Brown Wealth Management, LLC | Item 1 – Cover Page i
Item 1 – Cover Page
Brown Wealth Management, LLC
12100 Singletree Lane, #175 Eden Prairie, MN 55344 (952) 303-6715
www.BrownWealth.com
This brochure provides information about the qualifications and business practices of Brown Wealth Management, LLC. If you have any questions about the contents of this brochure, please contact us at (952) 303-6715 and/or [email protected]. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority.
Brown Wealth Management, LLC | Item 2 – Material Changes ii
Item 2 – Material Changes
The purpose of this page is to inform you of any material changes since the last annual update to this brochure. If you are receiving this brochure for the first time, this section may not be relevant to you.
Brown Wealth Management, LLC reviews and updates this brochure at least annually to assure it remains current. There have been the following material changes since the last annual update to this brochure, dated January 1, 2014:
We have made changes to our service offerings. See Item 4.
Our brochure may be requested by contacting Timothy B. Brown, Chief Compliance Officer, at (952) 303-6715 or [email protected].
Brown Wealth Management, LLC | Item 3 – Table of Contents iii
Item 3 – Table of Contents
Item 1 – Cover Page ...i
Item 2 – Material Changes ...ii
Item 3 – Table of Contents ...iii
Item 4 – Advisory Business ...1
About BWM ... 1
Investment and Financial Planning Services... 2
401(k) Management ... 5
Seminars and Workshops ... 6
Trade Error Policy ... 6
Client Obligations ... 6
Disclosure Statement ... 6
Non-Participation in Wrap Fee Programs ... 6
Amount of Assets Under Management ... 6
Our Policy on Class Action Lawsuits ... 7
Item 5 – Fees and Compensation ...8
Retainer Fees for BWM’s Investment Management and Financial
Planning Services ... 8
One Time Financial Planning ... 8
401(k) Management ... 9
General Information Regarding Advisory Services and Fees ... 9
Termination ... 10
Item 6 – Performance-Based Fees and Side-By-Side
Management ... 12
Item 7 – Types of Clients ... 13
Required Minimum Client Accounts ... 13
Item 8 – Methods of Analysis, Investment Strategies and
Risk of Loss ... 14
Brown Wealth Management, LLC | Item 3 – Table of Contents iv
Risk of Loss ... 15
Item 9 – Disciplinary Information ... 18
Item 10 – Other Financial Industry Activities and Affiliations ... 19
Item 11 – Code of Ethics ... 20
Item 12 – Brokerage Practices ... 22
Research and Additional Benefits ... 22
Aggregation of Client Trades ... 23
Directed Brokerage ... 23
Item 13 – Review of Accounts ... 24
Reports to Clients ... 24
Item 14 – Client Referrals and Other Compensation ... 25
Item 15 – Custody ... 26
Item 16 – Investment Discretion ... 27
Item 17 – Voting Client Securities... 28
Item 18 – Financial Information... 29
Item 19 – Requirements for State-Registered Advisers ... 30
Brochure Supplement ... 31
Timothy B. Brown ... 31
Brown Wealth Management, LLC | Item 4 – Advisory Business 1
Item 4 – Advisory Business
About BWM
Brown Wealth Management, LLC (BWM) is a limited liability corporation formed in 2003 in the state of Minnesota. The principal owner of the firm is Timothy B. Brown. The major decisions of a strategic and administrative nature for the firm are undertaken by Mr. Brown.
This narrative brochure provides clients with information regarding BWM and the qualifications, business practices, and nature of advisory services that should be considered before becoming an advisory client of BWM.
Our Process
We believe that holistic planning is critical to reaching your goals, and that true financial planning involves much more than just investment advice. Financial planning includes goal planning, retirement planning, tax planning, estate planning, insurance planning, cash flow planning, education planning, and investment management.
Investment management on its own is not financial planning but is an important part of the planning puzzle. When you work with Brown Wealth Management you get both financial planning and investment management at a cost that is typically much less than what you get with firms that only manage investments.
When we work with clients, we embrace the following process:
Step 1: Complete Confidential Questionnaire
Once you contact us, we will send you a Confidential Questionnaire to complete, along with information about our firm and services. Once we receive this completed questionnaire, we will send you dates and times for a no-cost introductory meeting.
Step 2: Introductory Meeting
Once we receive your Confidential Questionnaire we will invite you to an introductory meeting— again at no cost to you.
In this meeting we will:
• Have a Values Conversation so that we understand what is important to you and your family
• Complete a Financial Roadmap to help clarify your goals, finances and purpose • Determine the best services for you
• Answer any questions you may have
Brown Wealth Management, LLC | Item 4 – Advisory Business 2 For all introductory meetings, we request that all financial decision makers be present. We also ask that you bring your financial information for review. Introductory meetings are held at our Eden Prairie location or via web conference.
Step 3: Choose the Right Services
The final step is to choose the service that is right for you. Clients have several services to choose from ranging from our personalized Full Retainer service to our one time Financial Plan service.
For clients choosing a one-time Financial Plan, the financial planning engagement terminates upon the delivery of the plan or advice to the client. No on-going or automatic reviews are provided by BWM, unless specifically requested by the client. At that time, a new Agreement will be signed by the client. Periodic financial check-ups and portfolio reviews are recommended, and are made part of our Retainer Services.
Investment and Financial Planning Services
BWM offers the following investment management and financial planning services:
Full Retainer - Personalized Investment Management and Financial Planning
For clients with $1,000,000 or more to invest we recommend our personalized investment management and financial planning services. This service is designed for those who want ongoing assistance and want to delegate the day to day management of their portfolio to a professional. We help quarterback your financial life, making sure that nothing is falling through the cracks and that you are planning and making complete, knowledgeable decisions with your money.This service includes:
• A personalized analysis of your situation. In this service we review and analyze your entire situation, covering cash flow, net worth, investment strategy, specific (actionable) investment recommendations, tax planning, retirement planning, business planning, estate planning, stock option planning, and other areas applicable to your situation. • Specific and actionable recommendations.
• In the initial year we typically meet three to five times to ensure your plan is accurate, help you implement the recommendations, and get your investment portfolio invested. • In subsequent years we will typically have three meetings to ensure your plan is on
track. After the initial three years meetings may be reduced to one per year if requested. This service ensures you are on track to achieving all your goals, and that nothing is slipping through the cracks.
• Tax planning is incorporated into each meeting to ensure you are making good tax wise decisions
Brown Wealth Management, LLC | Item 4 – Advisory Business 3 • Access to institutional investment management portfolios.
• Unlimited access to a highly qualified team consisting of Certified Financial Planners (CFP®) and a Chartered Financial Analyst (CFA).
Retainer Light - Investment Management and Retirement Planning
This service is for those with $500,000 to $1,000,000 to invest.This service is designed to help you make important decisions about the wealth you have begun to accumulate. Clients who choose this service want professional investment management and regular updates to their retirement plan to ensure they stay on track to achieve their goals. This service includes:
• A personalized analysis of your situation. In this service we review and analyze your entire situation, covering cash flow, net worth, investment strategy, specific (actionable) investment recommendations, tax planning, retirement planning, business planning, estate planning, stock option planning, and other areas applicable to your situation. • Specific and actionable recommendations.
• In the first year we typically meet 2-3 times to get your financial plan completed and your investment plan implemented.
• In subsequent years, we meet annually to update and review your retirement plan to ensure you are on track to achieving and maintaining your financial independence and life’s goals. We will also review and update your investment strategy in this meeting. • Continuous investment management.
• Access to institutional investment management portfolios.
• Access to a highly qualified team including Certified Financial Planners (CFP®) and a Chartered Financial Analyst (CFA).
Project Based Planning - A One Time Financial Planning Engagement
This hourly service is designed for clients who are in the early stages of building and accumulating wealth. For these clients, we provide thoughtful financial advice and carefully constructed investment plans to increase the probability that you will achieve your specific goals.
This service may include (depends on your situation) discussion and specific recommendations in the following areas:
• cash flow, budgeting and spending • net worth analysis
• investment strategy
Brown Wealth Management, LLC | Item 4 – Advisory Business 4 • tax planning
• retirement planning • business planning • estate planning • stock option planning
• other areas applicable to your situation.
For both the Full Retainer and Retainer Light Services BWM will manage your investments by creating a portfolio consisting of one or all of the following: individual equities, bonds, other investment products, exchange traded funds, index funds, and no-load and load-waived mutual funds. BWM will allocate the client's assets among various investments taking into consideration the overall management style selected by the client. The mutual funds will be selected on the basis of any or all of the following criteria:
• the fund's performance history;
• the industry sector in which the fund invests; • the track record of the fund's managers; • the fund's investment objectives;
• the fund's management style and philosophy; and • the fund's management fee structure.
Portfolio weighting between funds and market sectors will be determined by each client's individual needs and circumstances. For additional information regarding BWM’s investment strategy, please see Item 8.
When appropriate to the needs of the client, BWM may recommend the use of trading (securities sold within 30 days), short sales, and/or margin transactions. Because these
investment strategies involve certain additional degrees of risk, they will only be recommended when consistent with the client's stated tolerance for risk.
Subject to any written guidelines, which the client may provide, BWM will be granted discretion and authority to manage the account. Accordingly, BWM is authorized to perform various functions, at the client’s expense, without further approval from the client. Such functions
include making all investment decisions on the (a) securities purchased/sold and (b) the amount of securities to be purchased/sold. Once the portfolio is constructed, BWM provides ongoing supervision and re-balancing of the portfolio as changes in market conditions and client circumstances may require.
BWM primarily allocates investment management assets of its client accounts among various mutual fund classes, (and to a lesser extent, among various individual debt and equity
Brown Wealth Management, LLC | Item 4 – Advisory Business 5 that all investment management accounts be maintained at T.D. Ameritrade (“TDA”). Prior to engaging BWM to provide services, clients are generally required to enter into an agreement with BWM setting the terms and conditions of the engagement (including
termination), describing the scope of the services to be provided, and the portion of the fee that is due from the client prior to BWM beginning services. If requested by the client, BWM may recommend the services of other professionals for implementation purposes. The client is under no obligation to engage the services of any such recommended professional. The client retains absolute discretion over all such implementation decisions and is free to accept or reject any recommendation from BWM. If a client engages any such recommended professional, and a dispute arises thereafter relative to such engagement, the client agrees to seek recourse exclusively from and against the engaged professional. It remains the client’s responsibility to promptly notify BWM if there is ever any change in the client’s financial situation or investment objectives for the purpose of reviewing/evaluating/revising BWM’s previous recommendations and/or services.
After consultation with BWM, clients may impose restrictions on investing in certain securities or types of securities. Other restrictions may be imposed by clients with respect to the (average or longest) maturity or credit quality of fixed income investments. In either case, all restrictions must be in writing.
401(k) Management
At Brown Wealth Management, we help business owners fulfill their fiduciary responsibilities. If you are the owner or fiduciary of a corporate retirement plan, you have a significant task on your plate. For many of your employees, a 401(k) is likely their largest investment asset, which makes your role as decision maker for the retirement plan even more important.
That, plus the financial consequences that accompany any loss or risk in the plan, can make your role as fiduciary overwhelming. We want to help.
Brown Wealth Management provides retirement plan solutions designed to give the greatest benefits to you and your employees. We are experienced at assisting you in the creation of a sound investment policy statement; ongoing investment selection and monitoring; and in consistently performing compliance reviews on your plan to ensure your plan is in line with ERISA requirements.
We find that we are often able to reduce fees and expenses and improve the investment choices.
More importantly, we also have the capability to assist you with and absorb some of your fiduciary risks. We invite you to schedule an initial phone call to discuss your situation and how we may be able to help.
Brown Wealth Management, LLC | Item 4 – Advisory Business 6
Seminars and Workshops
BWM conducts speaking engagements and educational workshop presentation on various financial planning and investment topics. The information provided is not intended to meet the objectives or needs of each individual present. The seminars will provide attendees with general information on financial planning topics. Seminars are open to the general public. There is typically no fee to attend.
Trade Error Policy
Should they occur, losses resulting from BWM’s trade errors shall be reimbursed by either BWM or the custodian depending on the dollar amount. Any gains will be donated to charity.
Client Obligations
In performing its services, BWM is not required to verify any information received from the client or from the client’s other professionals. Moreover, each client is advised that it remains his or her responsibility to promptly notify BWM if there is ever any change in the client’s financial situation or investment objectives during the client engagement.
Disclosure Statement
A copy of BWM’s written brochure as set forth on Part 2A of Form ADV shall be provided to each client prior to, or at the same time as, the execution of the Financial Planning Services Letter of Engagement. Any client who has not received a copy of BWM’s written Brochure at least 48 hours prior to executing the Financial Planning Services Letter of Engagement shall have five business days subsequent to executing the agreement to terminate the BWM’s services without penalty.
Non-Participation in Wrap Fee Programs
BWM, as a matter of policy and practice, does not sponsor any wrap fee program. A wrap fee program is defined as any advisory program under which a specified fee or fees not based directly upon transactions in a client’s account is charged for investment supervisory services (which may include portfolio management or advice concerning the selection of other
investment advisers) and the execution of client transactions.
Amount of Assets Under Management
As of February 16, 2015, BWM provided advice on approximately $87.7 million in assets. Of these assets approximately $68.2 million are managed on a discretionary basis and
Brown Wealth Management, LLC | Item 4 – Advisory Business 7
Our Policy on Class Action Lawsuits
From time to time, securities held in the accounts of clients will be the subject of class action lawsuits. BWM has no obligation to determine if securities held by the client are subject to a pending or resolved class action lawsuit. It also has no duty to evaluate a client’s eligibility or to submit a claim to participate in the proceeds of a securities class action settlement or verdict. Furthermore, BWM has no obligation or responsibility to initiate litigation to recover damages on behalf of clients who may have been injured as a result of actions, misconduct, or negligence by corporate management of issuers whose securities are held by clients.
Brown Wealth Management, LLC | Item 5 – Fees and Compensation 8
Item 5 – Fees and Compensation
Retainer Fees for BWM’s Investment Management and Financial Planning
Services
BWM utilizes the following fee schedule for its Sustain, Manage and Build Your Wealth services: Assets Under Advisement Quarterly Fee* Annual Equivalent
First $1,000,000 0.25% 1.00%
Next $1,000,000 0.20% 0.80%
Next $2,000,000 0.125% 0.50%
Next $6,000,000 0.05% 0.20%
Over $10,000,000 Negotiable
*The minimum quarterly fee for Investment Management services is $750.
The annual fee will be billed and/or deducted in quarterly equal installments. One-fourth of the annual fee is due and payable upon acceptance of the engagement agreement, and the remaining balance will be equally billed and deducted from client accounts at three month intervals. The fee is set at the beginning of the 12-month contract period and is re-set at the beginning of each 12-month period.
In all fee arrangements, fees will be invoiced in advance at the beginning of each agreed upon billing period. All fees are calculated based upon the value (market value or fair market value in the absence of market value), of the client's account at the beginning of the 12-month contract period. Fees are recalculated in the last month of the 12-month period to set the fee for the next 12-month period.
One Time Financial Planning
BWM offers financial planning to its clients based on an hourly and fixed fee basis that typically ranges between $2,000 and $10,000 depending on the scope and complexity of the contracted services.
When the scope of the financial planning services has been agreed upon, a determination will be made as to applicable fee, and a firm quote will be provided to the client. The final fee is directly dependent upon the facts and circumstances of the client’s financial situation and the complexity of the financial plan or services requested.
Brown Wealth Management, LLC | Item 5 – Fees and Compensation 9 However, at BWM’s discretion, fees and fee payment arrangements may be negotiated. For those clients participating in BWM’s Full-Retainer and Retainer-Light services, BWM may - in its sole discretion - offset all or part of the cost of the initial financial planning services. For these clients there will be no additional charge for normal planning services over and above the calculated retainer fee. The fees and terms of the financial planning services will be clearly set forth in the client agreement executed between the client and BWM prior to any work being commenced.
Clients may act on BWM’s recommendations by placing securities transactions with any brokerage firm the client chooses. The client is under no obligation to act on BWM’s financial planning recommendations. Moreover, if the client elects to act on any of the
recommendations, the client is under no obligation to implement the financial plan through BWM.
401(k) Management
The annual fee for plan services will be charged as a percentage of assets within the plan and based on the investment management fee schedule above.
General Information Regarding Advisory Services and Fees
BWM does not represent, warrant, or imply that the services or methods of analysis used by BWM can or will predict future results, successfully identify market tops or bottoms, or insulate clients from losses due to market corrections.
Advice offered by BWM may involve investments in mutual funds. Clients are hereby advised that all fees paid to BWM for investment supervisory services are separate and distinct from the fees and expenses charged by mutual funds to their shareholders, as described in each fund’s prospectus. These fees will generally include a management fee and other fund expenses. Further, transaction charges may be applicable when purchasing and selling securities. BWM does not share in any portion of the brokerage fees and/or transaction charges imposed by the broker-dealer/custodian holding the client funds or securities. Clients should review all fees charged by mutual funds, BWM, and others to fully understand the total amount of fees to be paid by the client.
Clients may also incur “account termination fees” upon the transfer of an account from one brokerage firm (broker-dealer/custodian) to another. These account termination fees are believed to range generally from $0 to $200 at present, but at times may be much higher. Clients should contact their custodians (brokerage firms, banks or trust companies, etc.) to determine the amount of account termination fees which may be charged and deducted from their accounts for any existing accounts which may be transferred.
Such charges, fees and commissions are exclusive of and in addition to BWM’s fee, and BWM does not receive any portion of these commissions, fees, and costs.
Brown Wealth Management, LLC | Item 5 – Fees and Compensation 10 to prospective investors. Because these types of investments involve certain additional degrees of risk, they will be recommended when consistent with the client's stated tolerance for risk and suitability.
Item 12 further describes the factors that the firm considers in selecting or recommending broker-dealers for client transactions and determining the reasonableness of their compensation (e.g., commissions).
The vast majority of clients pay BWM’s retainer fees based upon a percentage of the assets advised upon. This is a very common form of compensation for registered investment supervisory firms and avoids the multiple inherent conflicts of interest associated with
commission-based compensation (BWM does not accept commission-based compensation of any nature, nor does BWM accept 12b-1 fees).
Asset-advised-upon percentage method of compensation can still at times lead to conflicts of interest between our firm and our client as to the advice we provide. For example, conflicts of interest may arise relating to the following financial decisions in life: incur or pay down debt; gift funds to charities or to individuals; purchases of a (larger) home or cars or other non-investment assets; the purchase of a lifetime immediate annuity; expenditures of funds for travel or other activities; investment in private equity investments (private real estate ventures, closely held businesses, etc.), and the amount of funds to place in non-managed cash reserve accounts. BWM has adopted internal policies to properly manage these and other potential conflicts of interest. BWM’s goal is that advice to the client remains at all times in the client’s best interest, disregarding any impact of the decision upon BWM.
Termination
The client may terminate any new agreement without penalty by providing written notice of such cancellation to BWM within five (5) business days of the date of signing the agreement.
Following the five-day cancellation period, the first periods’ fee is not refundable due to the large volume of initial work to be undertaken by BWM. Thereafter, either party may terminate the agreement with a 60 day notice in writing to the other party. Upon termination of any account, any prepaid, unearned fees will be promptly refunded, with the refund calculations based pro rata to the date of termination. Upon the termination of the agreement, BWM will not possess any obligation to recommend or take any action with regard to the securities, cash, or other investments in a client’s account.
The agreement for portfolio management will continue in effect until terminated by either party by written notice in accordance with the terms of the Financial Planning Services Letter of Engagement.
BWM believes that the charges and fees offered within its program are competitive with
Brown Wealth Management, LLC | Item 5 – Fees and Compensation 11 the tax ramifications of same, and to avoid ad hoc emotional reactions to shorter-term market events. Also, some of the funds used by BWM may not be available to the client directly without the use of an investment adviser granted access to such funds.
Brown Wealth Management, LLC | Item 6 – Performance-Based Fees and Side-By-Side Management
Brown Wealth Management, LLC | Item 7 – Types of Clients 13
Item 7 – Types of Clients
BWM offers personalized investment supervisory services to individuals, high net worth individuals, trusts, corporations and business entities. Client relationships vary in scope and length of service.
Required Minimum Client Accounts
Brown Wealth Management, LLC | Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
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Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
Before designing investment plans for clients, BWM will evaluate the client’s investments to determine whether the client’s goals harmonize with the client’s financial objectives. In designing investment plans for clients, BWM relies upon the information supplied by the client and the client’s other professional advisors. Such information may pertain to the client’s financial situation, estate planning, tax planning, risk management, short-term and long-term lifetime financial goals and objectives, investment time horizon, and perceived current tolerance for risk. BWM will design and propose a portfolio to help clients attain their financial goals.This information will become the basis for the strategic asset allocation plan which BWM
believes will best meet the client’s stated long-term personal financial goals. The strategic asset allocation provides for investments in those asset classes which BWM believes (based on historical data and BWM’s analysis) will possess attractive combinations of return, risk, and correlation over the long term.
When BWM invests client assets, asset allocation techniques are used which include mutual funds that invest in stocks and bonds of varying characteristics and from both the United States and foreign markets. BWM invests for the long term and expects that not all investments in a given portfolio will perform in unison with other assets in the same portfolio. BWM’s portfolio management decisions are made considering only the assets being managed and not with regards to other investments the client may hold.
BWM may also provide advice on any type of investment held in a client’s portfolio at the inception of the advisory relationship. BWM will explore other investment options at the client’s request. Additionally, BWM reserves the right to advise clients on any other type of investment that it deems appropriate based on the client’s stated goals and objectives.
BWM may utilize fundamental analysis. Fundamental analysis is performed on historical and present data, with the goal of making financial forecasts. The main sources of information include financial newspapers and magazines, research materials prepared by others, corporate rating services, timing services, annual reports, prospectuses, filings with the Securities and Exchange Commission, and company press releases. Other sources that the firm may use include Morningstar mutual fund information, Morningstar stock information, and the worldwide web.
Investment Strategies
The primary investment strategy used on client accounts is asset allocation based on Modern Portfolio Theory. BWM develops a diversified investment portfolio by mixing different assets in varying proportions depending on client and current economic climate. The primary purpose of Asset Allocation is to reduce the risk in the portfolio, while maintaining or enhancing the rate of return of the portfolio. Portfolios are globally diversified to control the risk associated with traditional markets.
Brown Wealth Management, LLC | Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
15 • Risk Tolerance
• Expected Rate of Return • Asset Class Preferences • Tax situation
The investment vehicles used to invest in the various asset classes are mutual funds. (We also use some individual stocks and bonds where appropriate.) The mutual funds provide:
• Professional Management • Diversification
• Flexibility • Liquidity
The investment strategy for a specific client is based upon the objectives stated by the client during consultations. The client may change these objectives at any time.
Other strategies may include long-term purchases and short-term purchases.
BWM’s methods of analysis and investment strategies do not present any significant or unusual risks. However, every method of analysis has its own inherent risks. To perform an accurate market analysis BWM must have access to current/new market information. BWM has no control over the distribution rate of market information. An accurate market analysis can only produce a forecast of the direction of market values. There can be no assurances that a forecasted change in market value will materialize into actionable and/or profitable investment opportunities.
BWM’s primary investment strategies – Long-Term Purchases and Short-Term
Purchases - are fundamental investment strategies. However, every investment strategy has its own inherent risks and limitations. For example, longer-term investment strategies require a longer investment time period to allow for the strategy to potentially develop. Shorter-term investment strategies require a shorter investment period to potentially develop but, as a result of more frequent trading, may incur higher transactional costs when compared to a longer-term investment strategy.
Risk of Loss
Investing in securities involves risk of loss that clients should be prepared to bear. BWM’s investment approach constantly keeps the risk of loss in mind. Investors face the following investment risks:
Brown Wealth Management, LLC | Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
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Market Risk:
The risk that investment returns will be affected by changes in the overall level of the stock market. When the stock market as a whole increases or decreases; virtually all stocks are affected to some degree.Reinvestment Rate Risk:
The risk incurred when an investment’s income is reinvested at a lower rate than the rate that existed at the time the original investment was made. This risk is most prevalent when interest rates fall.Purchasing Power Risk (Inflation Risk):
The risk that inflation will affect the return of an investment in real dollars. In other words, the amount of goods that one dollar will purchase decreases with time. Investments that have low returns, such as savings accounts, are not likely to keep up with inflation. Investments with fixed returns, such as bonds, will decrease in value because their purchasing value will decrease with inflation.Business Risk:
The risk associated with a particular industry or firm. These are factors that affect the industry or firm, but do not affect the whole market. They include government regulations, management competency, or local or regional economic factors.Financial Risk:
The risk associated with the mix of debt and equity used to finance a firm. The greater the financial leverage, the greater the financial risk.Currency Risk (Exchange Rate Risk):
The risk that a change in the value of a foreign currency relative to the U.S. dollar will negatively affect a U.S. investor’s return.Liquidity Risk:
Liquidity is the ability to readily convert an investment into cash. Generally, assets are more liquid if many traders are interested in a standardized product. For example, Treasury Bills are highly liquid, while real estate properties are not.In general, cash equivalents provide liquidity with minimum income, and a return of principal with no capital appreciation. Cash equivalents are, however, subject to purchasing power risk. Fixed income investments provide current income. Usually, the longer the maturity of the security, the higher the income it will generate. Also, with longer maturities, fixed income investments will have greater price volatility and greater opportunity for capital gains or capital losses. Fixed income investments are subject to interest rate risk, reinvestment rate risk, and purchasing power risk. In additional, foreign bonds would be subject to currency rate risk and junk bonds would be subject to business risk and financial risk.
Brown Wealth Management, LLC | Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
17 rather than individual equities, may limit the exposure to business risk and financial risk. Investing outside the United States involves additional risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger-company stocks.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Different types of investments involve varying degrees of risk, and the client should not assume that future performance of any specific investment or investment strategy (including the
Brown Wealth Management, LLC | Item 9 – Disciplinary Information 18
Item 9 – Disciplinary Information
Brown Wealth Management, LLC | Item 10 – Other Financial Industry Activities and Affiliations
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Item 10 – Other Financial Industry Activities and Affiliations
Neither BWM nor its representatives are registered or have an application pending to register, as a broker-dealer or a registered representative of a broker-dealer.
Neither BWM nor its representatives are registered or have an application pending to register, as a futures commission merchant, commodity pool operator, a commodity trading advisor, or a representative of the foregoing.
BWM does not have any relationship or arrangement that is material to its advisory business or to its clients with any related person.
Brown Wealth Management, LLC | Item 11 – Code of Ethics 20
Item 11 – Code of Ethics
BWM has adopted a Code of Ethics for all supervised persons of the firm describing its high standard of business conduct, and fiduciary duty to its clients. The Code of Ethics includes provisions relating to the confidentiality of client information, a prohibition on insider trading, a prohibition of rumor mongering, restrictions on the acceptance of significant gifts and the reporting of certain gifts and business entertainment items, and personal securities trading procedures, among other things. All supervised persons at BWM must acknowledge the terms of the Code of Ethics annually, or as amended.
BWM anticipates that, in appropriate circumstances, consistent with clients’ investment
objectives, it will cause accounts over which BWM has management authority to effect, and will recommend to investment supervisory clients or prospective clients, the purchase or sale of securities in which BWM, its affiliates and/or clients, directly or indirectly, have a position of interest. BWM’s employees and persons associated with BWM are required to follow BWM’s Code of Ethics. Subject to satisfying this policy and applicable laws, officers, directors and employees of BWM and its affiliates may trade for their own accounts in securities which are recommended to and/or purchased for BWM’s clients. The Code of Ethics is designed to assure that the personal securities transactions, activities and interests of the employees of BWM 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 materially not interfere with the best interest of BWM’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, and to
reasonably prevent conflicts of interest between BWM and its clients.
Certain affiliated accounts may trade in the same securities with client accounts on an aggregated basis when consistent with BWM's obligation of best execution. In such circumstances, the affiliated and client accounts will share commission costs equally and
receive securities at a total average price. BWM will retain records of the trade order (specifying each participating account) and its allocation, which will be completed prior to the entry of the aggregated order. 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.
BWM’s clients or prospective clients may request a copy of the firm's Code of Ethics by contacting Timothy Brown at (952) 303-6715 or [email protected].
Brown Wealth Management, LLC | Item 12 – Brokerage Practices 22
Item 12 – Brokerage Practices
In the event that the client requests that BWM recommend a broker dealer/custodian for execution and/or custodial services (exclusive of those clients that may direct BWM to use a specific broker-dealer/custodian); BWM generally recommends TD Ameritrade Institutional, a division of TD Ameritrade, Inc. (“TD Ameritrade”), member FINRA/SIPC/NFA (“TDA”). TD Ameritrade is an independent SEC-registered broker-dealer. Prior to engaging BWM to provide investment management services, the client will be required to enter into a formal Financial Planning Services Letter of Engagement with BWM setting forth the terms and conditions under which BWM shall manage the client’s assets, and a separate custodial/clearing agreement with each designated broker-dealer/custodian.
Factors that BWM considers in recommending TDA (or any other broker- dealer/custodian to clients) include historical relationship with BWM, financial strength, reputation, execution capabilities, pricing, research, and service. Although the commissions and/or transaction fees paid by BWM's clients shall comply with BWM's duty to obtain best execution, a client may pay a commission that is higher than another qualified broker-dealer might charge to effect the same transaction. If this occurs, it is because BWM determines, in good faith, that the
commission/transaction fee is reasonable in relation to the value of the brokerage and research services received. In seeking best execution, the determinative factor is not the lowest possible cost, but whether the transaction represents the best qualitative execution, taking into
consideration the full range of a broker-dealer’s services, including the value of research provided, execution capability, commission rates, and responsiveness. Accordingly, although BWM will seek competitive rates, it may not necessarily obtain the lowest possible commission or transaction rates for client account transactions. The brokerage commissions or transaction fees charged by the designated broker-dealer/custodian are exclusive of, and in addition to, BWM's investment management fee. BWM’s best execution responsibility is qualified if
securities that it purchases for client accounts are mutual funds that trade at net asset value as determined at the daily market close.
Research and Additional Benefits
Although not a material consideration when determining whether to recommend that a client utilize the services of a particular broker-dealer/custodian, BWM may receive from TDA (or another broker-dealer/custodian) without cost (and/or at a discount) support services and/or products, certain of which assist BWM to better monitor and service client accounts maintained at such institutions. Included within the support services that may be obtained by BWM may be investment-related research, pricing information and market data, software and other
technology that provide access to client account data, compliance and/or practice management-related publications, discounted or gratis consulting services, discounted and/or gratis
attendance at conferences, meetings, and other educational and/or social events, marketing support, computer hardware and/or software and/or other products used by BWM in furtherance of its investment supervisory business operations.
Brown Wealth Management, LLC | Item 12 – Brokerage Practices 23 BWM’s clients do not pay more for investment transactions effected and/or assets maintained at TDA as a result of this arrangement. There is no corresponding commitment made by BWM to TDA or any other any entity to invest any specific amount or percentage of client assets in any specific mutual funds, securities or other investment products as result of the above
arrangement.
BWM’s Chief Compliance Officer, Timothy Brown, remains available to address any questions that a client or prospective client may have regarding the above arrangement and any
corresponding perceived conflict of interest such arrangement may create.
Aggregation of Client Trades
To the extent that BWM provides investment management services to its clients, the transactions for each client account generally will be effected independently, unless BWM decides to purchase or sell the same securities for several clients at approximately the same time. BWM may (but is not obligated to) combine or “bunch” such orders to obtain best
execution, to negotiate more favorable commission rates or to allocate equitably among BWM’s clients differences in prices and commissions or other transaction costs that might have been obtained had such orders been placed independently. Under this procedure, transactions will be averaged as to price and will be allocated among clients in proportion to the purchase and sale orders placed for each client account on any given day. BWM shall not receive any additional compensation or remuneration as a result of such aggregation.
BWM’s employees are not registered representatives of TDA or any other custodian/broker-dealer and do not receive any commissions or fees from recommending these services.
Directed Brokerage
Some clients may instruct BWM to use one or more particular brokers for the transactions in their accounts. Clients who may want to direct BWM to use a particular broker should
Brown Wealth Management, LLC | Item 13 – Review of Accounts 24
Item 13 – Review of Accounts
For those clients to whom BWM provides investment management supervisory services, account reviews will be conducted on an ongoing basis by Tim Brown. All investment supervisory clients are advised that it remains their responsibility to advise BWM in writing of any changes in their investment objectives and/or financial situation, or if they wish to impose any reasonable restrictions on BWM’s discretionary management services. All clients (in person or electronically) are encouraged to review investment objectives and account performance with BWM on an annual basis.
BWM generally reviews all client accounts on a monthly basis and meets with Full Retainer clients on a tri-annual basis. Accounts are reviewed in the context of each client's stated investment objectives and guidelines. During each meeting with the client, BWM discusses the client's accounts and securities portfolio(s) along with other matters, such as insurance or tax matters, that are relevant to the client's overall objectives. Where necessary, in light of the client’s particular objectives, BWM recommends changes to the client's securities portfolio(s). BWM may conduct account reviews on an other than periodic basis upon the occurrence of a triggering event such as a market correction, large deposits or withdrawals from an account, substantial changes in the value of a client’s portfolio, change in the client’s investment objectives and client request.
Reports to Clients
The account custodian provides trade confirmation and monthly statements to clients. For those clients to whom BWM provides investment supervisory services, they may receive investment tax reports on an annual basis and performance reports periodically, unless otherwise agreed to with the client.
BWM provides access to an online independent 3rd party reporting system that is updated daily, enabling clients to view their specific investment performance and activity on their entire
situation, or by individual account, or investment. Clients are able to view this at their convenience.
Brown Wealth Management, LLC | Item 14 – Client Referrals and Other Compensation
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Item 14 – Client Referrals and Other Compensation
As referenced in Item 12 above, BWM may receive an indirect economic benefit from TDA. BWM, without cost (and/or at a discount), may receive support services and/or products from TDA.
Brown Wealth Management, LLC | Item 15 – Custody 26
Item 15 – Custody
It is BWM’s policy to not accept physical custody of a client’s securities. In other words, BWM is not granted access to a client’s accounts which would enable BWM to withdraw or transfer or otherwise move funds or cash from any client account to BWM’s accounts or the account of any third party (other than for purposes of fee deductions, as explained below). This is for the safety of our clients’ assets.
The State of Minnesota deems that an advisor has custody, among other things, if they have the authority to withdraw funds or securities from a client's account. BWM can, with the client’s signed permission, deduct their fees directly from the client’s account at TDA. BWM employs measures to ensure that the fee calculation and deduction are accurate, such as, comparing the client’s current and previous billing statement, reviewing the overall reasonableness of
aggregate fees collected based on aggregate assets under management, and sending client’s quarterly billing statements that show fee calculations. The account custodian does not verify the accuracy of BWM’s advisory fee calculation.
Brown Wealth Management, LLC | Item 16 – Investment Discretion 27
Item 16 – Investment Discretion
BWM prefers to receive discretionary authority from the client at the outset of an advisory relationship to select the identity and amount of securities to be bought or sold. Prior to BWM assuming discretionary authority over a client’s account, the client shall be required to execute a Financial Planning Services Letter of Engagement, granting BWM full authority to buy, sell, or otherwise affect investment transactions. In addition, any investment discretion is obtained in writing through a limited power of attorney signed by the client prior. In all cases, however, such discretion is to be exercised in a manner consistent with the stated investment objectives for the particular client account.
Discretionary authority allows BWM to perform trades in the client’s account without further approval from the client. This includes decisions on the following:
• Securities purchased or sold
• The amount of securities to be purchased or sold
Once the portfolio is constructed, BWM provides ongoing supervision and re-balancing of the portfolio as changes in market conditions and client circumstances may require.
BWM seeks to undertake a minimal amount of trading in client accounts, in order to keep transaction fees, other expenses, and tax consequences associated with trading to minimal levels.
Clients who engage BWM on a discretionary basis may, at any time, impose restrictions, in writing, on BWM’s discretionary authority (i.e. limit the types/amounts of particular securities purchase for their account, exclude the ability to purchase securities with an inverse relationship to the market, limit or proscribe BWM’s use of margin, etc.).
Some clients may choose to engage BWM to manage securities on a non-discretionary basis. If BWM receives non-discretionary authority from the client, BWM will select the identity and amount of securities to be bought or sold, but must receive approval from the client prior to placing any trades in the client’s account.
Please be advised that as a result, until BWM reaches the client, no transactions will be placed in any client accounts.
Brown Wealth Management, LLC | Item 17 – Voting Client Securities 28
Item 17 – Voting Client Securities
BWM will not vote proxies on behalf of advisory clients’ accounts. Although on rare occasions and only at the client’s request, the BWM may offer clients advice regarding corporate actions and the exercise of proxy voting rights.
Brown Wealth Management, LLC | Item 18 – Financial Information 29
Item 18 – Financial Information
Brown Wealth Management, LLC | Item 19 – Requirements for State-Registered Adviser
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Item 19 – Requirements for State-Registered Advisers
See the attached Schedule(s) 2.B for information about those giving advice on behalf of Brown Wealth Management, LLC.
Brown Wealth Management, LLC and its supervised persons are not engaged in any business not described in this brochure, and have no relationship with any issue of securities.
Brown Wealth Management, LLC | Brochure Supplement 31
Brochure Supplement
Item 1 – Cover Page
Timothy B. Brown
Brown Wealth Management, LLC 12100 Singletree Lane, #175
Eden Prairie, MN 55344 (952) 303-6715 www.BrownWealth.com
This brochure supplement provides information about Timothy B. Brown that
supplements the Brown Wealth Management, LLC brochure. You should have received a copy of that brochure. Please contact us at (952) 303-6715 and/or [email protected] if you did not receive the Brown Wealth Management, LLC’s brochure or if you have any questions about the contents of this supplement.
Additional information about Timothy B. Brown also is available on the SEC’s website at www.adviserinfo.sec.gov.
Item 2 - Educational Background and Business Experience
Timothy B. Brown was born in 1965. Tim founded Brown Wealth Management, LLC in
2002. Prior to founding Brown Wealth Management, LLC, Tim worked in the financial services industry at Deloitte Consulting and US Bank in Minneapolis, MN, and Fleet Bank in Hartford, CT.
Education:
Tim is a graduate of the University of Minnesota’s Carlson School of Management MBA program. Tim holds the Chartered Financial Analyst (CFA) and the Certified Financial Planner (CFP®) designations. Tim is also a Qualified Kingdom Advisor.
Brown Wealth Management, LLC | Brochure Supplement 32
Item 3 - Disciplinary Information
Registered investment advisers are required to disclose all material facts regarding any legal or disciplinary events that would be material to client’s evaluation of each supervised person providing investment advice. No information is applicable to this Item.
Item 4 - Other Business Activities
Timothy B. Brown’s only business activities are those associated with Brown Wealth Management, LLC.
Item 5 - Compensation
Timothy B. Brown receives no outside compensation for providing advisory services.
Item 6 - Supervision
As Timothy B. Brown is the Chief Compliance Officer, he is his own supervisor.
Item 7 - Requirements for State-Registered Advisers
Arbitration Claims: None
Self-Regulatory Organization or Administrative Proceedings: None
Bankruptcy Petition: None
Professional Certifications
Employees have earned certifications and credentials that are required to be explained in further detail.
Chartered Financial Analyst (CFA): Chartered Financial Analysts are licensed by the CFA Institute to use the CFA mark. CFA certification requirements:
• Hold a bachelor's degree from an accredited institution or have equivalent education or work experience.
• To earn the CFA charter, you must successfully pass through the CFA Program, a graduate-level self-study program that combines a broad curriculum with professional conduct requirements, culminating in three sequential exams.
• Completing the CFA Program exams can take as little as 18 months, but on average, it takes about four years to earn a CFA charter. Successful candidates report spending an average of 300 hours preparing for each exam.
• Successful completion of all three exam levels of the CFA Program. These three exams, each taking approximately 6 hours to complete, must be completed sequentially.
Brown Wealth Management, LLC | Brochure Supplement 33 exams are offered once a year, in June.
• Have 48 months of acceptable professional work experience in the investment decision-making process.
• Fulfill society requirements, which vary by society. Unless you are upgrading from affiliate membership, all societies require two sponsor statements as part of each application; these are submitted online by your sponsors.
• Agree to adhere to and sign the Member's Agreement, a Professional Conduct Statement, and any additional documentation requested by CFA Institute (www.cfainstitute.org).
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.
As of January 1, 2011, to attain the right to use the CFP® marks, an individual must satisfactorily fulfill the following requirements. The qualifications may not have been in place when the
credential was obtained.
• 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
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.
Brown Wealth Management, LLC | Brochure Supplement 34 • 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.
Brown Wealth Management, LLC | Brochure Supplement 35
Brochure Supplement
Item 1 – Cover Page
Thomas Saunders
Brown Wealth Management, LLC 12100 Singletree Lane, #175
Eden Prairie, MN 55344 (952) 303-6715 www.BrownWealth.com
This brochure supplement provides information about Thomas Saunders that
supplements the Brown Wealth Management, LLC brochure. You should have received a copy of that brochure. Please contact us at (952) 303-6715 and/or [email protected] if you did not receive the Brown Wealth Management, LLC’s brochure or if you have any questions about the contents of this supplement.
Additional information about Thomas Saunders also is available on the SEC’s website at www.adviserinfo.sec.gov.
Item 2 - Educational Background and Business Experience
Thomas Saunders was born in 1989. Thomas began working for Brown Wealth Management, LLC in 2011. Prior to his work at Brown Wealth Management, LLC, Thomas worked in the financial services industry at Accredited Investors, Inc.
Education:
Brown Wealth Management, LLC | Brochure Supplement 36
Item 3 - Disciplinary Information
Registered investment advisers are required to disclose all material facts regarding any legal or disciplinary events that would be material to client’s evaluation of each supervised person providing investment advice. No information is applicable to this Item.
Item 4 - Other Business Activities
Thomas Saunders only business activities are those associated with Brown Wealth Management, LLC.
Item 5 - Compensation
Thomas Saunders receives no outside compensation for providing advisory services.
Item 6 - Supervision
Thomas Saunders is supervised by Timothy B. Brown, President & CCO, through review of client objectives/risk tolerance, trading activity, monthly/quarterly statements, office interactions and weekly scheduled meetings. Timothy B. Brown can be contacted at (952) 303-6715 and/or [email protected].
Item 7 - Requirements for State-Registered Advisers
Arbitration Claims: None
Self-Regulatory Organization or Administrative Proceedings: None
Bankruptcy Petition: None
Professional Certifications
Employees have earned certifications and credentials that are required to be explained in further detail.
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.
Brown Wealth Management, LLC | Brochure Supplement 37 fulfill the following requirements. The qualifications may not have been in place when the credential was obtained.
• 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
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:
• 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.