ADV
Item 1 - Cover Page
FILBRANDT INVESTMENT ADVISERS, INCORPORATED
FORM ADV - PART 2A INFORMATION
March 25, 2011
Filbrandt Investment Advisers, Incorporated
8401 Greenway Boulevard
Middleton, WI 53562
Phone (608) 836-3600 Fax (608) 836-7447
www.filbrandtco.com
This Brochure provides information about the qualifications and business practices of Filbrandt Investment Advisers, Incorporated ("FIA"). If you have any questions about the contents of this Brochure, please contact us at (608) 836-3600. The information in this Brochure has not been approved or verified by the United States Securities and Exchange Commission ("SEC") or by any state securities authority.
Additional information about FIA, including a copy of its Form ADV Part 1, is available on the SEC's website at www.adviserinfo.sec.gov.
Table of Contents
Schedule 2B Brochure Supplements -
Michael J. Filbrandt, CLU, ChFC®..................................................................... 13
Patricia J. Filbrandt, CFP®, CLU ...................................................................... 16
Brett H. Christensen, JD, CFP® ...................................................................... 19
Michael D. Welter, CFP® ................................................................................ 22
Crystal L. Hawks ........................................................................................... 25
Robert A. Parham, CFA .................................................................................. 27
Michael A. Tomaw ......................................................................................... 30
Filbrandt Investment Advisers, Incorporated ("FIA") is an investment adviser registered with the U.S. Securities and Exchange Commission ("SEC"). FIA has been offering advisory services since September 1994. FIA is owned by Michael J. and Patricia J. Filbrandt. FIA does not control any other firm.
The advisory services of FIA are described in detail below.
Comprehensive Advisory Services
FIA provides Comprehensive Advisory Services to clients who have a need for financial counsel involving more than an analysis of a particular investment or financial situation. The scope of an FIA comprehensive plan is as broad and detailed as desired by the client. This service usually includes an analysis of a client's existing assets, investments, insurance, cash flow, retirement and estate planning objectives. FIA provides a written analysis and at least one client meeting to discuss the analysis and its implementation.
Clients decide which investment recommendations to accept and implement. Clients are also free to select any brokerage, insurance or other product provider to purchase (or sell) the investments, insurance, or other products discussed with FIA. FIA does not guarantee results, and losses can occur from receiving Comprehensive Advisory Services.
Changes in client's financial condition, personal circumstances, goals, or general economic conditions may trigger changes to the advice provided by FIA. All Comprehensive Advisory Services advice is based on information provided by the client. It is the client's responsibility to be certain that FIA has current and accurate information.
Project Advisory Services
For clients wishing to receive advice about a specific financial situation, FIA will provide such services in the scope requested by the client. Project Services can be provided to new clients needing advice on a particular subject or to established clients wishing to expand upon the subjects covered by the Comprehensive or Ongoing Services provided by FIA. Project Advisory Services can include the following topics:
Financial Problem Solving Estate and Education Planning Investment Planning Risk Analysis Portfolio Analysis Employee Benefit Reviews Cash Flow Planning Charitable Giving Strategies Retirement Planning
To the extent material changes have occurred to a client's circumstances or goals, or to the extent a client requests a new project, the client may be asked to sign a new Services Agreement. The client may initiate contact with the client's Representative as often as needed and the Representative will schedule conferences as needed, usually no less than annually.
All Project Advisory Services are based on information provided by the client. It is the client's responsibility to be certain FIA has current and accurate information and it is the client's responsibility to inform the Representative of material changes affecting the investments and planning strategies implemented so the Representative has them for future reference.
Asset Management Services
FIA also provides discretionary asset management services. This means that FIA Representatives will have authority to purchase and sell securities of their choice in the amounts and at the times they believe it is suitable for a client's account to do so. Asset management services begin with FIA analyzing information provided by the client pertaining to the client's financial situation and needs. FIA then selects investments having objectives consistent with the objectives of the client and with the risk tolerances identified by the client. Most often FIA recommends investments in mutual funds.
The initial investment and asset allocation recommendations are based on the financial information gathered from each client including net worth, risk tolerance, financial goals and objectives, investment restrictions requested by the client and overall financial conditions. Based on this information, the client is provided with initial investment recommendations designed to provide an appropriate asset mix consistent with the client's objectives. The client's portfolio and its performance are monitored by the client's FIA Representative in light of the client's stated goals and objectives. The frequency of these reviews and transactions made for a client's account are determined by the FIA Representative. Representatives typically meet with the client on an as-needed or as-requested basis to discuss the portfolio and other aspects of the service. Clients are free to contact their Representative at any time if they have questions about their accounts.
As a general rule, FIA believes that investing is best suited to those who believe in a long-term buy-andhold policy. Therefore, clients should not expect frequent investment changes in the portfolio. However, as a result of monitoring the account, investment purchases and sales will be made.
Investments are not held by FIA. Instead, all investments managed by FIA are usually held at the brokerage firm through which transactions are placed.
FIA does not assure or guarantee the results of its Asset Management Services; thus, losses can occur from following FIA's advice pertaining to any investment or investment approach, including using conservative investment strategies.
As of December 31, 2010, FIA has assets of $386,690,636 under discretionary management and $3,013,813 under non-discretionary management.
Item 5 - Fees and Compensation
Fees paid to FIA are for FIA advisory services only. The fees do not include, for example, the fees charged by third parties such as third-party managers, or accountants and attorneys assisting with providing the client with accounting and legal advice. Commissions on transactions and other account fees will also be charged by brokerage firms in accordance with the account's brokerage firm's normal commission schedule. See Item 12, Brokerage Practices. Customary commissions on insurance are also not included.
Prospective clients should be aware that in addition to FIA's advisory fees, each mutual fund in which a client's assets are invested also pays its own advisory fees and other internal expenses which already have been deducted from the fund's reported performance. Depending on the fund, a client may be able to invest directly in the shares issued by the fund with or without incurring any sales or third-party management fees. Account maintenance fees are also deducted by the custodian.
In addition, there are tax effects pertaining to fund share redemptions, and other sales, made by FIA on behalf of clients. Redemptions and sales are taxable events which may accelerate the recognition of Comprehensive Advisory Services Fee
The fee for these services is calculated in advance and is based upon the Client's investable net worth, the complexity of the Client's financial circumstances and scope of services requested. Fees will generally be $2,500 to $4,000. The specific fee charged a Client is set forth on a schedule attached to the services agreement.
One-half quoted fee is due at the time the service agreement is signed, with the balance due after services are completed. Services are subject to a minimum fee of $2,500. In the event of contract termination, unearned prepaid fees are returned to the client, except for $750 retained for information collection if the contract is terminated before services are provided. If FIA is unable to complete the work within 6 months of contract signing due to inability to collect Client data or other similar circumstance, this Agreement may be terminated.
Project Advisory Services Fee
The fee for this service is quoted in advance and based on the scope and nature of advisory services requested and number and qualifications of professional staff needed to complete the project. Per person hourly rates range from $200-$500. One-half of the quoted fee is due at the time the service agreement is signed, with the balance due after services are completed. Services are subject to a minimum fee of $1,500. In the event of contract termination, unearned prepaid fees are returned to the client, except for $750 retained for information collection if the contract is terminated before services begin. If FIA is unable to complete the work within 6 months of contract signing due to inability to collect Client data or other similar circumstance, this Agreement will be terminated.
Asset Management Services Fee
Fees for Asset Management Services are based upon the value of assets under management and are listed below. A minimum investment of $250,000 is required to establish an investment advisory account, unless waived by FIA
| Quarterly | Annual | |
| Account Asset Value | Fee | Fee |
| On first $1 million | 0.3125% | 1.25% |
| On second million | 0.25% | 1.00% |
| Over $2,000,000 | 0.1875% | 0.75% |
Subject to a minimum quarterly fee of $1,000.
Annual asset-based fees are calculated based upon the total market value of assets in a client's portfolio on the last business day of the quarter during which services are provided and are payable in advance, before services are provided. Clients pay an initial fee which is pro-rated for the time remaining in the first billing period, plus the next quarter. Thereafter, fees are calculated for successive three month periods. For purposes of valuing assets, the assets of related accounts may, at the discretion of FIA, be combined for fee calculation purposes. In the event the service agreement is terminated, which can occur upon 30 days notice by FIA or the Client, prepaid fees are prorated for the last billing period to date of Other Information About Fees:
A one time set-up fee of $750 is due at contract signing.
The fee for providing quarterly reports only, or other limited services, on assets is quoted based on services requested.
If FIA performs background information gathering work, it charges $100 per hour to do so.
Fees for all of FIA services may be negotiated in isolated instances, thus may vary from client-to-client for similar services. Such negotiated fees may involve assets which are restricted from sale by a client, or subject to third party consulting services. For all services, FIA may, at its discretion, charge a client interest at the annual rate of 1% on all unpaid fees outstanding beyond 10 days from invoice date.
The fees paid to FIA are for FIA's advisory services only. Commissions and other account fees may be charged in accordance with the account's brokerage firm's normal commission schedule.
Fees payable to FIA for Asset Management Services are, with the client's prior permission, automatically deducted from the client's account when due. The client will receive reports from the account's custodian, showing the fee calculation and fee amounts debited. FIA will liquidate money market shares to pay the fee and, if money market shares or cash value are not available, other investments will be liquidated. Authorization for the deduction of fees from the managed account is contained in the Services Agreement. The client may terminate the authorization for automatic deduction at any time by notifying FIA in writing.
Other Compensation
FIA Representatives are also licensed to offer insurance products. FIA Representatives will receive customary commissions for the sale of such products should a client decide to make purchases through the FIA Representative. Clients are free to purchase such products other than through FIA Representatives. This compensation creates a conflict of interest. All prospective and existing clients are hereby advised that this conflict exists. Advisory fees are not reduced by the amount of sales compensation a Representative receives, but Representatives may consider commissions as a factor when determining asset-based fees.
Item 6 - Performance Based Fees and Side-by-Side Management
FIA does not charge any performance-based fees. All fees are disclosed above.
Item 7 - Types of Clients/Minimum Account Size
FIA makes its advisory services available to a wide variety of clients including. but not limited to, individuals, pension and profit sharing plans, trusts, estates, charitable organizations, corporations and other business entities.
FIA does not require a minimum account size or fee for its advisory services.
FIA's security analysis methods include, but are not limited to, fundamental analysis (evaluating securities based upon its historical and projected financial performance). All securities analysis methods and strategies, even those used by FIA may involve a high degree of risk and losses can occur.
FIA employs investment strategies using a variety of securities including equity, corporate debt, municipal, U.S. government, annuities and investment company securities as well as certificates of deposit and real estate limited partnerships. Specific strategies implemented include long and short term purchases and limited short-term trading strategies. Except for Asset Management Services, FIA's representatives do not have authority to determine, without client consent, the securities or insurance to be bought or sold, amount of securities or insurance to be bought or sold, the broker or insurance agent to be used, or the commission rates to be paid.
FIA's main sources of information include, but are not limited to, financial newspapers and magazines, research materials prepared by others, corporate rating services, annual reports, prospectuses, public filings and company press releases.
FIA does not guarantee the results of the advice given. Thus, significant losses can occur by investing in any security, or by following any strategy, including those recommended or applied by FIA.
FIA may recommend traditional exchange-traded funds ("ETF"). ETF shares are bought and sold at market price unlike mutual funds. ETFs are subject to risks similar to those of stocks.
Item 9 - Disciplinary Information
FIA does not have any disciplinary information to report regarding itself or any of its counselors or other related persons.
Item 10 - Other Financial Industry Activities and Affiliations
FIA is not involved in any other financial industry activities nor does it have any financial industry affiliations that are material to its advisory services.
Item 11 - Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
When FIA Representatives make recommendations for the purchase of insurance they also receive customary commissions as insurance salespersons. The receipt of commissions in return for insurance product purchases creates a conflict of interest for Representatives when they recommend the purchase of such products to clients.
Representatives of FIA may buy or sell securities for themselves that they also recommend to clients. Where a transaction for a Representative, or an account related to a Representative, is contemplated, a client's transaction is given priority. FIA has developed a Code of Ethics applicable to all persons who have access to confidential client records or to recommendations being made for client accounts. Designed to prevent conflicts of interest between the financial interests of clients and the interests of the firm's staff, the Code requires, among other procedures, such "access persons" to obtain preapproval of certain securities transactions, to report transactions quarterly and to report all securities positions in which they have a beneficial interest at least annually. These reporting requirements allow supervisors at the firm to determine whether to allow or prohibit certain employee securities purchases and sales based on transactions made, or anticipated to be made, in the same securities for clients' accounts. The Code also established certain bookkeeping requirements relating to federal reporting rules. The Code is required to be reviewed annually and updated as necessary. A complete copy of the firm's Code is available upon request.
Item 12 - Brokerage Practices
Although FIA will choose from a variety of investments when making recommendations and placing orders on behalf of clients, FIA will usually recommend clients open an account with Charles Schwab & Co., Inc. ("Schwab"), a registered broker-dealer, Member SIPC, to maintain custody of clients' assets and to process FIA's orders. Although a client is not obligated to utilize the services of Schwab, FIA believes that use of Schwab is a convenient means of obtaining efficient transaction executions, account reference and reporting services for investment positions. For FIA's client accounts maintained in its custody, Schwab generally does not charge separately for custody but is compensated by account holders through commissions or other transaction-related, or asset-based fees for securities trades that are executed through Schwab or that settle into Schwab accounts. FIA will recommend the use of Fidelity mutual funds for certain accounts, and also recommend TIAA-CREF custodial accounts when providing advice to clients regarding investments in their retirement annuities. FIA does not have authority to take possession of any client assets, except for withdrawal of fees permitted by each client in advance.
FIA is independently owned and operated and not affiliated with Schwab. Schwab provides FIA with access to its institutional trading and custody services, which are typically not available to Schwab retail investors. These services generally are available to independent investment advisers on an unsolicited basis, at no charge to them so long as a total of at least $10 million of the adviser's clients' assets are maintained in accounts at Schwab, and are not otherwise contingent upon adviser committing to Schwab any specific amount of business (assets in custody or trading). Schwab's services include brokerage, custody, research, and access to mutual funds and other investments that are otherwise generally available only to institutional investors or would require a significantly higher minimum initial investment.
Schwab makes available to FIA, at no cost, other products and services that benefit FIA but may not benefit its clients' accounts. Some of these other products and services assist FIA in managing and administering clients' accounts. These include software and other technology that provide access to client account data (such as trade confirmations and account statements), facilitate trade execution (and allocation of aggregated trade orders for multiple client accounts), provide research, pricing information and other market data, facilitate payment of FIA's fees from its clients' accounts, and assist with back-office functions, recordkeeping and client reporting. Many of these services generally may be used to service all or a substantial number of FIA's accounts, including accounts not maintained at Schwab. Schwab also makes available to FIA other services intended to help FIA manage and further develop its business enterprise. These services may include consulting, publications and conferences on advisory services management, information technology, business succession, regulatory compliance, and marketing. In addition, Schwab may make available, arrange and/or pay for these types of services rendered to FIA by independent third parties. Schwab may discount or waive fees it would otherwise charge for some of these services or pay all or a part of the fees of a third-party providing these services to FIA. While as a fiduciary, FIA endeavors to act in its clients' best interests, FIA's recommendation that clients maintain their assets in accounts at Schwab may be based in part on the benefit to FIA of the availability of some of the foregoing products and services and not solely on the nature, cost or quality of custody and brokerage services provided by Schwab, which may create a potential conflict of interest.
Clients should be aware that the receipt of economic benefits by FIA described above, in and of itself, creates a potential conflict of interest and may directly or indirectly influence FIA's recommendation of those service providers for custody and brokerage service.
Other than the services described above, FIA and its Representatives do not direct transactions and the commissions they generate (soft dollars) to brokerage firms or other parties to receive research or other benefits.
FIA does not process transactions through Schwab in return for Schwab referring new clients to FIA.
FIA may combine similar client orders into one aggregate order for the purpose of obtaining an average price for all customers participating in the order.
Item 13 - Review of Accounts and Reports
When performing Comprehensive Advisory Services, the initial review of a client's circumstances is performed by FIA's staff with at least one meeting with the Client within six months of the initial consultation. Ongoing Advisory Service account reviews are provided by FIA's staff at intervals selected by the client, and a review of each Asset Management Account occurs at least quarterly. All reviews and meetings are usually performed by one staff member.
One written financial analysis or project report is prepared in connection with Comprehensive or Project Advisory Services. The scope of each report is decided between the client and FIA before services begin. The number and type of reports prepared in connection with the Ongoing Services are also decided upon by client and FIA prior to the services being provided. A written report identifying the investments in a client's account, each investment's current value and the performance of the account is provided to each Asset Management client at least calendar quarterly. Clients typically receive services from one Investment Adviser Representative of the firm, although other representatives may assist.
Item 14 - Client Referrals and Other Compensation
FIA does not currently have any client referral relationships. Thus, it does not pay any fee to a third party for making client referrals to it. Also, as indicated above, the firm does not direct brokerage transactions to any third party in return for client referrals.
Item 15 - Custody
FIA does not take custody of client funds or securities. These safekeeping services are typically provided to managed accounts only by the brokerage firm processing the securities transactions ordered by FIA.
To the extent a client receives any account or other investment ownership statement from FIA, FIA recommends the client carefully compare the information in the report to that in the custodian's statements.
Item 16 - Investment Discretion
When providing Investment Management Services, FIA Representatives may exercise discretion when granted authority by clients and most clients grant discretionary authority to FIA. When doing so, it allows FIA to select the securities to buy and sell, the amount to buy and sell, when to buy and sell, and the commission rate paid, without obtaining specific consent from the client for each trade. Clients should be aware that FIA Representatives may make different recommendations and effect different trades with respect to the same securities and insurance to different advisory clients. Commissions and execution of securities transactions implemented through the custodian/broker dealer recommended by FIA may not be better than the commissions or execution available if the client used another brokerage firm. However, FIA believes that the overall level of services and support provided to the client by custodians and broker-dealers whom FIA recommends outweighs the potentially lower costs that may be available from other brokerage service providers.
When exercising discretion, FIA may combine orders for more than one client's account to form a "block" order for the purpose of seeking a better price and or execution. When a block order is executed, the broker/dealer executing the order typically allocates an average execution price to all shares in the block order, which FIA then allocates to each customer's account position on a pro rata basis. Should a block order only be partially filled, available shares are distributed in a manner fair to all accounts.
If a client directs FIA to effect transactions through a particular broker/dealer, including Schwab, FIA will do so. However, such an instruction may have implications to the client which may include incurring transaction costs and commissions that may be higher or lower than if the instruction had not been given. Also, restricting FIA to particular broker/dealers may limit FIA's ability to include a client account order within block orders to obtain the best price or execution. In addition, if FIA effecting transactions in a security for clients by means of a block order, as well as an order in the same security for a client who has directed FIA use a particular broker/dealer, FIA will effect the block order immediately prior to effecting the directed brokerage trade. Thus, clients directing FIA to use a particular broker/dealer may not receive the same average price for securities bought or sold that would be received if the order was part of a block order.
In those instances where an order error occurs by FIA, it is FIA's policy to reverse the order to make the client's account whole.
Item 17 - Voting Client Securities
FIA and its Representatives do not vote proxies on behalf of clients who will receive such notices from their account's custodian.
FIA also does not take any action on legal notices it or a client may receive from issuers of securities held in a client's managed account. However, it is available to answer questions regarding such notices.
Item 18 - Financial Information
FIA does not require or solicit fees of more than $1,200 six months or more in advance, thus no financial statement for FIA is attached. FIA does not have any financial condition that is reasonably likely to impair its ability to meet its contracted commitment to any client.