Regulation Best Interest for Investors
When we provide you with a recommendation as your broker-dealer or act as your Investment Advisor, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflict with your interest. You should understand and ask us about these conflicts because they can affect the recommendation and Investment Advice we provide you.
This portion of our website provides potential and existing clients of our Financial Service Representatives information and important disclosures about Independent Financial Group. It also provides tools and resources to educate potential and existing clients about general topics related to investing with our Representatives.
Understanding the difference between brokerage and investment advisory services
Independent Financial Group, LLC (IFG) is registered both as a broker-dealer with FINRA and as an investment advisor with the SEC. There are several differences between brokerage and advisory services, and it is important for you to understand that our brokerage and investment advisory services are separate and distinct. Depending on your needs and your investment objectives, you may have brokerage accounts, advisory accounts or both. We want you to be informed of the differences between these types of services so you can choose the services and accounts that are right for you.
Disclosures at a glance: Form CRS (PDF) | Form CRS Supplement (PDF) | ADV Part 2A (PDF)
Brokerage Services
As a broker-dealer, we facilitate the execution of securities transactions on your behalf. In addition to executing your orders, IFG provides various services through our Registered Representatives including investment education, research and recommendations on whether to buy or sell securities. There are no additional charges for these services since they are considered incidental to the brokerage services we provide. We are held to the legal standards under applicable federal and state securities laws, and the rules of our self-regulatory organization, FINRA.
Among other things, these regulations require broker-dealers to:
- Execute your trades with diligence, competence, and seek to provide best execution in light of prevailing market conditions;
- Have reasonable grounds for believing that any security that we specifically present to you is in your best interest given your investment objectives, risk tolerance, financial and tax status and other financial information you have disclosed to us; and
- Treat you in a manner characterized by principles of fair dealing and high standards of honesty and integrity.
As a broker-dealer, your registered representative does not have the discretion to buy or sell securities for you without your approval. This means that you make the decision to buy or sell securities before trades are placed. If your registered representative recommends that you buy or sell a security, they must have a reasonable basis to believing their recommendation is in your best interest.
Advisory Services
Under a Registered Investment Advisor (“RIA”), your Investment Adviser Representative (“IAR”) may provide a variety of investment advisory programs and services including financial planning, discretionary asset management, and access to third-party asset managers for a set fee. The fee typically covers the advisory services, but may include brokerage charges in certain programs.
When we act as an investment advisor, we have a fiduciary duty to act in your best interest and provide ongoing investment services. We will enter into a written agreement with you that acknowledges our advisory relationship and our obligations to you. Investment advisory services are limited strictly to those accounts for which you have entered into an advisory agreement with IFG.
IFG will provide you with disclosure documents that describe the services offered, related program fees and any potential conflicts of interest inherent in the advisory relationship.
In an advisory relationship, we also are obligated to:
- Ensure that investment advisory services are suited to your specific investment objectives, needs, and circumstances;
- Disclose potential conflicts of interest between our interests and yours;
- Disclose whether, and to what extent, we (or our affiliates) receive additional compensation from you or a third party as a result of our relationship with you;
- Not unfairly advantage one advisory client to the disadvantage of another.
To allow clients and prospective clients to evaluate the risks associated with a particular investment advisor, its business practices, and its investment strategies; it is essential that clients and prospective clients have clear disclosure that they are likely to read and understand. Part 2 of Form ADV requires investment advisers to provide new and prospective clients with a brochure and brochure supplements written in plain English. The requirements of Part 2 are designed to provide new and prospective clients with clearly written, meaningful current disclosure of the business practices, conflicts of interest, and background of the investment advisor firm and the firm’s employees who provide advice.
Part 2B is called the “brochure supplement” and includes information about your specific Investment Advisery Representative (“IAR”), acting on behalf of the investment advisor, who actually provides the investment advice and interacts with the client. The ADV Part 2B must be provided to a prospective client at the time they become an advisory client. Please contact your Adviser to view their Form ADV 2B.
Acting as Broker-Dealer and Investment Advisor
You may have several accounts with IFG where we act as investment advisor, broker-dealer, or both at the same time. It is important you recognize that does not mean that brokerage relationships are advisory relationships. We encourage you to ask questions so you completely understand what capacity we are acting in, as well as the difference between brokerage and advisory services.
Payment for Order Flow
U.S. Securities and Exchange Commissions (“SEC”) Rule 11Ac1-6 requires IFG to publicly disclose its equity and option order routing practices. The firm directs all trades in over-the-counter (OTC), listed stock, and options to its clearing firm, Pershing, LLC (Pershing) for execution. IFG does not receive compensation for directing order flow to Pershing.
Quality of Execution
Consistent with the governing principle of best execution, the designated market makers to whom orders are automatically routed, are selected by Pershing based on the consistently high quality of their executions in one or more market segments and their history of seeking price improvements. Pershing regularly publishes reports for quality of execution purposes.
To view the most recent quarterly report, go to https://orderroutingdisclosure.com.
Enter/input INDEPENDENT FINANCIAL GROUP LLC (exactly as it appears) and click on “GO.”
Questions to Consider as an Investor
- Do you want a financial advisor to manage your investment portfolio? If so, an advisory account may be appropriate.
- Do you prefer to make investment decisions on your own and are just looking for an advisor to execute your orders? If so, a brokerage account may be appropriate.
- Do you want your advisor to act as a fiduciary with a duty to provide you with ongoing investment services? If so, an advisory account may be the right choice.
- What do you expect will be the amount and size of the holdings and transactions in your portfolio? If you plan to hold a number of securities and to have your account rebalanced on a frequent basis, an advisory account may be the right decision. However, if you plan to only hold a few securities and/ or follow a buy-and-hold strategy for a long period of time without ongoing investment advice from an advisor, a brokerage account may be the right decision.
For more details about Advisory accounts, please visit: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-44
Fees and Costs
Charges for Brokerage Services
The costs for brokerage services are typically based on a transaction charge, often called a commission or a mark-up/ mark-down for each trade you make in your account. Your brokerage account will also be subject to custodial fees. Please see the link below (Pershing Custodial Charges) for more information regarding custodial fees.
Most investments in brokerage accounts are either held through IFG’s custodian, Pershing LLC, or directly with the sponsor company or issuer. Brokerage accounts are subject to certain account and transaction fees, depending on where the assets are held or how the assets are purchased. A ticket charge is charged for each brokerage transaction (for example, buy/ sell/ exchange) by our custodian, Pershing. Below are some examples of some general account and transaction fees:
Commissions: A commission, also known as a sales load, sales charge, or placement fee, is typically charged when a transaction occurs within your brokerage account as a result of your financial professional facilitating the transaction. A commission is often a set percentage of the price paid and charged on a per transaction basis. The commissions that your financial professional earn are shared with IFG.
Mark up: A markup occurs when Pershing buys and sells from their inventory and charges the customer for the service. Factors included in determining the markup include but are not limited to: type of security, amount of money in transaction and availability of the security.
Ticket Charges: An additional flat fee charged by Pershing for facilitating buys and sells on behalf of customers. Ticket charges vary based on product types. Please see the “Pershing Custodial Charges” for the ticket charges on different products.
Other Custodial Fees: These fees and costs to maintain your brokerage account include but are not limited to: check fees, wire fees, account transfer fees and termination fees. For further details about custodial fees, please contact your financial professional.
Certain types of products, including 529s, mutual funds, UITs, interval funds, money market funds, VAs and VULs, and other investment products, utilize share classes. Fees and expenses that are commonly associated with share classes include but are not limited to: sales charges, sales loads, fund maintenances fees and 12b-1 fees which are paid to the financial professional from fund assets, therefore, indirectly from your invested assets. In addition, some funds offer volume discounts which reduces the price you pay based on the amount you invest. Understanding these charges and volume discounts will assist you in identifying the best investment for your particular needs and may help you to reduce the cost of your investment. More details about share classes, sales loads, fees, and expenses of these products are outlined in the product-specific prospectus and or offering materials.
The most common types of compensation structures associated with share classes are front-end load, back-end load, and 12b-1 fees:
- Front End Load: A sales charge is deducted from your investment at the time you buy the investment. This sales charge is a percentage of your total purchase price. Some investments offer volume discounts to the front-end sales charge assessed on certain share classes at predetermined levels of investment. Please refer to the product-specific prospectus or offering materials for more information.
- Back End Load: No sales charge is deducted at the time of purchase. The load is paid by deducting it from profits or principal when you sell the investment (i.e. contingent-deferred sales costs). Therefore, it is important that you understand the fees and costs associated with selling your investments within a period defined by the fund company. Please refer to the product-specific prospectus or offering materials for more information.
12b-1 Fee: The 12b-1 fee is considered to be an operational expense charged annually for marketing and distribution of a mutual fund. As such, the 12b-1 fee is included in a fund’s expense ratio. A portion of the 12b-1 fee is paid to your financial professional and shared with IFG.
DOWNLOAD: Pershing Custodial Charges (PDF)
For more details on Brokerage accounts, please visit https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-43
Fees and Charges for Advisory Services
Your fees for investment advisory services are described in the client agreement for the applicable program. Typically, advisory fees will be based on a percentage of the assets held in your investment advisory account. This fee is expressed as an annual percentage (for example, 1%) of your account value and is charged on a monthly or quarterly basis. The fee may or may not include brokerage transaction charges. Each of our investment advisory services has an agreement and disclosure document that explains its fees and charges in detail.
Please note – In March 2021, IFG combined all ADV 2A brochures into one document.
DOWNLOAD: ADV Part 2A (PDF)
Wrap Accounts
Under a wrap account, IARs invest and manage investments that could include individual securities or funds in a fee-based account. IFG’s wrap accounts provide investment guidance, portfolio management, and brokerage services based on a percentage of the account assets. Clients may prefer an annual account fee over commissions because they may feel more comfortable knowing IARs will have no incentive to trade frequently to generate commissions (since the account is charged a fee on the account balance versus transactional commissions) and have a vested interest in increasing the overall asset size of the account.
Before investing in a wrap account, it is important that IARs and their clients consider investment strategy, asset allocation needs, and trading frequency. Bond investors and investors with a buy-and-hold approach may not stand to benefit from wrap accounts because the annual wrap fee may be higher than any one-time commissions they would otherwise pay. However for active stock investors; the ability to make unlimited trades for a set fee instead of on a per-trade commission basis could result in large savings.
Please note – In March 2021, IFG combined all ADV 2A brochures into one document.
DOWNLOAD: ADV Part 2A (PDF)
Retirement Plan Services
ERISA Retirement Plans may be established with investment direction provided by either the trustee as in a defined benefit plan, or by the participant as is typically done in a 401(k) plan. IFG refers to these plans as either a trustee-directed plan or a participant-directed plan.
When an IAR has a relationship with the employer sponsoring the Retirement Plan and has every participant’s account in the Plan (as is typical in a 401(k) plan), the RR is referred to as having a plan-level relationship. When an IAR has a relationship with just one participant in the Plan (as is common in a self-directed brokerage arrangement), the IAR is referred to as having a participant-level relationship.
ERISA retirement plans contain unique disclosure, reporting, and recordkeeping requirements that are not present in the retail (individual) marketplace such as IRAs. To meet this need, a line of retirement plan products was developed by various product sponsors over a period of many years with those unique requirements in mind. Those retirement plan product providers are also referred to as record-keepers, though they can also be referred to as platform providers or product sponsors.
Compensation for Retirement Plan Services
Plan Sponsors will pay an Adviser Fee (Fee) for services as set forth in the Retirement Plan Services Agreement. Adviser and IAR will share in the Fee. Fees for the Retirement Plan Services are negotiable. A description of the different types of fees for Retirement Plan Services appears in the ADV Part 2A RPS below.
Please note – In March 2021, IFG combined all ADV 2A brochures into one document.
DOWNLOAD: ADV Part 2A (PDF)
Investment Choices, How IFG is Compensated, and Conflicts of Interest
Compensation and Conflicts of Interest
IFG offers a wide range of products which includes: mutual funds, variable annuities, variable life insurance, Direct Participation Programs (“DPPs”), Real Estate Investment Trusts (“REITS”), equities, fixed income, and third-party money management services through both our clearing firm Pershing, LLC and through direct selling agreements with the sponsoring companies. We strive to provide you objective investment advice to assist you in reaching your goals, however, there are conflicts of interests inherent in any recommendation. This conflict can come from the compensation that our Registered Representatives receive on specific investments or advisory services, or from the compensation that we may receive from third-party providers as a result of your purchase of products, advisory, or retirement plan services. Lastly, there is a conflict when product sponsors pay us to be a part of our conference programs. It is important for you to understand these conflicts of interest so that you may make an informed decision to allow us to serve your investment needs.
The following sections describe in further detail the types of products IFG offers:
Traditional ETFs
ETFs are typically structured as registered unit investment trusts (UITs) or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Some ETFs that invest in commodities, currencies, commodity or currency based instruments, or volatility instruments, are not registered as investment companies and are generally established as grantor trusts. Unlike traditional UITs or mutual funds, shares typically trade throughout the day on an exchange at prices established by the market.
Like individual stocks, ETFs can be bought and sold throughout the trading day at the current market value, which continuously fluctuate and reflect the value of each ETF share at any particular time. Shares of ETFs are bought and sold on various stock exchanges.
ETFs can track a wide variety of sector-specific, country-specific, and broad-market indexes. ETFs may provide diversification to your overall portfolio because one share or one unit may represent multiple underlying stocks, bonds, and/ or other asset classes. Each ETF seeks to replicate the market performance of the underlying index that makes up its basket of securities. Although ETFs seek to mirror the performance of a particular index, the relationship between performance of the index or sector and the ETF is not exact because of the fees and trading costs associated with the ETF, as well as the difficulties in exactly mimicking an index.
Non-Traditional ETFs
Non-traditional ETFs may be “leveraged” or “inverse”, and function like traditional ETFs, but may offer leverage depending on the product’s investment objective. These ETFs, which are sometimes referred to as “geared” or “responsive”, generally rebalance daily or monthly in some cases. They are complex financial instruments designed to meet a stated investment objective although their performance can change significantly from their stated objective on a daily or monthly basis, depending upon the trading session.
These non-traditional ETFs seek to deliver multiples of the performance of the index or benchmark they track. To accomplish their objectives, non-traditional ETFs involve investment strategies that utilize swaps, futures contracts, and other derivative instruments. Both leveraged and inverse non-traditional ETFs are trading vehicles and are not suitable for investors who are interested in a buy-and-hold strategy, particularly in volatile markets.
- Leveraged: Leveraged ETFs attempt to track a multiple of the daily (or monthly) returns of an index usually by using total return swaps. A leveraged ETF may be two times (2x) or three times (3x) leveraged, which means it attempts to provide two or three times the daily index return or loss, respectively. For instance, the double leveraged ETF seeks to provide a 2% gain on that daily return for each 1% increase in the market index return. Conversely, if the index drops 1%, your loss, in theory, would be 2% for that given day, assuming the ETF is rebalanced daily.
- Inverse: Some leveraged ETFs are inverse or “short” funds, meaning that they seek to deliver the opposite of the performance of the index or benchmark they track. An inverse ETF generally engages in trading strategies, such as short selling, or enters into total return swap agreements and futures contracts. An inverse ETF seeks to deliver the inverse (-1x) of the index’s performance, while a two times (-2x) or three times (-3x) leveraged inverse ETF seeks to deliver two or three times the opposite of the index’s performance, respectively.
Non-traditional ETFs are not suitable for most investors. The effects of mathematical compounding can grow significantly over time, leading to scenarios whereby performance over the long run can differ significantly from the performance (or inverse performance) of their underlying index or benchmark during the same period of time. Leveraged, inverse, and leveraged inverse ETFs may be more volatile and risky than traditional ETFs due to their exposure to leverage and derivatives, particularly total return swaps and futures. In addition, these instruments are typically designed to achieve their desired exposure on a daily (in a few cases, monthly) basis. Holding leveraged, inverse, and leveraged inverse ETFs for longer periods of time potentially increases their risk due to the effects of compounding and the inherent difficulty in market timing.
Mutual Funds
Before investing in mutual funds, it is important to understand their associated fees and expenses. Mutual funds have ongoing expenses that clients will pay as long as they hold the funds. Most funds pay a sales commission to the RR when the fund is purchased in addition to the annual costs that are associated with operating the fund. Annual operating expenses include management fees, 12b-1 fees (payments made in connection with marketing and distribution expenses which may include trailing compensation to RRs), the cost of shareholder mailings and other expenses. Investors should always consult the fund’s prospectus for specific details regarding fees, expenses, and charges.
Variable Products
IFG receives compensation in different ways from the purchase of variable annuities and variable life insurance products. Similar to mutual funds, IFG is paid by variable product companies based on the fees paid by the investor and a portion of that payment is paid to the RR. In addition to customary compensation from variable product companies that include commissions and ongoing payments (known as residuals or trails), IFG does receive additional compensation from certain variable product sponsors under a revenue-sharing agreement. RRs do not receive a greater or lesser commission from sales under this agreement, however, the marketing and educational activities paid for with these payments can lead RRs to focus on those funds when making recommendations. Although compensation varies, IFG receives up to 25 basis points (0.25%) of the gross amount of each sale of a variable product. For example, a $10,000 transaction with a participating company could result in a one-time payment of $25 under this agreement.
Non-Variable Insurance
IFG receives compensation from product sponsors and/ or their affiliates for marketing their insurance products to IFG RRs. IFG receives marketing and educational support payments of up to $60,000 on an annual basis from Field Marketing Organizations (FMOs) to assist training and educating IFG RRs. Such training and education of IFG RRs may include conference calls, webcasts, advertising in IFG’s monthly and quarterly magazines, and participation at IFG conferences including speaking opportunities (breakout sessions) and exhibit time (booths). Payments received through the IFG Marketing Support Program are not made in connection with any specific IFG retirement plan customer. IFG RRs do not receive any portion of these payments.
Alternative Investments and Direct Participation Programs
IFG receives compensation from Alternative Investment (“AI”) and DPP sponsors (such as REITs, Limited Partnerships, Oil and Gas programs and Tenant-in-Common offerings) that include commissions and due diligence/ marketing allowances/ revenue sharing from the sponsor. Such compensation is described in detail in the offering’s Private Placement Memorandum or Prospectus, and vary depending upon the offering and range from 2.00% to 9.00%. Due diligence/ marketing allowances typically range from 0.5% to 1.50% and is retained by the firm to supplement due diligence cost.
529 Plans
Similar to mutual funds, IFG is paid by the fund family or distributor based on the fees paid by the investor. A portion of that payment goes to the RR. IFG does not have a revenue sharing program with any 529 Plan sponsor, nor do we receive any additional fees (conference or marketing fees) other than those disclosed in the issuer’s offering statement.
Money Market Funds
Brokerage accounts provide automatic daily cash sweep programs into client selected money market funds offered by Federated Financial Services Company and Dreyfus Insured Deposit Program. IFG receives compensation of up to 0.15% of the assets invested in Dreyfus Insured Deposits and up to 0.35% of the assets invested in Federated money market funds. RRs do not receive any portion of these payments.
Banking Products
IFG provides bank products such as checking, savings, money market, and CDs from AXOS. IFG receives up to 0.35% on assets in these products. RRs receive a portion of these payments. Bank of the Internet participates in our Conference Program by contributing $10,000 towards our National Conference.
Revenue Sharing with Pershing LLC
IFG has a clearing relationship with Pershing, LLC where IFG is responsible for the opening and maintenance of accounts. In return for servicing the accounts, Pershing shares revenue generated from these accounts with IFG through various forms including but not limited to: mark-ups on transactions, interest rates, and other account and transaction-related fees. This revenue sharing agreement is customary within the industry and is reasonable given the time and resources utilized to provide account servicing support.
Retirement Plan Providers
Under IFG’s Marketing Support Program, IFG receives compensation from product sponsors and/ or their affiliates for marketing their retirement plan products and platforms to IFG RRs. IFG receives marketing and educational support payments of up to $75,000 on an annual basis from retirement plan product sponsors to assist in the training and education of IFG RRs. Such training and education of IFG RRs may include conference calls, web-casts, advertising in IFG’s monthly and quarterly magazines, and participation at IFG conferences including speaking opportunities (breakout sessions) and exhibit time (booths). Payments received through the IFG Marketing Support Program are not made in connection with any specific IFG retirement plan customer. IFG RRs do not receive any portion of these payments.
Investment Advisory Services
IFG’s Registered Investment Advisor offers advisory services and portfolio management through various third-party money managers. IFG receives a percentage of advisory fees as a percentage of client assets invested with the third-party money managers. In addition to customary compensation based on customer assets, IFG may receive additional compensation from certain money managers under a revenue sharing agreement. IFG’s Investment Adviser Representatives (IARs) do not participate in revenue sharing under this agreement, however the marketing and educational activities paid for with these payments may lead IARs to focus on those funds when making recommendations. Although compensation varies, IFG receives up to 10 basis points (0.10%) of the gross amount of the account value. For example, a $10,000 transaction with a participating advisory firm could result in a one-time payment of $10 under this agreement.
Conference Programs
IFG’s representatives have the ability to create investment portfolios from a variety of approved products and programs. Certain product sponsors contribute additional funds and resources to programs that support our marketing, education, and training efforts, such as our national conference and other seminars or conferences conducted throughout the year (“Marketing Support Program”).
The amounts that product sponsors pay to participate in the Conference Program is based on a tiered platform that ranges from $1,500 to $100,000 and according to the events and activities the sponsor chooses, may include conference calls, web-casts, advertising in Independent Financial Group’s monthly and quarterly magazines, Elite Advisor Conference, Practice Management Forum, and National Conference; including speaking times (breakout sessions) and exhibits (booths).
Additional Training and Support
In addition, product sponsors and other companies may also reimburse up to 100% of the cost of due diligence, training, and education/ joint marketing meetings for our RRs, as permitted by industry rules. Product Sponsors, at their discretion, can provide IFG RRs’ cash and non-cash compensation that includes support for their business activities, attendance at seminars, conferences, and entertainment. It is important to know that although the product sponsors contribute these funds to IFG and may have greater access to our RRs’ the client does not pay more to purchase these products through IFG than they would through another broker-dealer. The payment of this additional compensation to IFG by these product sponsors may pose a financial incentive to promote certain products over other products, although we do not believe that these arrangements compromise the service the RR provides to the client
FDIC, SIPC, and BROKERCHECK
Federal Deposit Insurance Corporation (FDIC)
Savings accounts, insured money market accounts, and certificates of deposit (CDs) are generally viewed as safe because they are federally insured by FDIC. This independent agency of the federal government insures your money up to $250,000 per insured bank. It is important to note that the total is per depositor not per account. But there is a trade off between security and availability; your money earns a low interest rate.
The FDIC insures deposits only. It does not insure securities, mutual funds, or similar types of investments that banks and thrift institutions may offer. For more information, visit https://www.fdic.gov
Securities Investors Protection Corporation (SIPC)
Securities you own, including mutual funds that are held for your account by a broker, or a bank’s brokerage subsidiary, are not insured against loss in value.
The value of your investments can go up or down depending on the demand for them in the market. The Securities Investors Protection Corporation (SIPC), a non-government entity, replaces missing stocks and other securities in customer accounts held by SIPC member firm up to $500,000, including up to $250,000 in cash, if the firm fails. For more information, visit https://www.sipc.org.
Excess of SIPC Coverage
In addition to SIPC protection, our clearing firm, Pershing LLC, provides coverage in excess of SIPC limits from certain underwriters in Lloyd’s insurance market and other commercial insurers.
The excess SIPC coverage is not guaranteed and the terms of the coverage are subject to change.
SIPC and the excess of SIPC coverage do not protect against loss due to market fluctuation.
An excess of SIPC claim would only arise if Pershing failed financially and client assets for covered accounts—as defined by SIPC—cannot be located due to theft, misplacement, destruction, burglary, robbery, embezzlement, abstraction, failure to obtain or maintain possession or control of client securities, or to maintain the special reserve bank account required by applicable rules.
For more information, please speak with your financial professional.
BrokerCheck
Before opening an account with any Registered Representative, you should check their background and disciplinary history through BrokerCheck. BrokerCheck provides information regarding state licenses, exams passed, and Broker Registration History. Check the background of this firm and its Investment Professionals on FINRA’s BrokerCheck.
Questions to Consider Asking Your Financial Professional
- What experience do you have, especially with people like me? What percentage of your time would you estimate that you spend on people with situations and goals that are similar to mine?
- What education have you had that relates to your work?
- Have you ever been disciplined by a regulator? If yes, what was the problem and how was it resolved?
- Have you had customer complaints? If yes, how many, what were they about, and how were they resolved?
Investor Definitions and Disclosures
General Terms
Asset allocation: Involves dividing your investments among different assets, such as stocks, bonds, and cash. The asset allocation decision is a personal one. The allocation that works best for you changes at different times in your life, depending on how long you have to invest and your ability to tolerate risk.
Factors to consider when determining your Asset Allocation include your:
Time Horizon: Your time horizon is the number of months, years, or decades you need to invest to achieve your financial goal. Investors with a longer time horizon may feel comfortable taking on riskier or more volatile investments. Those with a shorter time horizon may prefer to take on less risk.
Risk Tolerance: Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for potentially greater returns. (The different types of Risk Tolerances are listed and defined below.)
Investment Objectives: An investment objective is a set of goals an investor has for their portfolio. After determining your investment objective, your advisor will be able provide investment options that align with your objective. It is encouraged that you understand the different investment objectives before meeting with your advisor.
Liquidity Needs: The extent to which the Client desires the ability or has financial obligations that dictate the need to quickly and easily convert to cash all or a portion of Client’s investments without experiencing significant loss in value from the lack of a ready market or incurring significant costs or penalties.
Refer to https://www.investor.gov/introduction-investing/getting-started/asset-allocation
Professional Designations
The following professional designations are small selection of those attributable to financial services professionals. The entire list can be found on FINRA’s website. FINRA does not approve or endorse any professional credential or designation.
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Accredited Estate Planner (AEP)
Accredited Investment Fiduciary (AIF)
Accredited Retirement Plan Consultant (ARPC)
Accredited Wealth Management Advisor (AWMA)
Certified 401(k) Professional (C(k)P)
Certified Annuity Specialist (CAS)
Certified College Planning Specialist (CCPS)
Certified Divorce Advisor (CDA)
Certified Employee Benefit Specialist (CEBS)
Certified Financial Consultant (CFC)
Certified Financial Planner (CFP)
Certified Personal Retirement Specialist (CPRS)
Certified Specialist in Estate Planning (CSEP)
Certified Wealth Strategist (CWS)
Chartered Investment Counselor (CIC)
Chartered Financial Consultant (ChFC)
Types of Risk Tolerance
Low: Client wants to preserve as much of their initial principal as possible, with minimal risk, even if that means this account does not generate significant income or returns and may not keep pace with inflation.
Moderate: Client is willing to accept more risk to their initial principal and tolerate some volatility to seek higher returns and understands they could lose a portion of the money invested.
Moderately High: Client is willing to accept high risk to the or initial principal, including high volatility or illiquidity, to seek high returns over time and understands they could lose a substantial amount of the money invested.
High: Client is willing to accept maximum risk to their initial principal, including high volatility or illiquidity, to aggressively seek maximum returns, and understands they could lose some, or all, of the money invested.
Investment Objectives
Capital Preservation: A strategy that seeks to provide relative principal protection by investing primarily in fixed-income securities. This strategy is designed for investors with little or no tolerance for principal volatility and who are willing to accept lower returns in exchange for increased stability.
Conservative: A strategy that seeks to provide portfolio stability and current income with modest portfolio appreciation by investing primarily in fixed-income securities. This strategy is designed for investors with a need for regular income in the form of dividends and interest, as well as some desire for modest growth from the stock portion of their portfolio.
Conservative Growth: A strategy that seeks to provide portfolio growth with current income by investing in a combination of both equity and fixed-income securities in similar weights. This strategy is designed for investors who desire capital appreciation balanced with income and portfolio stability.
Moderate: A strategy that seeks to provide portfolio appreciation and current income. This portfolio’s allocation generally includes both equity and fixed-income securities, with a greater weighting to equities. Investors should have a mid- to long-term investment time horizon and be willing to take on some risk in pursuit of better returns.
Moderate Growth: A strategy that seeks to provide appreciation with modest current income as a secondary objective. This portfolio’s allocation is generally heavily weighted to equity securities with a modest investment in fixed-income securities for portfolio diversification. Investors should have a long-term investment time horizon and be willing to take on risk in pursuit of better returns.
Growth: A strategy that seeks to provide portfolio appreciation by investing primarily in equity securities. Generally, only a small percentage of the portfolio is invested in fixed income securities for diversification purposes. This strategy is designed for investors with a relatively long-term investment time horizon as well as their sources to withstand market volatility.
Aggressive Growth: A strategy that seeks to provide potentially above average returns. Portfolios following this strategy are generally fully invested in equity securities. Investors in pursuit of maximizing capital appreciation over a long-term investment horizon should have sources to withstand the volatility inherent in equity investing.
Liquidity Needs
Very Important: The Client will need cash at varying times to meet near term financial demands. The Account should have the ability to convert assets to cash without a significant loss of capital and/ or income. NOTE: The Client may desire a portion of the Account invested in liquid assets to pay for unexpected expenses or take advantage of unforeseen opportunities.
Somewhat Important: The Client typically has a long-term investment horizon or maintains liquid assets elsewhere and does not anticipate the need for liquidity from the Account.
Not Important: The Client will not need liquidity from the Account.
Risk by Investment Type
Before participating in any program or investing in any specific asset class, Client should discuss their tolerance for risk with their IAR and carefully consider the risks associated with the investment by reviewing, as applicable, the prospectus, offering memorandum, or disclosure brochure. All investment decisions involve risk, or the possibility that your investment will not increase in value and may lose value. The following describes common characteristics of risk associated with specific types of investments that may be recommended:
Mutual Funds: Each mutual fund has different risks and rewards. Generally, the higher the potential return, the higher the risk of loss. Investors may have to pay taxes on capital gains distributions received even if the fund goes on to perform poorly after the investor bought shares.
Money Market Funds: Although Money Market Funds have relatively low risk, the NAV may fall below $1.00 if the fund performs poorly; therefore, losses are possible.
Fixed Income Securities: Fixed income investments tend to be more conservative than individual stocks; however, clients should be aware that bonds and bond funds do carry risks including but not limited to: loss of principal, interest rate, credit, inflation, prepayment, and reinvestment.
Stocks: Investment that represents an ownership share in a company. The risks associated with stock investments include business risk and market risk, but may also include other types of risks depending on the size of the company, the company’s use of debt, location of the company’s primary businesses, etc.
Closed-End Mutual Funds: While similar to Mutual Funds above, closed-end funds trade intra-day and are priced by the market rather than being valued by the fund’s holdings at the end of the day. Like Mutual Funds, the risks associated with specific Closed-End Mutual Funds depend on the fund’s portfolio and investment objectives.
Exchange-Traded Funds (ETF): Like stocks and index funds, ETFs can carry a significant amount of market risk. ETFs are made up of many assets or companies. Unlike a mutual fund that prices at Net Asset Value at the end of the trading day, ETFs can be traded at any time during trading hours, like a stock. Investing in ETFs involves volatility and risk of loss that client should be able to withstand.
Leveraged ETFs: Leveraged ETFs, sometimes labeled as “ultra” or “2x” seek to deliver multiples of the performance of the index or benchmark they track. To achieve a return that is a multiple of an index or benchmark, the underlying investment includes derivatives that creates additional volatility and are very risky. Most leveraged ETFs “reset” daily, meaning that they are designed to achieve their stated objectives for the day and on a daily basis. Their performance over longer periods of time (over weeks or months or years) can differ significantly from the performance of their underlying index or benchmark during the same period of time. This effect can be magnified in volatile markets.
Leveraged Inverse ETFs: Leveraged Inverse ETFs, sometimes labeled as “ultra short” or “2x” seek to deliver multiples of the inverse performance of the index or benchmark they track. To achieve a return that is a multiple of an index or benchmark, the underlying investment includes derivatives that creates additional volatility and are very risky. Most leveraged inverse ETFs “reset” daily, meaning that they are designed to achieve their stated objectives for the day and on a daily basis. Their performance over longer periods of time (over weeks or months or years) can differ significantly from the performance of their underlying index or benchmark during the same period of time. This effect can be magnified in volatile markets.
Exchange-Traded Notes (ETN): Senior, unsecured debt securities issued by an underwriting bank. Similar to other debt securities, ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are designed to provide investors access to the returns of various market benchmarks. The returns of ETNs are usually linked to the performance of a market benchmark or strategy, less fees. When a client buys an ETN, the underwriting bank promises upon maturity to pay the amount reflected in the index, minus fees.
Unit Investment Trusts (UIT): An investment company that offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time and generally designed to provide capital appreciation and/ or dividend income. UITs can vary in their investment strategies, risk profiles, performance, and management fees. The risks of UITs are directly related to the underlying holdings.
Structured Products: Structured products are securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance, and/ or a foreign currency. Structured products have a fixed maturity, but typically contain two components – a note and a derivative (which may be an option). Structured products are issued by financial institutions, such as investment banks, and are senior to the unsecured debt of the issuing institution. As such, structured products are subject to the credit worthiness of the issuer even if they are structured to offer principal protection, and any payments due at maturity are dependent on the issuer’s ability to make payment. There may be little or no secondary market for the securities and information regarding market pricing for the securities may be limited even if the product has a ticker symbol or has been listed on an exchange. In addition to credit risk, other risks of investing in structured products include, but are not limited to, principal risk, liquidity risk, limitations on upside participation, and the tax treatment may be different from other investments in an Account.
Alternative Investments/DPPs/Private Placements: Direct Participation Programs (DPPs) typically include Limited Partnerships, LLCs, and REITs which benefit the investor based on their partial tax shelter. However, these programs also have significant risks associated with them. Direct Participation Programs rely upon the general partner to manage the investment. This type of program is often a blind pool because the investment may not be specifically identified, and as a result you cannot evaluate the risks of, or potential returns from, the investment. DPPs are highly illiquid and there is no guarantee of a secondary market for the investment. All or a substantial portion of the distributions from this type of investment may be a return of capital and not a return on capital, which will not necessarily be indicative of performance. DPPs are speculative investments which could result in the loss of the client’s entire investment.
Interval Funds: Interval funds are closed-end funds with varying investment strategies and investment objectives that may not give investors the right to redeem shares and a secondary market may not exist. While the fund may provide limited liquidity to shareholders by offering to repurchase a limited amount of shares on a periodic basis, there is no guarantee that clients will be able to sell their shares even if there is a repurchase offer. Also, the offer to repurchase shares may be suspended or postponed by the investment sponsor. An investment in an interval fund involves a considerable amount of risk.
Options: Certain types of options strategies (such as selling covered calls or purchasing puts) are allowed in accounts as a way to generate income or hedge existing positions. The use of options involves additional risks including the potential for the market to rise significantly, making your put options worthless and having a security called away (covered call writing) or the loss of the premium paid for the purchase of the option.
Investment Risk
Because investment risk is a given, it is up to you to understand those risks so that you can confidently decide what to do with your financial assets.
There are two broad categories of risk to consider. First, there is business risk. Business risks, or “non-systemic” risks, are any risks associated with investing in a particular product, company, or industry.
The second broad category to consider is market risk. Market risk affects the overall economy or securities markets. It is the risk that an overall market decline will knock down the value of all investments, regardless of their individual strengths or weaknesses.
Here is a look at nine common types of investment risk:
Business Risks
Management Risk: This is inherent to a company’s day-to-day operations. For example, the risk that a company’s key product line is discontinued, that production costs soar or that a key executive leaves, potentially impacting the value of the company or its ability to repay its debts. These risks vary by company and sector.
Credit Risk (or Default Risk): The risk that a bond issuer will fail to make interest payments or to pay back your principal when your bond matures.
Market Risks
Sociopolitical Risk: This involves risk related to political and social events such as a terrorist attack, war, pandemic, or elections that could impact financial markets. Such events, whether actual or anticipated, can affect investor attitudes and outlooks, resulting in system-wide fluctuations in stock prices.
Country Risk: The risk that events in the country in which an investment is made could impact general market sentiment. This can occur when a country overhauls its government, changes its policies, or experiences social unrest or war.
Currency Risk: Any change in the exchange rate between two relevant currencies can increase or reduce your investment return. You probably have exposure to currency risk if you own stock in a foreign firm or in a large U.S. company with significant foreign sales.
Interest Rate Risk: This is the risk that the value of a security can fluctuates due to changes in interest rates. Interest rate changes directly affect bonds — as interest rates rise, the price of a previously issued bond falls; conversely, when interest rates fall, bond prices increase. The rationale is that a bond is a promise of a future stream of payments; an investor will offer less for a bond that pays-out at a rate lower than the rates offered in the current market. The opposite also is true.
Inflation Risk (or Purchasing Power Risk): The risk that general increases in the prices of goods and services will reduce the purchasing power of money, and likely negatively impact the value of investments. Inflation and interest rate risks are closely related as interest rates generally go up with inflation. However inflation can also be cyclical. During periods of low inflation, new bonds will likely offer lower interest rates, which may lead investors to higher-risk bonds offering higher rates.
Liquidity Risk: The risk that you won’t be able to buy or sell investments quickly for a price that tracks the true underlying value of the asset, or that you won’t be able to sell the investment at all because of a lack of buyers in the market.
Legal Remedies Risk: The risk that if you have a problem with your investment, you may not have adequate legal means to resolve it. When investing in an international market, you often must rely on the legal measures available in that country to resolve problems. These measures may be different from the ones you may be used to in the US.
For more information about investment risk, please visit https://www.finra.org/investors/insights/investment-risk
Additional Disclosures
General Disclosure
Services and products described may not be eligible for solicitation in your state. This site is for use by individuals residing in states where our products and services may legally be offered. The information on this site is not intended to be used as the primary basis for investment decisions.
Non-U.S. Residents
This site has been published in the United States for residents of the United States. We do reserve the right to require proof of residence from any user accessing this site and requesting information. It is not intended for use by, or to provide any information to investors outside of the United States. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site.
Business Continuity Plan Disclosure Statement
Independent Financial Group, LLC has developed a Business Continuity Plan on how we will respond to events that significantly disrupt our business. Since the timing and impact of disasters and disruptions are unpredictable, we will have to be flexible in responding to actual events as they occur. With that in mind, we are providing you with this information on our business continuity plan.
Contacting Us. If after a significant business disruption, you cannot contact your representative as you usually do at his or her branch office, you should call our firm’s home office at (858) 436-3180 or go to our website at www.ifgsd.com. In the event that you are unable to contact either your representative or the firm’s home office due to a significant business interruption, you can contact our clearing firm, Pershing, LLC. During a significant business disruption, Pershing may be contacted directly to process limited trade-related transactions, cash disbursements, and security transfers. Instructions to Pershing must be in writing and transmitted via facsimile or postal service as follows: Pershing LLC, P.O. Box 2065, Jersey City, New Jersey 07303-2065, Fax: (201) 413-5368. For additional information about how to request funds and securities when we cannot be contacted due to a significant business interruption, please call (201) 413-3635 for recorded instructions. If you cannot access the instructions from the previously noted telephone number, Pershing may be contacted at (213) 624-6100 extension 500 as an alternate telephone number for recorded instructions.
In cases where you cannot contact your representative and your accounts are held directly with a product sponsor, please utilize the sponsor company’s contact information located on your account statement.
Our Business Continuity Plan. We plan to respond by safeguarding our employees and property, making a financial and operational assessment, protecting the firm’s books and records, and allowing our customers to transact business. Our business continuity plan is designed to permit our firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption and addresses the following: data back-up and recovery; all mission critical systems; financial and operational assessments; alternative communications with customers, employees, and regulators; alternate physical location of employees; critical supplier, contractor, bank and counter-party impact; regulatory reporting; and assuring our customers prompt access to their funds and securities if we are unable to continue our business.
Independent Financial Group, LLC implements redundancies by maintaining multiple backup files in different geographical locations as part of our business continuity program. Additionally, Pershing, LLC, backs up our important records in a geographically separate area. While every emergency situation poses unique problems based on external factors, such as time of day and the severity of the disruption, we have been advised by our clearing firm that its objective is to restore its own operations and be able to complete existing transactions and accept new transactions and payments within the same business day. Your orders and requests for funds and securities could be delayed during this period.
Varying Disruptions. Significant business disruptions can vary in their scope, such as those involving only our firm, a single building housing our firm, the business district where our firm is located, the city where we are located, or the whole region. Within each of these areas, the severity of the disruption can also vary from minimal to severe. In a disruption to only our firm or a building housing our firm, we will transfer our operations to a local site when needed and expect to recover and resume business within 24 hours. In a disruption affecting our business district, city, or region, we will transfer our operations to a site outside of the affected area and recover and resume business within 48 hours. In either situation, we plan to continue in business, transfer operations to our clearing firm if necessary, and notify you through our website www.ifgsd.com or our customer emergency number, (858) 436-3180, as to how to contact us. Please be aware that we cannot guarantee that we will be successful in achieving recovery in the times noted above. If the significant business disruption is so severe that it prevents us from remaining in business, we will assure our customer’s prompt access to their funds and securities.
For More Information. If you have questions about our business continuity planning, you can contact us at [email protected].
Helpful links for investors
Ask and Check: https://www.finra.org/investors/protect-your-money/ask-and-check
Mutual Fund Analyzer: https://tools.finra.org/fund_analyzer/
Social Security Estimator: https://www.ssa.gov/benefits/retirement/estimator.html
529 Plan Calculator: https://tools.finra.org/college_savings/
Required Minimum Distribution (RMD) Calculator: https://www.investor.gov/financial-tools-calculators/calculators/required-minimum-distribution-calculator
Savings Goal Calculator: https://www.investor.gov/financial-tools-calculators/calculators/savings-goal-calculator
Compound Interest Calculator: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Investor Checklist: https://www.investor.gov/sites/investorgov/files/2019-03/OIEA_Financial_Capability%20Checklist.pdf
The IRA Rollover: 10 Tips to Making a Sound Decision: https://www.finra.org/investors/alerts/ira-rollover-10-tips-making-sound-decision
