Form CRS & Disclosure Statement
This Investment Advisory Agreement (“Agreement”) is entered into as of the date below between (“Client” or “You”) and Pacific Financial Advisors, Inc. (“PFA” or “We”). By signing this Agreement, you are retaining PFA as your financial advisor to provide the services described herein.
Summary of Services To Be Provided
Fiduciary: PFA’s fiduciary duty to you is the highest standard of care and gives rise to a relationship of trust and confidence. You can expect PFA to exhibit undivided loyalty to you, operate in good faith, place your best interests ahead of our own, and to disclose any conflicts of interest.
Financial Counsel: PFA is available to talk with you, meet with you, and answer your questions you may have. We encourage you to call us or meet with us if you anticipate any significant life changes or need to make any decisions that may have significant financial consequences. On no less than an annual basis, we will meet with you to review your goals.
Customized Investment Management: PFA recognizes that your investment assets are unique to you and your family. For this reason, we take into consideration such things as the size and composition of your net worth, your risk tolerance, values, legacy holdings, and stage of life when designing, managing, and monitoring your investment assets. Our objective is to protect and grow your net worth at an appropriate risk-adjusted rate so as to provide the resources you need to achieve your financial goals. Please review Appendix D for a detailed description.
Comprehensive Account Oversight and Management: PFA’s investment management approach is comprehensive in nature. We will consider all of your investment assets, regardless of account type, when evaluating and constructing your strategy.
Design and Implementation of Investment Plan: PFA will design your investment portfolio in an attempt to maximize expected returns within your risk tolerance and time horizon using an analytical asset allocation strategy, according to the goals and constraints expressed in your Investment Policy Statement (IPS). We execute this approach through broad diversification that can include bonds, equities, real estate or REITs, hedge funds, natural resources, and private equity depending on your circumstances. We will regularly monitor the investments that we manage for you. We may adjust, reallocate or rebalance your portfolio based on our internal portfolio reviews. Portfolio management is on a discretionary basis. We will consider trading costs, fees, and tax implications whenever portfolio adjustments are made. PFA is able to work with your various account restrictions to design surrogate replacements when necessary; such restrictions will be documented in your IPS.
Illiquid Alternatives: Your investment strategy may include an allocation of illiquid investments such as direct real estate, hedge funds, private equity, or debt equivalents. These investments typically carry a greater degree of risk, and we will only offer them to you if they are determined to be suitable for your portfolio. In some situations, we may not inform you of opportunities as they may involve excessive risk or may not fit into your asset allocation needs. These investments may require separate subscription agreements and may not be held by a custodian. Interim valuations of these assets are limited by the manager and may not be readily available.
Discretionary and Limited Discretion: Pacific Financial Advisors, Inc. provides discretionary portfolio management and financial planning services to its clients.
Professional Resource Coordination: PFA’s objective is to ensure that your plans and goals are fully discussed and reviewed by legal and tax experts. As needed, we will meet with you and your attorney, accountant, or other professionals to assist with coordinating and implementing your plan and to discuss developing issues. We will balance the need to consult with these professionals with an eye on the additional costs and professional fees that you may incur. Please note: while investment advisory services are comprehensive in nature, PFA does not provide legal or tax advice.
Consolidated Performance and Tax Reporting: PFA will provide you with online access to your investment portfolio, where you will be able to examine portfolio transactions, holdings, and performance. In order to assist with tax planning and the preparation of your tax returns, we will provide tax reports to your accountant throughout the year. Please note: these items are in addition to any transaction confirmations, statements and reports that you will receive directly from your various custodians; they are not substitutes for them, and should be compared to your brokerage documents.
Your Responsibilities: The advice and recommendations PFA offers can only be useful when based on information that is accurate. Therefore, you agree to furnish PFA with all current information relative to your financial situation, and to update PFA as your information, goals, and circumstances change. PFA will treat all such information, advice and recommendations that we furnish to you as confidential, and we will not release it to any individual or entity without your express prior approval except as required by law. However, in order that we may coordinate the implementation of your plan with your other advisors, you grant PFA full authority to discuss, impart, disclose or communicate any or all information received from you under the terms of this Agreement.
Custody: PFA utilizes the services of third party custodians to hold your assets. We generally recommend the use of TD Ameritrade or Fidelity as our custodian and prime broker; we may recommend others in the future. In certain unique circumstances, we may agree and/or be required to use other custodians than those we generally recommend.
Regulatory Oversight and Disclosure: PFA is a Registered Investment Advisor, as defined by the Investment Advisers Act of 1940 and Securities Act of Washington. Washington Administrative Code 460-24A-145 requires that I provide you with a copy of the materials required by this section to an advisory client or prospective advisory client (i) not less than forty-eight hours prior to entering into any investment advisory contract with such client or prospective client, or (ii) at the time of entering into any such contract, if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract.
Duration, Modification and Assignment of Agreement: This contract may be terminated at any time by either party. Any modification of WAC 460-24A-130 and other adverse or material terms requires your prior written consent as the client. We ask for a commitment for an initial contract period of at least one year, so that your financial planning and investment portfolio can be fully implemented. Because fees are billed and paid in advance, should you decide to terminate our services, your final fee will be prorated based on the termination date and refunded. This Agreement may be modified from time to time with advance written notice. We cannot and will not assign this Agreement without your written consent.
Disputes: First and foremost, PFA has a fiduciary duty to clients. As a fiduciary, PFA intends to protect clients by putting their interests first and by disclosing all actual and potential conflicts of interest. Any adviser affiliated with PFA will act in accordance with its fiduciary duty to the clients. As a fiduciary, PFA is expected to
operate in conformity with applicable state laws and to conduct business in the highest ethical and professional manner.
Except in cases of negligence, malfeasance, or violation of applicable law, neither PFA, nor any of its officers, managing directors or employees shall be liable hereunder for any action performed or omitted to be performed, or for any errors of judgment in managing the account. Federal securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights that you may have under federal securities laws.
In the normal course of business, PFA may provide you with referrals to third parties for services and/or products. PFA is not responsible and cannot be held liable for the actions or damages caused by these firms or individuals. PFA does not receive, directly or indirectly any compensation for any third party referral. PFA does not guarantee the future performance of any financial plan, asset allocation, the success of any investment decision or strategy that PFA may use, or the success of PFA’s overall management of the account. Financial plans and asset allocations must be continuously monitored and adjusted. You understand that investment decisions made for your Account are subject to various market, currency, economic, political and business risks, and that those investment decisions will not always be profitable. Except as may otherwise be provided by law, PFA will not be liable to you for (i) any loss that you may suffer by reason of any investment decision made or other action taken or omitted by PFA with that degree of care, skill, prudence, and diligence under the circumstances that a prudent person acting in a fiduciary capacity would use; (ii) any loss arising from PFA’s adherence to your instructions; or (iii) any act or failure to act by any broker or dealer to which PFA directs transactions for the Account, or by any other third party.
Services Provided to Others: PFA provides financial counsel, financial planning, and customized investment management services to other clients. Based on the facts and circumstances, PFA may provide the same or different services, recommendations or decisions from those made to you.
PFA has no obligation to purchase or sell for your accounts, or to recommend the purchase or sale by your accounts, any security that PFA, its managing directors or its employees may purchase for themselves or for other clients. Transactions in a specific security may not be accomplished for all clients’ accounts at the same time or at the same price.
Nonpublic Information: PFA and/or its employees may provide services for, or solicit business from various companies, including issuers of securities that PFA may recommend or purchase or sell for client accounts. In providing these services, PFA may obtain material, nonpublic or other confidential information that, if disclosed, might affect an investor’s decision to buy, sell or hold a security. Under applicable law, PFA cannot improperly disclose or use this information for their personal benefit or for the benefit of any person, including clients of PFA. If PFA obtains nonpublic or other confidential information about any issuer, PFA will have no obligation to disclose the information to Client or use it for Client’s benefit. PFA is also prohibited from taking any action for itself, any employee or affiliated person’s account or to communicate the information until publicly available.
Client Identification Program: In order to protect PFA and its clients and to prevent fraudulent activity including money laundering, PFA has adopted a “know-your-client” program in compliance with federal securities law. In conducting the program, PFA will ask you to provide us with legal identification documents (e.g. driver’s license, passport) which PFA will verify and copy for our records. PFA will ask you for updated documentation from time to time, or upon expiration. In order to conduct the ongoing management of your portfolio or implement various financial decisions or transactions for you, PFA may also provide copies of this documentation to custodians, brokers, or third party money managers as they require.
Consent to Receive Electronic Communications: Although certain exceptions exist on a case-by-case basis, PFA’s default client document delivery method is electronic (e.g., through e-mail.) In order to protect sensitive information while in transit, PFA will password-protect documents that PFA sends to you electronically and that contain sensitive data, and recommend that you do the same when transmitting documents to us.
Fees for Investment Advisory Services (including investment management of assets): PFA generally structures its fees as a percentage of assets under management, and documents them in the advisory agreement. Our fee schedule is as follows:
Assets Under Management Annual Fee
$0 - $1,000,000 1% - 2%
$1,000,001+ 0.85% - 1.35%
A $250 annual minimum management fee will be assessed on all accounts. For account values of less than $12,500, this may equate to be more than the maximum stated 2% as stated in this Form ADV and the Agreement. The fee schedule may not be the actual fee charged, but the maximum fee charged. Sub-Adviser fees are included in the fee schedule above.
PFA bills fees quarterly, in advance. At inception, fees for partial periods will be prorated from the date of the agreement through the end of the calendar quarter, based on initial asset values where applicable. For agreements that are terminated during the quarter, PFA will promptly refund the unearned portion of that quarter’s prepaid advisory fee. At termination, PFA may mutually agree to perform certain actions or transactions which are needed to accomplish an orderly transition away from PFA. Your portfolio may incur other fees and expenses in addition to those you pay PFA for investment management services. These fees are separate from, and in addition to PFA’s fees and may include (i) mutual fund or exchange traded fund fees; (ii) fees, costs and expenses of third-party service providers, brokerage commissions, transaction/trading fees.
Fees for Services: Services are billed annually on an hourly basis at a rate of $500 per hour with a minimum of 5 hours per year. Prior to the planning process the client will be provided an estimated plan fee. Services include but are not limited to all applicable topics including Wills, Estate Plan/Trusts, Investments, Taxes, Tax Return Preparation, Mortgages and Insurance. The payment for these services are due when invoiced.