Important Public Disclosure

 

TO:            Valued Clients and Prospects

FROM:      Norman R. Smith, CPA/PFS/CFP

DATE:       April 2008                                                                                                                             REVISED

 

As Registered Investment Advisors, the Securities and Exchange Commission requires nrSmith and Associates, PS to furnish clients and prospective clients with a written disclosure of our business practices.  This Important Public Disclosure is an alternative brochure that summarizes Form ADV, Part II, which is available to you upon request.  These business practices, as summarized below, are also available on our website at http://www.NRSmith.com (end of the Firm Profile section under Important Public Disclosure):

 

Advisory Services and Fees

Ø   Furnish personal financial planning services and newsletters to clients as an integral dimension of the practice of public accounting.  As an extension of this personal financial planning, we provide specific investment management services with assets held by Charles Schwab & Co., Inc. under an institutional agreement.  Investment management fees are based on specific gross assets under management.

Ø   Furnish advice to clients on matters not involving securities.

 

The above services are provided as an adjunct to rendering public accounting services, including accounting and auditing, management advisory services, technology consulting, income tax planning and preparation, and general personal financial planning.

 

All services, except investment management services, are rendered on an hourly basis determined on the experience and technical level of employees involved.  All billings are rendered on an ongoing basis with invoices due upon receipt.

 

An investment advisory agreement is executed before commencing services.  nrSmith and Associates, PS refers to the services described above as "financial planning" or some similar term.  The firm generally provides investment advice to individuals, pension and profit sharing plans, trusts, estates, charitable organizations, and corporations or business entities other than those mentioned.  An investment advisory agreement may be terminated by written notice according to the terms set forth in each client agreement.

 

The fee for investment portfolio management is .25% per quarter of the first $500,000; .1875% on the next $200,000 and .125% of the amount in excess of $700,000, which amounts to 1%, .75% and .50% respectively of the total portfolio assets under management on an annual basis.  Whereas, the hourly rates for personal financial planning services range from $120 to $140 per hour and the clerical rate is $52 per hour.  Satisfaction is guaranteed for services provided and billings rendered.  If a client is not satisfied, we make every effort to resolve the situation and will negotiate our fee accordingly.

 

Types of Investments

nrSmith and Associates, PS offers advice on the following:

Ø      Equity securities:  exchange-listed and securities traded over-the-counter

Ø      Corporate debt securities (other than commercial paper)

Ø   U.S. government securities

 

Ø   Municipal securities

Ø      Registered investment company securities:  mutual fund shares

Ø   Warrants

 

 

Ø      Interests in partnerships investing in:  real estate, oil and gas interests, and partnerships having economic merit and positive tax consequences such as equipment leasing

 

 

Methods of Analysis, Sources of Information and Investment Strategies

nrSmith and Associates, PS security analysis methods include:

 

Ø      Fundamental

Ø      Technical

 

The main sources of information used include:

 

Ø      Financial publications

Ø      Corporate rating services

Ø      Inspections of corporate activities

Ø      Research materials prepared by others

Ø      Annual reports, prospectuses, and filings with the Securities and Exchange Commission

 

The investment strategies used to implement any investment advice given to clients include long-term purchases (securities held at least a year).

 

Education and Business Standards

Those involved in determining or giving investment advice to clients are required by nrSmith and Associates, PS to meet specific education requirements and be certified as, or be in the process of becoming, a Certified Public Accountant and/or Certified Financial Planner.  Further, they must meet the continuing education requirements of Certified Public Accountants for Washington State.  They must adhere to the code of conduct/ ethics of the Washington Society of Certified Public Accountants, American Institute of Certified Public Accountants, and Certified Financial Planners Board of Standards, and National Association of Personal Financial Advisors.

 

President's Education and Background

Norman R. Smith began his career with Coopers & Lybrand (now known as Pricewaterhouse Coopers) where he spent one year as a staff accountant.  He advanced to supervisor with Peterson, Sullivan & Company, CPAs.  After five years of growing responsibility, he moved from Seattle to the South Puget Sound area for the CPA firm of Frost, Pearson & Woody from 1974 to 1976.  As a resident manager, he acquired the Shelton practice from Frost, Pearson & Woody in 1976 and has since owned and operated it in the Olympia area as nrSmith and Associates, PS.

 

Norman R. Smith's education and memberships includes:

College for Financial Planning, Denver, CO - Certified Financial Planner - 1989

Golden Gate University, Seattle, WA - Master of Business Administration in Taxation - 1981

University of Puget Sound, Tacoma, WA - Bachelor of Arts in Business Administration - 1969

Member of National Association of Personal Financial Advisors

American Institute of Certified Public Accountants – PFP Section

Washington Society of Certified Public Accountants

 

Norman R. Smith obtained his certification and license as a Certified Public Accountant in 1971.  He has served on the Personal Financial Planning Committee of the Washington Society of Certified Public Accountants for the last twelve years and was chair for the 1995-97 years.  He became a Personal Financial Specialist in 1996.  He was appointed to the Ethics Committee of the Washington Board of Accountancy in 1996.  He became an Associate Member of the Association of Certified Fraud Examiners in 2000.  In 2000, he was admitted membership in the National Association of Personal Financial Planners.  He has conducted numerous technical training sessions including sessions sponsored by Washington Society of Certified Public Accountants.


 

Certified Financial Planner’s Education and Background

Deborah Kelley began her public accounting career in 1978.  She joined the firm in 1990 and became a Certified Financial Planner in 1993.

 

Deborah Kelley's education and memberships includes:

College of Financial Planning, Denver, CO - Certified Financial Planner - 1993

Western Washington State University, Bellingham, WA - Bachelor of Arts - 1968

Member of National Association of Personal Financial Advisors

 

Conditions for Managing Accounts

As a registered investment advisor and financial planner, the firm does not establish a specific minimum dollar value of assets or other conditions for starting or maintaining an account.

 

nrSmith and Associates, PS is incorporated as a professional service organization and is not related nor involved in any partnership in which clients are solicited to invest.

 

Review of Accounts

Any financial planning which nrSmith and Associates, PS is engaged to perform is reviewed with the client to determine change in objectives, actual performance versus projected performance, and possible adjustments necessary as a result of change in objectives or investment performance.  Accounts are reviewed by the President of the Corporation in connection with income tax and management planning at least annually or at the request of the client.

 

Nature and Frequency of Reports to Clients on Their Accounts

Upon development of a client's initial financial plan, recommendations will be developed and reported to the client at that time.  Clients will receive quarterly reports containing the information described above.

 

Proxies

nrSmith and Associates, PS will not vote proxies and will not be required to take action and/or render any advice with respect to voting of proxies solicited by or with respect to the issuers of securities in which assets in client accounts may be invested from time to time.  In addition, nrSmith and Associates, PS will not take any action or render any advice with respect to any securities held in client accounts, which are named in or subject to class action lawsuits.  nrSmith and Associates will, however, forward any information received regarding class action legal matters involving any security held in client accounts.

 

Investment or Brokerage Discretion

nrSmith and Associates, PS has discretionary authority to determine:

Ø      Securities to be bought or sold

Ø      Amount of the securities to be bought or sold

Ø      Broker or dealer to be used

Ø      But, not commission rates paid (to broker or dealer)

nrSmith and Associates, PS does not have any arrangements, oral or written, where it is paid cash or receives an economic benefit (including commissions, equipment, or non-research services) from a non-client in connection with giving advice to clients.  In addition, the firm does not directly or indirectly compensate any person for client referrals.

 

Use of Schwab Institutional® Platform

nrSmith and Associates, PS recommends that clients establish brokerage accounts with the Schwab Institutional division of Charles Schwab & Co., Inc. (Schwab), a registered broker-dealer, member SIPC, to maintain custody of clients’ assets and to effect trades for their accounts.  nrSmith and Associates, PS is independently owned and operated and not affiliated with Schwab.  Schwab provides nrSmith and Associates, PS 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 advisors on an unsolicited basis, at no charge to them so long as a total of at least $10 million of the advisor’s clients’ assets is maintained in accounts at Schwab Institutional.  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.

 

For nrSmith and Associates, PS clients' accounts maintained in our custody, Schwab generally does not charge separately for custody but is compensated by account holders through commissions or other transaction-related fees for securities trades that are executed through Schwab or that settle into Schwab accounts.

 

Schwab also makes available to nrSmith and Associates, PS other products and services that benefit nrSmith and Associates, PS but may not benefit our clients' accounts.  Some of these other products and services assist nrSmith and Associates, PS 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 nrSmith and Associates, PS fees from our 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 nrSmith and Associates, PS accounts, including accounts not maintained at Schwab Institutional.  Schwab Institutional also makes available to nrSmith and Associates, PS other services intended to help nrSmith and Associates, PS manage and further develop our business.  These services may include consulting, publications, and conferences on practice 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 nrSmith and Associates, PS by independent third parties.  Schwab Institutional 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 nrSmith and Associates, PS.  While as a fiduciary, nrSmith and Associates, PS endeavors to act in our clients’ best interests, and nrSmith and Associates, PS recommendation that clients maintain their assets in accounts at Schwab may be based in part on the benefit to nrSmith and Associates, PS 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.

 

Privacy Policy, Code of Ethics, and Records Retention

As Certified Public Accountants/Financial Planners, we will not release personal identifiable information except as provided in professional codes conduct, ethics, and governing rules related thereto.  This means we will not release your information as part of the sale of marketing data.  We do not sell marketing data.  Before we provide any data to obtain information on specific financial products on your behalf, we will obtain your permission.  We retain only those documents for active clients, as we deem appropriate.  To comply with the Internal Revenue Code, we will keep copies of tax returns prepared by us for at least three years.  Some records will be in electronic format.  Our Code of Ethics is based on a few basic principles that pervade all investment related activities of all employees, personal as well as professional: (1) the interests of our clients/investors come before the firm’s or any employee's interests; (2) each employee's professional activities and personal investment activities is monitored regularly to be consistent with this Code and avoid any actual or potential conflict between the interests of clients/investors and those of the firm or the employee; and (3) those activities are conducted in a way that avoids any abuse of an employee's position of trust with and responsibility to nrSmith and Associates, PS and its clients/investors, including taking inappropriate advantage of that position.

 

Copies of our Privacy Policy, Code of Ethics, Records Retention Schedule, and Form ADV Parts I and II are available upon request or examination at our office.  Please retain this Important Public Disclosure for future reference. Questions or concerns regarding the content should be directed to our Chief Compliance Officer, Norman Smith, nrSmith and Associates, PS, at 2120 Caton Way SW, Olympia, WA  98502, or call (360) 754-9475.

 

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