firm brochure - Fee-Only Financial Advisor

 FIRM BROCHURE
Form ADV Part 2A & 2B
Effective: September 30, 2015
This Brochure provides information about the qualifications and business practices of Constant
Guidance Financial, LLC. If you have any questions about the contents of this Brochure, please
contact us at (508) 207-8049 or by email at [email protected]. The information in this
Brochure has not been approved or verified by the United States Securities and Exchange
Commission (“SEC”) or by any state securities authority.
Constant Guidance Financial, LLC is a Registered Investment Adviser. Registration of an
Investment Adviser does not imply any level of skill or training. The oral and written
communications of an Adviser provide you with information that you may use to determine
whether to hire or retain them.
Additional information about CGF Advisor is also available via the SEC’s website
www.adviserinfo.sec.gov. You can search this site by using a unique identifying number, known
as a CRD number. The CRD number for CGF Advisor is 172612. The SEC’s web site also
provides information about any persons affiliated with CGF Advisor who are registered, or are
required to be registered, as Investment Adviser Representatives of CGF Advisor.
Constant Guidance Financial LLC
521 Mount Hope Street
North Attleboro, MA 02760
Phone: (508) 207-8049
www.CGFadvisor.com
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 1 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 2 – Material Changes
This is a new Adviser.
This Brochure is a new document that describes the Adviser’s business.
In the future, this section of the Brochure will discuss only the specific material changes that
were made to the Brochure and will provide you with a summary of all material changes that
have occurred since the last filing of this Brochure. This section will also identify the date of our
last annual Brochure update.
We will ensure that you receive a summary of any material changes to this and subsequent
Brochures within 90 days of the close of our business fiscal year end, which is December 31st.
We will provide other ongoing disclosure information about material changes as they occur. We
will also provide you with information on how to obtain the complete brochure. You may
request a copy of this Disclosure Brochure at any time, without charge, by contacting us at (508)
207-8049 or by email at [email protected].
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 2 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 3 – Table of Contents
Item 1 – Cover Page ...................................................................................................................... 1
Item 2 – Material Changes ................................................................................................................. 2 Item 3 – Table of Contents .................................................................................................................. 3 A. Firm Description and Principal Owners ....................................................................................... 5 B. Type of Advisory Services Offered .............................................................................................. 5 Financial Planning ............................................................................................................................... 5 Investment Advisory ............................................................................................................................ 6 401K Consulting Services .................................................................................................................... 7 Item 5 – Fees and Compensation ........................................................................................................ 7 B. Fee Deduction and Billing Methods ............................................................................................. 8 Financial Planning Fee Schedule ......................................................................................................... 9 Item 6 – Performance Based Fee and Side by Side Management ..................................................... 10 Item 7 – Types of Client(s) ................................................................................................................ 10 Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss ............................................ 10 Methods of Analysis .......................................................................................................................... 10 Fundamental Analysis ................................................................................................................ 10 Technical Analysis ..................................................................................................................... 11 Asset Allocation ......................................................................................................................... 11 Investment Strategies ......................................................................................................................... 11 Diversified Balanced .......................................................................................................................... 12 High Dividend Yield .......................................................................................................................... 12 Tactical Global Value ........................................................................................................................ 13 Diversified Growth ............................................................................................................................ 13 Option Investment Strategies ............................................................................................................. 13 Long Put Strategy .............................................................................................................................. 13 Covered Call Strategy ........................................................................................................................ 13 Fixed Income ..................................................................................................................................... 14 A. Material Risks Involved ............................................................................................................. 14 Item 9 – Disciplinary Information .................................................................................................... 19 Item 10 – Other Financial Industry Activities and Affiliations ........................................................ 19 A. Other Affiliations ....................................................................................................................... 19 Item 11 – Code of Ethics, Participation or Interest in Client Accounts and Personal Trading ........ 19 A. Code of Ethics ............................................................................................................................ 19 B. Personal Trading ........................................................................................................................ 20 C. Privacy Statement ....................................................................................................................... 21 Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 3 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 12 – Brokerage Practices .......................................................................................................... 21 Best Execution ................................................................................................................................... 23 Brokerage for Client Referrals ........................................................................................................... 23 B. Aggregate Trading ..................................................................................................................... 23 Item 13 – Review of Accounts ........................................................................................................... 25 A. Periodic Reviews ........................................................................................................................ 25 B. Regular Reports .......................................................................................................................... 25 Item 14 – Client Referrals and Other Compensation ....................................................................... 26 Item 15 – Custody ............................................................................................................................. 26 Item 16 – Investment Discretion ....................................................................................................... 26 Item 17 – Voting Client Securities .................................................................................................... 27 Item 18 – Financial Information ....................................................................................................... 27 Item 19 – Requirements for State Registered Advisers .................................................................... 27 Form ADV Part 2B - Brochure Supplement .................................................................................... 29 Item 2 – Educational Background and Business Experience ............................................................. 30 Item 3 – Disciplinary History ............................................................................................................. 33 Item 4 – Other Business Activities ..................................................................................................... 34 Item 5 – Additional Compensation .................................................................................................... 34 Item 6 – Supervision .......................................................................................................................... 34 Item 7 – Requirements for State-Registered Advisers ....................................................................... 34 Mitch Zides has no reportable events to disclose here. ...................................................................... 34 Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 4 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 4 – Advisory Business Introduction
A. Firm Description and Principal Owners
Constant Guidance Financial LLC (referred to as “CGF Advisor”, the “Advisor”, “we”, “our”,
“us”) is a Registered Investment Adviser with the State of Massachusetts, which is organized as
a Limited Liability Company (LLC) under the laws of the State of Massachusetts. CGF Advisor
was founded in October 2014, and is owned and operated by its President and CEO, Mitch S.
Zides, CFA, CFP®, AIF®, NSSA®. Mr. Zides also serves as Chief Compliance Officer and
Portfolio Manager.
As a fee-only investment advisor, we don’t charge commissions, sales fees, custody fees or
referral fees from any third parties. We are proud to be directly compensated by our clients. We
hold ourselves to a fiduciary standard, which means our firm has a legal duty to always try to put
the interest of our clients ahead of its own. We carefully manage, disclose, and minimize all
potential conflicts of interest. Our goal is to provide the highest quality service at a reasonable
fee, which is always fully transparent.
B. Type of Advisory Services Offered
CGF Advisor provides wealth management advice, investment advisory, and retirement plan
consulting to individuals, trusts, estates, charitable organizations, corporations, plan sponsors,
and other business entities. Each client’s needs are different and the financial counseling
recommendations and advice are customized to meet the client’s unique objectives. Although
each client may have unique needs, the types of services are similar. These services include asset
allocation, investment planning, retirement planning, estate planning, risk management
strategies, and comprehensive financial counseling.
We manage accounts on both a discretionary and nondiscretionary basis. When we manage your
accounts on a discretionary basis we have the authority to make purchase and sell decisions for
your account(s) consistent with the goals and objectives. Client’s investment objectives are
determined through data gathering, risk assessment questionnaires and interviews during the
initial planning process. If we manage your account(s) on a non-discretionary basis, we must
obtain either verbal or written approval from you before placing any transaction on your behalf.
In addition, we may coordinate with attorneys to develop estate plans, insurance agents, and
accountants for tax planning and the preparation of tax returns.
Financial Planning
For individual clients, CGF Advisor begins the relationship with a financial planning overview.
As needed, or as requested by the client, analysis may be offered for areas such as retirement
planning, estate planning, education funding, and other matters specific to each client’s
circumstances.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 5 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC CGF Advisor offers a unique planning philosophy that incorporates goal-based planning with
full cash flow after retirement. We meet with our clients regularly, either in person or via
telephone, to discuss progress towards goals and to make necessary changes as needed. This
service is offered at no additional charge to CGF Advisor investment management clients.
On a case-by-case basis, CGF Advisor may accept Financial Planning engagements for
individuals who are not ongoing portfolio management clients. These engagements are
standalone, meaning they are limited in scope and not ongoing, and billed on an hourly rate or on
a project basis.
If you engage us to perform these services, you will receive a written agreement detailing the
services, fees, terms and conditions of the relationship. You will also receive this Brochure.
You are under no obligation to implement recommendations through us. CGF Advisor does not
manage or place Client assets into a wrap fee program.
Investment Advisory
CGF Advisor provides investment advice and portfolio management services on an ongoing
basis. We provide in-depth and rigorous analysis of existing investment portfolios and
construction of new portfolios. In performing investment management services, we typically
examine and analyze your overall financial situation, which may include issues such as taxes,
insurance needs, overall debt, credit, business consulting, retirement savings and reviewing your
current investment program. Our services may focus on all or only one of these areas depending
upon the scope of our engagement with you.
In most cases, an Investment Policy Statement is established that summarizes your specific
financial circumstances, including goals and objectives, risk tolerance, and time horizon for
investing. This information is used in the design, implementation and management of a
diversified and risk appropriate investment portfolio. Thereafter, CGF Advisor actively manages
your portfolio on an ongoing basis, and will rebalance the portfolio as required by changes in
market conditions and/or changes in your financial circumstances. The Advisor may employ
cash positions and option strategies (if consent is given prior in writing) as possible hedges
against market movement, which may adversely affect the portfolio.
Our customized portfolio asset allocations will include but will not be limited to cash, bonds
(corporate debt, certificates of deposit, municipal securities and US Government securities),
stocks, exchange-traded funds, closed-end fund and mutual funds. We will select specific
securities that will provide diversification to help meet each client's stated investment objectives
and risk objectives. The types of Investment Advisory services rendered include asset allocation
strategies and discretionary management of investment strategies. In some cases, clients may
select pre-built asset allocation models based on their investment objectives, risk profile, and
goals. These ETF Strategies are used to create diversified asset allocations across asset classes,
geographic regions, sectors, and market capitalizations.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 6 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC 401K Consulting Services
CGF Advisor offers a range of services to retirement plans governed by the Employee
Retirement Income Security Act of 1974 (“ERISA”) and their participants. CGF Advisor
provides investment advice in the form of mutual fund evaluation and recommendation services
to 401k plans and the plan’s trustees. Our ERISA services include but are not limited to
establishing an Investment policy statement, participant and sponsor education, 404(c) Safe
Harbor advice, service provider due diligence, and investment advice.
Typically, there are one or more trustees (employees of the company sponsoring the plan) who
are the 401k “named fiduciaries” under ERISA supervised by the DOL (Department of Labor).
Our services are provided to, and contracted by the Named Fiduciaries responsible for the overall
administration of the Plan (and their various service providers, including a custodian, plan
administrator, etc.).
We will also monitor the current managed investment line up including the investment’s
performance compared to an applicable benchmark cost. If we determine that a fund no longer
meets our criterion, we will select possible alternatives and present them to the plan sponsor. In
providing services for some 401k plans, CGF Advisor has the discretionary authority to make
changes to the funds within the plan that are made available to plan participants to buy and sell.
We may conduct plan participant meetings when a change is made either to the structure of the
plan or if the investment lineup changes as a result of our decisions. We will detail the changes
being made, how it affects the current participants, review the current investment opportunities,
how participants may make changes to their investment selections, and will answer any questions
a participant may have. We will review with the participants how to select the investments.
C. Wrap Fee Programs
CGF Advisor does not manage or place Client assets into a wrap fee program. Investment
management services are provided directly by CGF Advisor.
D. Amount of Client Assets
As of October 2014, we do not have any assets under management nor do we have accounts for
which we provide asset management services. We are a new adviser in 2014.
Item 5 – Fees and Compensation
A. Compensation Description
We provide investment management, financial planning and 401K services for a fee. Our fees
do not include brokerage commissions, transaction fees, and other related costs and expenses.
You may incur certain charges imposed by custodians, third party investment companies and
other third parties. These include fees charged by managers, custodial fees, deferred sales
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 7 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees, and other fees
and taxes on brokerage accounts and securities transactions. Mutual funds, money market funds
and exchange-traded funds (ETFs) also charge internal management fees, which are disclosed in
the fund’s prospectus. These fees may include, but are not limited to, a management fee, upfront
sales charges, and other fund expenses. We do not receive any compensation from these fees.
All of these fees are in addition to the management fee you pay us. You should review all fees
charged to fully understand the total amount of fees you will pay. Services similar to those
offered by us maybe available elsewhere for more or less than the amounts we charge.
You could invest in a mutual fund directly, without our services. In that case, you would not
receive the services provided by us which are designed, among other things, to assist you in
determining which mutual fund or funds are most appropriate to your financial condition and
objectives. The specific manner in which fees are charged by CGF Advisor is established in a
client’s written agreement.
B. Fee Deduction and Billing Methods
The annual fee for investment management services will be charged as a percentage of assets
under management according to the schedule below:
•
•
Wealth Management and investment advisory is provided for a flat fee of 0.75% of AUM
annually. Wealth Management fees are paid quarterly (at a rate of 0.1875% of AUM per
quarter) in arrears pursuant to the terms of the Wealth Management Agreement.
All fees are negotiable depending upon the complexity and nature of your circumstances.
No increase in the annual fee shall be effective without prior written notification to you.
C. Payment of Client Fees
Our fees are payable quarterly, in arrears within fifteen (15) days following the beginning of the
quarter for which said fees have been incurred. Our clients authorize the account custodian to
debit their client account for the amount of our investment management fee. At the inception of
the relationship and each quarter thereafter, we will notify your custodian of the amount of the
fee due and payable to us through our fee schedule and contract. The custodian does not validate
or check our fee, its calculation or the assets on which the fee is based. They will “deduct” the
fee from your account(s) or, if you have more than one account, from the account you have
designated to pay our advisory fees. In limited situations we may provide an alternate payment
method. Alternatively, the Client may request to be invoiced for fees directly by CGF Advisor. If
invoiced directly, fees are due upon receipt of CGF Advisor’s invoice.
Each month, you will receive a statement directly from your custodian showing all transactions,
positions and credits / debits into or from your account; the statements after the quarter-end will
reflect these transactions, including the management fee paid by you to us. Upon request, at the
end of every calendar quarter, CGF Advisor will mail you an invoice that includes the following
information:
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 8 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC •
Assets Under Management - month-end account value(s) for the three months in the
quarter, and the average of these values.
•
Method of Fee Calculation - the management fee is calculated by multiplying one
quarter of your annual fee with the averaged month-end account value.
•
Payment method –whether the fee will be directly deducted from the account(s) or
paid by check per client instructions.
We encourage you to review your quarterly invoice closely, including the month-end account
values and fee calculation. Your custodian will deduct a management fee but does not check
account values or calculations.
Either party may terminate the relationship with a thirty (30) day written notice. Upon
termination of any account, any prepaid fees that are in excess of the services performed are
prorated from the date of termination will be promptly refunded to you via check. Upon
termination of an account, any fees due and payable to CGF Advisor will be directly deducted
from your account. Otherwise, CGF Advisor will invoice you for the fees due and payable, and
payment is requested within 30 days.
Financial Planning Fee Schedule
CGF Advisor offers Financial Planning and Consulting Services on an hourly basis for $150 per
hour. Prior to establishing the advisory relationship, we will agree with the client in advance of
an estimate amount of total hours that will be required to fulfill the engagement. In certain
circumstances, a fixed fee may be agreed in advance on predetermined services.
Either party may terminate the relationship with a thirty (30) day written notice. Upon
termination of any account, any prepaid fees that are in excess of the management services
performed will be promptly refunded to you on a pro rata basis via check.
401K Fee Schedule
The annual fee for 401k services will be charged as a percentage of assets ranging from 0.25% to
0.75% depending upon the level of services selected. These fees are paid per the fee schedule of
the individual plan sponsors and forwarded to the Advisor by the record keeping company of the
401(k) plan. The advisory agreement the plan sponsor has with us will outline exactly how the
fees are charged and remitted to us.
We believe our services help plan sponsors and plan fiduciaries meet their fiduciary duty to the
plan and its participants. As a part of our services, we review the fees of service providers and
the transparency of their fees. We will assist the plan sponsors with a review of service
providers including the third-party administrator, daily record keeper, and custodian to ensure
that their services, along with ours, remain competitive to alternatives that are available. Either
party may terminate the relationship with thirty (30) days written notice. Upon termination of
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 9 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC any account, any prepaid fees that are in excess of the management services performed will be
promptly refunded to you on a pro rata basis.
Item 6 – Performance Based Fee and Side by Side Management
We do not charge any performance-based fees. These are fees based on a share of capital gains
on or capital appreciation of the assets of a client.
Item 7 – Types of Client(s)
We provide our services to a number of different Client types including: individuals; trusts and
estates; endowments, foundations, and other non-profit organizations; corporations and other
business entities and pension and profit sharing plans.
The minimum initial investment is $100,000 for management of accounts. Fees and account
sizes are subject to negotiation and may differ based on a number of factors. These factors may
include the amount of assets and the number and range of supplemental advisory and clientrelated services, as well as the complexity of the Client’s financial situation.
Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
A. Methods of Analysis and Investment Strategies
CGF Advisor uses Modern Portfolio Theory (“MPT’) to analyze investment opportunities and
create portfolio allocations. MPT attempts to maximize expected return for any given level of
risk through the overall allocation of a portfolio’s assets. The process utilizes various statistical
methods of asset class analysis. This approach attempts to classify, quantify and manage both the
type and amount of investment risk in a portfolio. It shifts the emphasis onto overall portfolio
composition and behavior rather than on that of any single security.
We use fundamental analysis and technical analysis as part of our overall investment
management discipline; the implementation of these analyses as part of our investment advisory
services to you may include any, all or a combination of the following:
Methods of Analysis
Fundamental Analysis
Fundamental analysis is a technique that attempts to determine a security’s value by focusing on
the underlying factors that affect a company's actual business and its future prospects.
Fundamental analysis is about using real data to evaluate a security's value. It refers to the
analysis of the economic well-being of a financial entity as opposed to only its price movements.
Bottom-up analysis and valuation techniques are key components of the investment approach.
We assess a stock’s value primarily on the basis of its earnings power, growth potential, balance
sheet and competitive positioning. We take an opportunistic approach, often considering how
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 10 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC industry dynamics could change and looking beyond very near term factors which are obvious to
most investors and that we believe are discounted in the stock’s price. A primary objective of
fundamental analysis is to determine a reasoned value for a security that can be compared with
its current market price. A decision to buy, sell or hold a particular security in a client’s portfolio
is directly influenced by our expectations of how fundamental factors are anticipated to impact
its long-term valuation. Under this approach we routinely examine a company’s financial
statements and concurrently consider the impact that prevailing economic, political, and industry
circumstances may have on its future value. After researching and analyzing relevant
fundamental information, we develop an initial judgment of a security’s investment potential.
We will employ fundamental stock and sector analysis and focus on high dividend companies
that have strong management teams and franchise value.
Technical Analysis
Technical security analysis concentrates on historical trends and their relationships among and
between various quantitative measures. These variables are typically displayed in charts and
graphs and studied to determine if a particular pattern may be repeating, ongoing or non-existent.
Minimal attention is given to a company’s present earnings, strategy, products, services or other
pertinent qualitative issues. In sum, this is a data, statistical, or quantitative only approach to
security analysis. Examples of technical analysis factors include, but are not limited to, market
trading volume, price levels, and price movements. CGF Advisor employs technical security
analysis on a limited basis and as a supplement to fundamental security analysis discussed above.
Asset Allocation
CGF Advisor employs an investment philosophy emphasizing asset allocation that is customized
to each client. We begin the investment process by carefully listening to the client and gaining a
thorough understanding of the client’s unique goals, objectives, risk tolerance, time horizon, and
other unique circumstances. We then determine an appropriate investment strategy for the client
based on those understandings. Furthermore, customizing the portfolio takes into consideration
individual client preferences such as social investing, concentrated positions, existing holdings,
taxes, and other considerations.
Investment Strategies
CGF Advisor ETF Strategies utilize exchange-traded funds (ETFs) and Vanguard Funds to
create diversified asset allocations across asset classes, geographic regions, sectors, and market
capitalizations. CGF Advisor believes investment risk is reduced when a portfolio is diversified.
CGF Advisor’s investment philosophy centers on the construction of portfolios primarily
through the use of exchange-traded funds. An exchange-traded fund (ETF) is a basket of
securities designed to track the performance of a particular market index. ETFs provide purity of
style, liquidity, transparency, and diversification in a very cost efficient manner. We combine
asset allocation with diversification to ensure a client’s portfolio will be managed in a prudent
manner. We then implement the strategy to achieve the client’s investment objectives.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 11 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC We employ top-down analysis to look at the “big picture” and analyze macroeconomic trends.
We determine which regions present the best reward-to-risk ratio by using an investment
approach that incorporates both technical and fundamental analysis. All investment strategies use
a core-satellite approach to portfolio construction. Each strategy is constructed using two
components - a strategic allocation which replicates market risk and return (the beta) and a
satellite allocation which designed to generate returns in excess of the overall market (the alpha).
The core typically makes up 60-80% of the portfolio, while the satellites typically make up 2040%. Strategic allocations will be periodically rebalanced if portfolio allocations fall outside of
set tolerance levels.
CGF Advisor asset allocations are customized to each client’s needs. We begin the investment
process by carefully listening to the client and gaining a thorough understanding of the client’s
unique goals, objectives, risk tolerance, time horizon, and other unique circumstances. CGF
Advisor focuses its efforts on the individual needs and goals of its clients, and prides itself on not
fitting neatly into one specific style-box.
We then determine an appropriate investment strategy for the client based on those
understandings. Clients have the choice of selecting from four ETF model portfolios, individual
stocks, bonds and other types of securities to create a portfolio.
CGF Advisor generally provides portfolio management services through the use of four managed
model portfolios – Diversified Balanced, High Dividend Yield, Tactical Global Value,
Diversified Growth – all of which are all tactically managed by the President & CEO, Mitch S.
Zides CFA, CFP®, AIF®.
Diversified Balanced
The Diversified Balanced is a mixed asset allocation of 0-35% Equity and 0-100% Fixed
Income. The primary objective is to add stability to your portfolio, mitigate drawdowns,
and target returns in excess of inflation over time. The portfolio will be diversified across
sectors and asset classes with an importance placed on safety of principal. The balanced
approach will invest predominately in ETFs and Vanguard Funds. The equity exposure
will be modest and the emphasis will be placed on fixed income securities. This strategy
is suitable for investors with low tolerances for risk but who still need income.
High Dividend Yield
The High Dividend Yield is a diversified equity asset allocation that seeks an above
average dividend yield across multiple asset classes. The asset allocation typically
contains between 85-100% and the cash allocation can go to 100% in extremely volatile
markets. The High Dividend approach seeks to provide dividend yields in excess of the
S&P 500 Index by investing in high quality, undervalued, large cap companies with less
downside risk than the overall market. This portfolio will invest predominately in ETFs
and Vanguard funds that offer above average dividends and on occasion closed-end
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 12 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC funds. This strategy is appropriate for investors with a time horizon greater than five
years and who have a moderate tolerance for risk.
Tactical Global Value
The Tactical Global Value is a blended allocation primarily seeking to balance growth of
capital with current income. It is diversified asset allocation across global asset classes
and typically contains 50-85% equity. The allocation is primarily seeking current income
with growth of capital given secondary consideration. There will be a core allocation of
low cost ETFs and Vanguard Funds that will be a permanent part of the portfolio. The
core allocation will typically be 60-100% of assets. The strategic/tactical overlay will
invest in small caps, microcaps, alternative investments, or any parts of the markets that
are deemed undervalued. We use a tactical approach to opportunistically add risk to
portfolios only when we believe that an investment return will be overly compensated for
that level of risk.
Diversified Growth
The Diversified Growth is a model global asset allocation of ETFs and Vanguard funds
that seeks capital appreciation over full market cycles with a risk/return profile relative to
the S&P 500. The asset allocation consists of 60-90% Equity and 0-25% alternatives. The
maximum cash allocation can be 100% in extremely volatile markets. This portfolio will
have a high allocation to equities and thus will have higher risks. The strategy is
appropriate for investors who have over an 8 year time horizon and has a risk tolerance
that can withstand a permanent loss of capital.
Option Investment Strategies
Under certain circumstances, and only with the Clients express written consent, CGF Advisor
will utilize option strategies in client accounts. If Clients would like to purchase options, they
would first have to be approved for option trading. Some Clients may elect to incorporate
dynamic risk management tactics to hedge some downside risk or generate income.
Long Put Strategy
CGF Advisor may, from time to time, purchase put options to add to the level of
downside protection. Using put options is likely to temper total returns due to the
premium paid to purchase the put options but does provide some downside protection
again sharp declines in underlying stocks. The put option is an option contract giving the
owner the right, but not the obligation, to sell a specified amount of an underlying asset at
a set price within a specified time. The buyer of a put option estimates that the underlying
asset will drop below the exercise price before the expiration date.
Covered Call Strategy
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 13 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Covered call positions will be created to fund the purchase of the put or be written to
create income. The goal of the covered call position is for the short option to decay over
time and allow the account holder to realize a gain up to the total net option premium
received should the option position expire worthless. A “covered call” is an incomeproducing strategy where you sell, or “write”, call options against shares of stock you
already own. Typically, you’ll sell one contract for every 100 shares of stock. In
exchange for selling the call options, you collect an option premium. But that premium
comes with an obligation. If the buyer exercises the call option you sold, you may be
obligated to deliver your shares of the underlying stock.
Clients should read the option disclosure document, “Characteristics and Risks of Standardized
Options,” which can be obtained from any exchange on which options are traded or by calling 1888-OPTIONS, or by contacting CGF Advisor.
Fixed Income
CGF Advisor manages across a wide spectrum of debt vehicles, including government
and agency bonds, mortgages, high-yield, corporate and municipal bonds, and fixed
income ETFs.
Research information is generated both internally and obtained from external sources.
We carefully study this information and subject it to numerous quantitative and
qualitative considerations. Mitch Zides is solely responsible for all management,
research and analysis. In order to perform this analysis, we use many resources, such as:
•
Prospectuses and filings with the Securities and Exchange Commission including
annual reports, 10Ks and 10Qs
•
Corporate rating services
•
Research materials prepared by others
•
Company earnings announcements, news releases and websites
•
Financial newspapers, magazines and industry publications
•
Analyst conference calls
•
Government and economic reports
•
Websites
A. Material Risks Involved
We cannot guarantee our analysis methods will yield a return. In fact, a loss of principal is
always a risk. Investing in securities involves a risk of loss that you should be prepared to
handle. You need to understand that investment decisions made for your account by us are
subject to various market, currency, economic, political and business risks. The investment
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 14 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC decisions we make for you will not always be profitable nor can we guarantee any level of
performance.
A list of all risks associated with the strategies, products and methodology we offer are listed
below:
Alternative Investment Risk
Investing in alternative investments is speculative, not suitable for all clients, and intended
for experienced and sophisticated investors who are willing to bear the high economic risks
of the investment, which can include:
•
Loss of all or a substantial portion of the investment due to leveraging, short-selling
or other speculative investment practices
•
Lack of liquidity in that there may be no secondary market for the fund and none
expected to develop
•
Volatility of returns
•
Absence of information regarding valuations and pricing
•
Delays in tax reporting
•
Less regulation and higher fees than mutual funds.
Bond Fund Risk
Bond funds generally have higher risks than money market funds, largely because they
typically pursue strategies aimed at producing higher yields of the risks associated with bond
funds include:
•
Call Risk - The possibility that falling interest rates will cause a bond issuer to
redeem—or call—its high-yielding bond before the bond's maturity date.
•
Credit Risk — the possibility that companies or other issuers whose bonds are owned
by the fund may fail to pay their debts (including the debt owed to holders of their
bonds). Credit risk is less of a factor for bond funds that invest in insured bonds or
U.S. Treasury bonds. By contrast, those that invest in the bonds of companies with
poor credit ratings generally will be subject to higher risk.
•
Interest Rate Risk — the risk that the market value of the bonds will go down when
interest rates go up. Because of this, you can lose money in any bond fund, including
those that invest only in insured bonds or Treasury bonds.
•
Prepayment Risk — the chance that a bond will be paid off early. For example, if
interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue
new bonds that pay a lower rate. When this happens, the fund may not be able to
reinvest the proceeds in an investment with as high a return or yield.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 15 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Fundamental Analysis Risk
Fundamental analysis, when used in isolation, has a number of risks:
•
There are an infinite number of factors that can affect the earnings of a company, and
its stock price, over time. These can include economic, political and social factors, in
addition to the various company statistics.
•
The data used may be out of date.
•
It is difficult to give appropriate weightings to the factors.
•
It assumes that the analyst is competent.
•
It ignores the influence of random events such as oil spills, product defects being
exposed, and acts of God and so on.
Stock Fund Risk
Overall "market risk" poses the greatest potential danger for investors in stocks funds. Stock
prices can fluctuate for a broad range of reasons, such as the overall strength of the economy
or demand for particular products or services.
Options Contracts
Investments in option contracts have the risk of losing value in a relatively short period of
time. Option contracts are leveraged instruments that allow the holder of a single contract to
control many shares of an underlying stock. This leverage can compound gains or losses.
Concentrated Portfolios
Concentrated portfolios are an aggressive and highly volatile approach to trading and
investing and should be viewed as complementary to a stable, highly predictable investment
approach. Concentrated portfolios hold fewer different stocks than a diversified portfolio and
are much more likely to experience sudden dramatic price swings. In addition, the rise or
drop in price of any given holding in the portfolio is likely to have a larger impact on
portfolio performance, than a more broadly diversified portfolio. While CGF Advisor
generally will not hold concentrated portfolios of securities in a single company in Client
Accounts, we may use concentrated portfolios of ETFs and other diversified investments.
Mutual Funds and ETFs
An investment in a mutual fund or ETF involves risk, including the loss of principal.
Mutual fund and ETF shareholders are necessarily subject to the risks stemming from the
individual issuers of the fund’s underlying portfolio securities. Such shareholders are also
liable for taxes on any fund-level capital gains, as mutual funds and ETFs are required by
law to distribute capital gains in the event they sell securities for a profit that cannot be
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 16 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC offset by a corresponding loss. Shares of mutual funds are generally distributed and
redeemed on an ongoing basis by the fund itself or a broker acting on its behalf. The trading
price at which a share is transacted is equal to a fund’s stated daily per share net asset value
(“NAV”), plus any shareholders fees (e.g., sales loads, purchase fees, redemption fees). The
per share NAV of a mutual fund is calculated at the end of each business day, although the
actual NAV fluctuates with intraday changes to the market value of the fund’s holdings.
The trading prices of a mutual fund’s shares may differ significantly from the NAV during
periods of market volatility, which may, among other factors, lead to the mutual fund’s
shares trading at a premium or discount to NAV.
Shares of ETFs are listed on securities exchanges and transacted at negotiated prices in the
secondary market. Generally, ETF shares trade at or near their most recent NAV, which is
generally calculated at least once daily for indexed-based ETFs and more frequently for
actively managed ETFs. However, certain inefficiencies may cause the shares to trade at a
premium or discount to their pro rata NAV. There is also no guarantee that an active
secondary market for such shares will develop or continue to exist. Generally, an ETF only
redeems shares when aggregated as creation units (usually 50,000 shares or more).
Therefore, if a liquid secondary market ceases to exist for shares of a particular ETF, a
shareholder may have no way to dispose of such shares.
The following is a list of some general risks associated with investing in mutual funds.
•
Country Risk - The possibility that political events (a war, national elections),
financial problems (rising inflation, government default), or natural disasters (an
earthquake, a poor harvest) will weaken a country's economy and cause investments
in that country to decline.
•
Currency Risk -The possibility that returns could be reduced for Americans investing
in foreign securities because of a rise in the value of the U.S. dollar against foreign
currencies. Also called exchange-rate risk.
•
Income Risk - The possibility that a fixed-income fund's dividends will decline as a
result of falling overall interest rates.
•
Industry Risk - The possibility that a group of stocks in a single industry will decline
in price due to developments in that industry.
•
Inflation Risk - The possibility that increases in the cost of living will reduce or
eliminate a fund's real inflation-adjusted returns.
•
Manager Risk -The possibility that an actively managed mutual fund's investment
adviser will fail to execute the fund's investment strategy effectively resulting in the
failure of stated objectives.
•
Market Risk -The possibility that stock fund or bond fund prices overall will decline
over short or even extended periods. Stock and bond markets tend to move in cycles,
with periods when prices rise and other periods when prices fall.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 17 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Principal Risk -The possibility that an investment will go down in value, or "lose money,"
from the original or invested amount.
Management Through Similarly Managed Accounts
CGF Advisor manages certain accounts through the use of similarly managed “model”
portfolios, whereby the firm allocates all or a portion of its clients’ assets among various
ETFs, mutual funds and/or securities on a discretionary basis using one or more of its
proprietary investment strategies.
The strategy used to manage a model portfolio may involve an above average portfolio
turnover that could negatively impact clients’ net after tax gains. While the firm seeks to
ensure that clients’ assets are managed in a manner consistent with their individual financial
situations and investment objectives, securities transactions effected pursuant to a model
investment strategy are usually done without regard to a client’s individual tax
ramifications. Clients should contact CGF Advisor if they experience a change in their
financial situation or if they want to impose reasonable restrictions on the management of
their accounts.
Frequent Trading
Frequent trading in securities can result in higher transaction costs in the Client’s account[s].
For taxable accounts, frequent trading can also result in taxable transactions each year that
would not be present in a buy-and-hold strategy. There are no guarantees that a frequent
trading strategy will correctly time purchases and sales of any particular security.
Overall Risks
•
Clients need to remember that past performance is no guarantee of future results. All
funds carry some level of risk. You may lose some or all of the money you invest,
including your principal, because the securities held by a fund goes up and down in
value. Dividend or interest payments may also fluctuate, or stop completely, as
market conditions change.
•
Before you invest, be sure to read a fund's prospectus and shareholder reports to learn
about its investment strategy and the potential risks. Funds with higher rates of return
may take risks that are beyond your comfort level and are inconsistent with your
financial goals.
•
While past performance does not necessarily predict future returns, it can tell you
how volatile (or stable) a fund has been over a period of time. Generally, the more
volatile a fund, the higher the investment risk. If you'll need your money to meet a
financial goal in the near-term, you probably can't afford the risk of investing in a
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 18 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC fund with a volatile history because you will not have enough time to ride out any
declines in the stock market.
•
Changes in the financial condition of an issuer, changes in specific economic or
political conditions that affect a particular type of security or issuer, and changes in
general economic or political conditions can increase the risk of default by an issuer,
which can affect a security's or instrument's credit quality or value.
Item 9 – Disciplinary Information
Registered Investment Advisers are required to disclose all material facts regarding any legal or
disciplinary events that would be material to your evaluation of us or the integrity of our
management. We do not have any information to disclose concerning CGF Advisor or any of
our investment advisors. We adhere to high ethical standards for all advisors and associates. We
strive to do what is in your best interests.
Item 10 – Other Financial Industry Activities and Affiliations
A. Other Affiliations
Mitch Zides is a licensed Real Estate agent in MA and RI. This activity takes up less than 1% of
his time during normal trading hours. Mitch is not associated with a real estate broker and will
not receive commissions for the sale or referral of real estate sales.
CGF Advisor is not engaged in any other financial industry activities other than giving
investment advice. CGF Advisor does not sell products or services other than investment advice
to its clients. CGF Advisor does not have any arrangements that are material to its advisory
business or its clients with a related person who is a broker-dealer, investment company, other
investment adviser, financial planning firm, futures commission merchant, commodity pool
operator, commodity trading adviser, bank or thrift institution, accounting firm, law firm,
insurance company or agency, pension consultant, real estate broker or dealer or an entity that
creates or packages limited partnerships.
Item 11 – Code of Ethics, Participation or Interest in Client Accounts and
Personal Trading
A. Code of Ethics
We have adopted a Code of Ethics for all supervised persons of the firm describing its high
standards of business conduct, and fiduciary duty to you, our client. The Code of Ethics includes
provisions relating to the confidentiality of client information, a prohibition on insider trading,
restrictions on the acceptance of significant gifts, the reporting of certain gifts and business
entertainment items, and personal securities trading procedures. All of our supervised persons
must acknowledge the terms of the Code of Ethics annually, or as amended.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 19 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC In addition, CGF Advisor has also implemented the Code of Ethics and Standards of
Professional Conduct put forth by the CFA Institute, which also applies to all persons associated
with CGF Advisor. The Code of Ethics and Standards of Professional Conduct govern seven
major areas including (i) Professionalism, (ii) Integrity of Capital Markets, (iii) Duties to Clients,
(iv) Duties to Employers, (v) Investment Analysis, Recommendations and Actions, (vi) Conflicts
of Interest, and (vii) Responsibilities as a CFA Institute Member of CFA Candidate. Clients may
view the CFA Code of Ethics and Standards of Professional Conduct here:
www.cfapubs.org/toc/ccb/2014/6\
B. Personal Trading
We may recommend securities to you that we will purchase for our own accounts. We may trade
securities in our account that we have recommended to you as long as we place our orders after
your orders.
The Code of Ethics is designed to assure that the personal securities transactions, activities and
interests of the employees of CGF Advisor will not interfere with (i) making decisions in the best
interest of advisory clients and (ii) implementing such decisions while, at the same time,
allowing employees to invest for their own accounts. Under the Code certain classes of securities
have been designated as exempt transactions, based upon a determination that these would not
materially interfere with the best interest of CGF Advisor’s clients. In addition, the Code requires
pre-clearance of many transactions and restricts trading in close proximity to client trading
activity. Nonetheless, because the Code of Ethics in some circumstances would permit
employees to invest in the same securities as clients, there is a possibility that employees might
benefit from market activity by a client in a security held by an employee. Employee trading is
continually monitored under the Code of Ethics to reasonably prevent conflicts of interest
between CGF Advisor and its clients.
It is CGF Advisor’s policy that the Firm will not affect any principal transactions for client
accounts. CGF Advisor will also not cross trades between client accounts. Principal transactions
are generally defined as transactions where an adviser, acting as principal for its own account or
the account of an affiliated broker-dealer, buys from or sells any security to any advisory client
CGF Advisor’s clients or prospective clients may request a copy of the Firm's Code of Ethics by
contacting the Firm.
Certain affiliated accounts may trade in the same securities with your accounts on an aggregated
basis when consistent with our obligation of best execution. When trades are aggregated, all
parties will share the costs in proportion to their investment. We will retain records of the trade
Order (specifying each participating account) and its allocation. Completed Orders will be
allocated as specified in the initial trade order. Partially filled Orders will be allocated on a pro
rata basis. Any exceptions will be explained on the Order.
You may request a copy of the firm's Code of Ethics by contacting Mitch S. Zides.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 20 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC C. Privacy Statement
We are committed to safeguarding your confidential information and hold all personal
information provided to us in the strictest confidence. These records include all personal
information that we collect from you or receive from other firms in connection with any of the
financial services they provide. We also require other firms with whom we deal with to restrict
the use of your information. Our Privacy Policy is available upon request.
Item 12 – Brokerage Practices
A. Selecting or Recommending Broker-Dealers
The Adviser recommends investment management clients open accounts with Interactive
Brokers to be managed by the Adviser for the following reasons:
• Interactive Brokers has been selected based on their commission rates, execution
capabilities, settlement, record-keeping capabilities, trading platform and administrative
infrastructure.
www.individuals.interactivebrokers.com/en/general/education/comparebrokers.php
• Interactive Brokers commission rates charged to the client is believed to be among the
lowest available from any brokerage.
• Interactive Brokers is the only online broker the Adviser can find that sends trades
directly to exchange and reports back execution exchange for each traded share, hence its
execution price is less likely manipulated by broker.
• Interactive Brokers does daily NAV calculation and daily management fee calculation for
client accounts, which also enables clients to monitor their own account balance on daily
basis and do strict risk control if necessary.
• The Adviser believes that the total commission and fee cost to the client is among the
lowest available from any brokerage.
Nonetheless the Adviser may select other custodians based on clients’ investment objectives.
Upon signing the investment advisory agreement, the Adviser will assist the client with opening
an account with Interactive Brokers or other custodians.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 21 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC The Adviser believes any special arrangement with brokerage firms significantly increase
commission rates for client accounts. Accounts using high commission brokerage are likely to
have fewer securities and less trading activities in their portfolios due to increased trading costs,
and these highly concentrated and inactive portfolios will have higher degree of risk than
portfolios that hold many securities and trade more frequently to manage risk.
Research and Other Soft Dollar Benefits
Soft dollar benefits may not be proportionally allocated to any accounts that generate different
amounts of the soft dollar benefits.
Interactive Brokers may provide us with certain brokerage and research products and services
that qualify as "brokerage or research services" under the rules. These research products and/or
services will assist the Advisor in its investment decision making process. Such research
generally will be used to service all of the Advisor’s clients, but brokerage commissions paid by
the client may be used to pay for research that is not used in managing the client’s account. The
account may pay to a broker-dealer a commission greater than another qualified broker-dealer
might charge to effect the same transaction where the Advisor determines in good faith that the
commission is reasonable in relation to the value of the brokerage and research services received.
Because soft dollar benefits could be considered to provide a benefit to the adviser that might
cause the client to pay more than the lowest available commission without receiving the most
benefit, they are considered a conflict of interest in recommending or directing custodial and
third party managerial services. CG Advisor mitigates these conflicts of interest through strong
oversight of soft-dollar arrangements by the Chief Compliance Officer, in order to assure the soft
dollar benefits serve the best interests of the client.
There may other benefits from recommending Interactive Brokers or other third party managers
such as software and other technology that (i) provide access to client account data (such as trade
confirmations and account statements); (ii) facilitate trade execution and allocate aggregated
trade orders for multiple client accounts; (iii) provide research, pricing and other market data;
(iv) facilitate payment of fees from its clients' accounts; and (v) assist with back-office functions,
recordkeeping and client reporting.
Other services may include, but are not limited to, performance reporting, investment consulting,
contact management systems, third party research, publications, access to educational
conferences, roundtables and webinars, practice management resources, access to consultants
and other third party service providers who provide a wide array of business related services and
technology with whom CG Advisor may contract directly. CG Advisor may receive seminar
expense reimbursements from product sponsors which may be based on the sales of products to
their clients.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 22 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Best Execution
We have an obligation to seek best execution for you. In seeking best execution, the
determinative factor is not the lowest possible commission cost but whether the transaction
represents the best qualitative execution, taking into consideration the full range of a brokerdealer’s services, including the value of research provided, execution capability, commission
rates, reputation and responsiveness. Therefore, we will seek competitive commission rates, but
we may not obtain the lowest possible commission rates for account transactions.
Brokerage for Client Referrals
We do not receive any compensation or incentive for referring you to broker-dealers for
brokerage trades.
B. Aggregate Trading
We will supervise and direct the investments of the client accounts subject to such limitations as
the client may impose in writing. CGF Advisor, with respect to the client’s account and without
prior consultation with the client, may (a) direct the purchase, sale, exchange, conversion, and
otherwise trade in stocks, bonds and other securities including money market instruments, (b)
direct the amount of securities purchased, sold, exchanged, and otherwise traded; and (c) place
orders for the execution of such securities transactions.
For investment management clients, the Adviser uses aggregate trading for client accounts of the
same portfolio. In aggregate trading, the Adviser purchases and/or sells the same securities for
many accounts. When possible, the Adviser aggregates the same transactions in the same
securities for many clients who have the same brokerage firm. Clients in an aggregated
transaction each receive the same price per share of unit, but, if they have different brokerage
accounts, they may pay different commissions and have different execution prices. If more than
one price is paid for securities in an aggregated transaction, each client in the aggregated
transaction will typically receive the average price paid for the securities in the same aggregate
transaction on that day. If the brokerage is unable to fill an aggregated transaction completely,
but receives a partial fill of the aggregated transaction, brokerage will normally allocate the
partially filled transaction to clients based on an equitable pro rata basis. The trading sequence of
portfolios follows a rotational system by brokerage and sub-advisory third party RIA firms, so
that clients of each brokerage firm or sub-advisory third party RIA firms will have their
opportunity to participate in a transaction first. The actual client trade allocation sequence within
each brokerage group in the rotation is usually made on a pro rata basis. This rotational trading
mechanism and random allocation process of client transactions aims to provide, over the longrun, fair treatment of each client account.
Trade Errors
CGF Advisor has fiduciary responsibilities related to the correction of trade errors. If CGF
Advisor creates the error our policy is to make the client whole; meaning that you will not suffer
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 23 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC an economic loss due to our error. We have policies and procedures related to the identification,
documentation and correction of errors. If a third party caused or created the error the third party
is responsible for the correction of the error and making your account(s) whole.
We endeavor to catch all errors before settlement; typically errors are corrected by a simple
cancel of the error trade and re-entry of the trade as it should have been placed. Examples of
trade errors include (but are not limited to) the following:
•
Are not legally authorized for an account
•
Are prohibited by investment policy or style
•
Are prohibited by the Advisory Services Agreement
•
Include an incorrect security or transaction (buy v. sell or vice versa)
•
Block trades that are incorrectly allocated
If a trade error results in a gain in the impacted client account, the gain remains in the client
account. CGF Advisor does not maintain a trade error account.
Allocation of Investment Opportunities and Orders
We have adopted the following policies and procedures related to the fair allocation of
investment opportunities. These policies are designed to help ensure that each client receives fair
and equitable treatment in the investment process.
•
Investment ideas are equally disseminated among all appropriate investment
professionals responsible for selecting investments.
•
Transactions in the same security on behalf of more than one client are aggregated,
when possible, to facilitate best execution. This results in all clients within the
aggregate receiving the same average share price on the transaction.
•
When orders cannot be aggregated, we employ a trading process that is fair among all
clients, regardless of size.
•
IPOs are only allocated to accounts when the issuer meets the investment objectives
of participating accounts as well as a review process for allocations.
•
Accounts in which our employees or affiliates have a beneficial interest, or in which
CGF Advisor has a conflict of interest, do not receive preferential treatment.
•
All clients receive fair and equitable treatment for investment opportunities that are
too limited to be effectively allocated among all accounts.
When orders are generated, the decision on which accounts should participate, and in what
amount, is based on the type of security or other asset, the present or desired structure of the
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 24 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC various portfolios and the nature of the account’s goals. Other factors include risk tolerance, tax
status, permitted investment techniques and, for fixed-income accounts, the size of the account
and other practical considerations. As a result, we may have different price limits for buying or
selling a security in different accounts. Portfolio information systems, portfolio reports and
quality control reports permit us to consider these factors as appropriate.
When our investment professionals decide to sell a security regardless of tax considerations, both
taxable and tax-deferred accounts are eligible for sale simultaneously. In situations where tax
gains influence the sale, securities in the tax-deferred accounts may be placed for sale first, as
additional time is needed to consider the tax implications for each taxable account. Conversely,
when tax losses influence the sale, CGF Advisor may prioritize taxable clients first, as the loss
has a specific impact in a given year. In any event, the prioritization process is applied
consistently over time.
Item 13 – Review of Accounts
A. Periodic Reviews
Reviews are conducted at least quarterly and monitored on a regular and continuous basis by
Mitch Zides, President & CEO of CGF Advisor. While the nature of each review is somewhat
different, they are purposefully designed to ensure each account is maintained in accordance with
a client’s goals and objectives or investment policy. These reviews effectively identify any issues
that may require immediate attention. Should such an instance occur, appropriate actions are
taken.
B. Regular Reports
On a quarterly basis, reports are sent upon request to our clients by CGF Advisor. These reports
include performance for the most recent quarter, YTD, trailing 12 months, 3 year, 5 year and
since inception periods (as applicable). For comparison purposes, performance is reported along
with relevant and appropriate benchmarks. Additionally, the reports include current data
regarding client accounts as of the report date – asset allocation, diversification metrics, fixed
income ratings; asset balances per account and in the aggregate, and aggregate quarterly account
activity.
In addition to the quarterly report received from CGF Advisor, all clients receive separate
monthly and/or quarterly statements from their portfolio custodian detailing all cash and asset
transactions and activity as well as the asset balances for each security as of the report date.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 25 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 14 – Client Referrals and Other Compensation
We do not receive any compensation for referring clients to another advisor nor do we pay any
compensation to another advisor if they refer clients to us.
Item 15 – Custody
We recommend Interactive Brokers for brokerage and custodial services. We recommend
Interactive Brokers because we have independently evaluated Interactive Brokers and the
brokerage / custodial services that are available to our clients. Where CGF Advisor does not
exercise discretion over the selection of the custodian, it may recommend the custodian[s] to
Clients for execution and/or custodial services. Clients are not obligated to use the recommended
custodian and will not incur any extra fee or cost associated with using a broker not
recommended by CGF Advisor.
CGF Advisor may recommend a custodian based on criteria such as, but not limited to,
reasonableness of commissions charged to the Client, breadth of investment products available,
reputation and financial strength, services made available to the Client, and products and services
that benefit CGF Advisor. CGF Advisor does not receive research services, other products, or
compensation as a result of recommending a particular broker that may result in the Client
paying higher commissions than those obtainable through other brokers.
We do not have physical custody of any accounts or assets. All assets for your accounts are held
by a qualified and independent custodian (bank, broker, trust company or insurance company).
However, we may be deemed to have custody of your account(s) if we have the ability to deduct
your quarterly fees from the custodian. You should receive at least quarterly statements from the
broker-dealer or custodian that holds and maintains your investment assets. We urge you to
carefully review such statements and compare this official custodial record to the account
statements that we may provide to you. Our statements may vary from custodial statements
based on accounting procedures, reporting dates, or valuation methodologies of certain
securities.
We send information to your custodian to debit your fees and to pay us. You authorized the
custodian to pay us directly at the onset of the relationship.
Item 16 – Investment Discretion
We usually receive discretionary authority from you at the beginning of an advisory relationship
to select the identity and amount of securities to be bought or sold. This information is described
in the Advisory Agreement you sign with us. In all cases, however, this discretion is exercised in
a manner consistent with your stated investment objectives for your account.
When selecting securities and determining amounts, we observe the investment policies,
limitations and restrictions you have set. For registered investment companies, our authority to
trade securities may also be limited by certain federal securities and tax laws that require
diversification of investments and favor the holding of investments once made.
We require that any investment guidelines and/or restrictions be provided to us in writing.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 26 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC If we do not receive discretionary authority from you to select the type of securities and amount
of securities to be bought or sold, we usually only have the ability to rebalance and reallocate
your accounts on a quarterly basis, with your permission.
Item 17 – Voting Client Securities
As a matter of firm policy and practice, we do not have any authority to and do not vote proxies
on behalf of advisory clients. You retain the responsibility for receiving and voting proxies for
any and all securities maintained in your portfolios. We may provide advice to you regarding
your voting of proxies. We are authorized to instruct the custodian to forward you copies of all
proxies and shareholder communications relating to your account assets.
Item 18 – Financial Information
We are required to provide you with certain financial information or disclosures about our
financial condition. We have no financial commitment that would impair our ability to meet any
contractual and fiduciary commitments to you, our client. We have not been the subject of any
bankruptcy proceedings. In no event shall we charge advisory fees that are both in excess of five
hundred dollars and more than six months in advance of advisory services rendered.
Item 19 – Requirements for State Registered Advisers
A. Education Background and Business Experience of Principal Officer
President/CEO of the Advisor is Mitch S. Zides, whose education and business background can
be found on the FORM ADV Part 2B SUPPLEMENT of this Brochure.
B. Other Business in Which This Adviser is Actively Engaged
Mitch Zides does not have any other investment-related business activities.
C. How Performance Based Fees are Calculated and Degree of Risk of Clients
CGF Advisor does not charge performance-based fees for its investment advisory services. The
fees charged by CGF Advisor are described in Item 5 – Fees and Compensation above and are
not based upon the capital appreciation of the funds or securities held by any Client.
D. Material Disciplinary Disclosures for Management Persons of This Firm
There are no legal, civil or disciplinary events to disclose regarding CGF Advisor or Mr. Zides.
There have been no client complaints, lawsuits, arbitration claims or administrative proceedings
against CGF Advisor or Mr. Zides.
Securities laws require an advisor to disclose any instances where the advisor or its advisory
persons have been found liable in a legal, regulatory, civil or arbitration matter that alleges
violation of securities and other statutes; fraud; false statements or omissions; theft,
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 27 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC embezzlement or wrongful taking of property; bribery, forgery, counterfeiting, or extortion;
and/or dishonest, unfair or unethical practices. As previously noted, there are no legal, civil or
disciplinary events to disclose regarding CGF Advisor or Mitch Zides.
E. Material Relationships with Issuers of Securities
Neither CGF Advisor nor Mr. Zides has any relationships or arrangements with issuers of
securities.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 28 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Form ADV Part 2B - Brochure Supplement
for
Mitch S. Zides, CFA, CFP®, AIF, NSSA®
President & CEO
Effective: September 30, 2015
This Brochure supplement provides information about Mitch S. Zides CFA, CFP®, AIF,
NSSA® (CRD# 2971097) and supplements the Constant Guidance Financial, LLC Disclosure
Brochure (“CGF Advisor” or the “Advisor” – CRD #). If you have not received a copy of the
Disclosure Brochure or if you any questions about the contents of the CGF Advisor Disclosure
Brochure or this Brochure Supplement, please contact us at (508) 207-8049 or by email at
[email protected].
Additional information about
www.adviserinfo.sec.gov.
Constant Guidance Financial, LLC Mr.
Zides
ADV Part 2B is
available
on
the
September 2015 SEC’s
website
at
Page 29 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 2 – Educational Background and Business Experience
Mitchell S. Zides, CFA, CFP®, AIF, NSSA® is President and Chief Compliance Officer of CGF
Advisor. Mr. Zides, born in 1974, is also a dedicated Portfolio Manager for Client accounts of
CGF Advisor.
Education
M.B.A., Cum Laude, Bryant University, 2005
B.A., Cum Laude in Finance, University of Massachusetts, Amherst, 1997
Chartered Financial Analyst (CFA), 2003
Certified Financial Planner (CFP®), 2014
Accredited Investment Fiduciary® (AIF®), 2011
National Social Security Advisor (NSSA®), 2014
Designations
Chartered Financial Analyst (“CFA”)
The CFA charter is a globally recognized, graduate-level investment credential, recognized for
its foundation in investment analysis and portfolio management skills, and emphasizes the
highest ethical and professional standards. To attain the right to use the CFA marks, an
individual must satisfactorily fulfill the following requirements:
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Prerequisites/Experience: Complete either an undergraduate degree and four years of
professional experience involving investment decision-making, or four years of qualified
work experience (full time, but not necessarily investment related).
Educational Requirements: Complete a self-study program (250 hours of study for each
of the three levels).
Examination Type: Pass the comprehensive CFA Certification Examination. The
examination consists of three comprehensive exams which are six hours in length each.
Ethics: Agree to be bound by CFA Institute's Standards of Professional Conduct, a set of
documents outlining the ethical and practice standards for CFA® professionals.
High Ethical Standards
The CFA Institute Code of Ethics and Standards of Professional Conduct, enforced through an
active professional conduct program, require CFA charterholders to:
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Place their clients’ interests ahead of their own
Maintain independence and objectivity
Act with integrity
Maintain and improve their professional competence
Disclose conflicts of interest and legal matters
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The CFA Program curriculum provides a comprehensive framework of knowledge for
investment decision making and is firmly grounded in the knowledge and skills used every day
in the investment profession. The three levels of the CFA Program test proficiency with a wide
range of fundamental and advanced investment topics, including ethical and professional
standards, fixed-income and equity analysis, alternative and derivative investments, economics,
financial reporting standards, portfolio management, and wealth planning. The CFA Program
curriculum is updated every year by experts from around the world to ensure that candidates
learn the most relevant and practical new tools, ideas, and investment and wealth management
skills to reflect the dynamic and complex nature of the profession.
To learn more about the CFA charter, visit www.cfainstitute.org.
Continuing Education
Mitch S. Zides is committed to completing the annual requirements of CFA Institute’s voluntary
Continuing Education Program.
Certified Financial Planner (“CFP®”)
The CERTIFIED FINANCIAL PLANNER™, CFP® and federally registered CFP (with flame
design) marks (collectively, the “CFP® marks”) are professional certification marks granted in
the United States by Certified Financial Planner Board of Standards, Inc. (“CFP Board”).
The CFP® certification is a voluntary certification; no federal or state law or regulation requires
financial planners to hold CFP® certification. It is recognized in the United States and a number
of other countries for its (1) high standard of professional education; (2) stringent code of
conduct and standards of practice; and (3) ethical requirements that govern professional
engagements with clients. Currently, more than 62,000 individuals have obtained CFP®
certification in the United States.
To attain the right to use the CFP® marks, an individual must satisfactorily fulfill the following
requirements:
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Education - Complete an advanced college-level course of study addressing the financial
planning subject areas that CFP Board’s studies have determined as necessary for the
competent and professional delivery of financial planning services, and attain a
Bachelor’s Degree from a regionally accredited United States college or university (or its
equivalent from a foreign university). CFP Board’s financial planning subject areas
include insurance planning and risk management, employee benefits planning,
investment planning, income tax planning, retirement planning, and estate planning;
Examination - Pass the comprehensive CFP® Certification Examination. The
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examination, administered in 10 hours over a two-day period, includes case studies and
client scenarios designed to test one’s ability to correctly diagnose financial planning
issues and apply one’s knowledge of financial planning to real world circumstances;
Experience - Complete at least three years of full-time financial planning-related
experience (or the equivalent, measured as 2,000 hours per year); and
Ethics - Agree to be bound by CFP Board’s Standards of Professional Conduct, a set of
documents outlining the ethical and practice standards for CFP® professionals.
Individuals who become certified must complete the following ongoing education and ethics
requirements in order to maintain the right to continue to use the CFP® marks:
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Continuing Education - Complete 30 hours of continuing education hours every two
years, including two hours on the Code of Ethics and other parts of the Standards of
Professional Conduct, to maintain competence and keep up with developments in the
financial planning field; and
Ethics - Renew an agreement to be bound by the Standards of Professional Conduct. The
Standards prominently require that CFP® professionals provide financial planning
services at a fiduciary standard of care. This means CFP® professionals must provide
financial planning services in the best interests of their clients.
CFP® professionals who fail to comply with the above standards and requirements may be
subject to CFP Board’s enforcement process, which could result in suspension or permanent
revocation of their CFP® certification.
Accredited Investment Fiduciary® (“AIF®”)
The Accredited Investment Fiduciary, AIF® is federally registered designation issued by the
FI360. To attain the right to use the AIF® marks, an individual must satisfactorily fulfill the
following requirements:
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Meet prerequisite requirements that are based on a point system that factors an
individual’s education, relevant industry experience, and/or professional development.
Must complete the AIF Designation Training
Pass the AIF designation exam
Accrue six (6) hours of continuing professional education
The AIF designation can make you feel confident that our approach is based on:
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Understands the basis for, and benefits of, fiduciary standards of excellence
Identify the legal standards that require fiduciaries to prudently
investment decisions
Best practices and the fiduciary role
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A commitment to standards of investment fiduciary excellence
National Social Security Advisor (“NSSA®”) Certification
The National Social Security Advisor certification, NSSA is professional designation offered by
the National Social Security Association. To attain the right to use the NSSA designation, an
individual must satisfactorily fulfill the following requirements:
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Must complete eight (8) hours NSSA administrated course work.
Pass the NSSA certification exam
Accrue sixteen (16) hours of continuing professional education every two years.
Knowledge of the following topics:
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How to maximize benefits
Surviving Spouse Benefits
Social Security Statement
Children’s Benefits
Incorporate your benefits into your retirement plan
Retirement Benefits WEP/GPO
Disability/Medicare
Employment History CIO, CCO and Managing Partner at Constant Guidance Financial, LLC
Relationship Analyst at Wellington Management
Portfolio Consultant at Pioneer Investments
07/2014 to Present
03/2011 to 07/2014
09/2005 to 03/2011
Sales at John Hancock
10/2000 to 09/2005
Item 3 – Disciplinary History
There are no legal, civil or disciplinary events to disclose regarding CGF Advisor or Mitch
Zides. There have been no client complaints, lawsuits, arbitration claims or administrative
proceedings against CGF Advisor or Mitch Zides. Securities laws require an advisor to disclose
any instances where the advisor or its advisory persons have been found liable in a legal,
regulatory, civil or arbitration matter that alleges violation of securities and other statutes; fraud;
false statements or omissions; theft, embezzlement or wrongful taking of property; bribery,
forgery, counterfeiting, or extortion; and/or dishonest, unfair or unethical practices. As
previously noted, there are no legal, civil or disciplinary events to disclose regarding CGF
Advisor or Mitch Zides. Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 33 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC Item 4 – Other Business Activities
Mitch Zides is a licensed Real Estate agent in MA and RI. This activity takes up less than 1% of
his time during normal trading hours. Mitch is not associated with a real estate broker and will
not receive commissions for the sale or referral of real estate sales.
Item 5 – Additional Compensation
Mitch Zides does not receive any other compensation. Item 6 – Supervision
Mitch Zides is the Chief Compliance Officer and performs all supervisory duties for his firm. Item 7 – Requirements for State-Registered Advisers
Mitch Zides has no reportable events to disclose here.
Performance Fees
We do not charge a performance-based fee (fees based on a share of capital gains on, or capital
appreciation of, the assets of a client) for our normal asset management accounts.
Other Relationships
Neither the firm nor Mitch Zides has any relationship with any issuer of securities.
Constant Guidance Financial, LLC ADV Part 2B September 2015 Page 34 of 34 © 2010 – 2015 Red Oak Compliance Solutions LLC