reduce the value of a bond, while a decrease in interest rates may increase the value of the bond.
Stocks: equity securities; the investor owns a share of a corporation and is entitled to certain rights. Stock values vary every minute of every business day. Investors pay or receive the same price, but usually pay trading fees to the broker where they purchase or sell the stock. Stock values can change drastically at any time and could become worthless. Some stocks pay dividends (portions of profit) to their shareholders.
Mutual funds: bundled stocks, bonds and/or other securities that are bought and sold as a group. There are literally thousands of mutual funds available for investment. They can be very diversified portfolios or very specific (i.e. S&P 500 Index vs a healthcare fund). Some are index funds and some are actively managed funds. The investor pays a fee to the manager of the mutual fund and may also pay trading fees to buy and sell. Mutual funds are priced once per day, after the market close.
ETFs (Exchange-Traded Funds): similar to mutual funds in that they are bundled stocks, bonds and/or other securities that are bought and sold as a group. However, they trade like stocks with pricing throughout the day.
Accounts are defined by the Tax Code and have very different rules for participation and tax consequences. You can hold a variety of assets within any account, but the tax consequences of those assets will vary depending on the type of account it is held in. You can have many types of accounts.
Taxable accounts include checking accounts, savings accounts and brokerage accounts. While checking and savings accounts are typically just cash, other types of taxable accounts, often called money market or brokerage accounts, can invest in assets. Income received from taxable accounts (interest, dividends, capital gains) are taxable in the year they are received and are reported on your tax return. If you buy or sell securities within a taxable account, the gain or loss on the sale of that asset will be reported that same year. Your tax consequences will vary depending on the type of asset, how long you owned the asset and how much total income you received in that year.
Deferred Tax/Retirement Accounts
401(k) accounts are typically retirement plans set up by a business for its employees. Contributions can be pre-tax or Roth contributions. The maximum contribution depends on the IRS annual limits, the specifics of the employer plan, and the participant's age. Some 401(k) plans offer a match from the employer on employee contributions. Withdrawals are restricted by the plan and IRS rules. You owe no tax until withdrawals begin. Should you change employers, you often have the opportunity to "roll out" the account to a new employer 401(k) or an IRA Rollover account.
IRA accounts are owned by individuals and not set up by businesses. Contributions are limited based on IRS rules. Withdrawals are severely limited until age 59 1/2. Withdrawals are partially or wholly taxable depending on the type of contribution. You will pay no tax until you begin taking withdrawals, which are required by the Tax Code after age 70 1/2.
Roth IRA accounts are owned by individuals and not set up by businesses. Contributions are post-tax and are limited based on IRS rules. Withdrawals of contributions can be withdrawn at any time with no tax consequences but earnings cannot be withdrawn until age 59 1/2. There are no taxes paid upon withdrawal and all earnings are tax-free.
SEP IRA, SIMPLE IRA and Individual 401(k) accounts are used by small business owners to save for retirement for themselves and for their employees. Contributions are typically pre-tax and are limited based on IRS rules. These accounts may offer larger contributions than a regular IRA or Roth IRA. The type of account you use as a small business owner will vary depending on your needs. Income taxes are paid by the participant upon withdrawal.
College Saving Accounts
Coverdell Education Savings accounts allow for small contributions per year (limited by IRS rules) toward education expenses. They grow tax-free and earnings are not taxable if withdrawn for education needs for its beneficiary (the student). Coverdells allow the owner to invest in whatever they want, limited only by what is available through the custodian (bank or brokerage firm that holds the account). Because the account is not owned by the student, the value of the account will not impact financial aid as much as an account owned by the student. Unused monies from one student can be transferred to another student in the same family. The maximum contribution applies to ALL Coverdells for one student.
529 plan accounts are similar to Coverdells except that they are managed by the state (every state in the US has at least one plan). 529 plans vary considerably in cost and investment options. While you do not have to use a plan in your own state, your state's plan may have a tax incentive attached. Also, 529 plans allow much higher contributions than Coverdells, but their use is restricted to college tuition and fees only. You can own both a Coverdell and a 529 plan for the same student.