Independent Investment Advisors Inc Singletree Ln #100 Eden Prairie, MN 55344

Transcription

1 Item 1 Cover Page Independent Investment Advisors Inc Singletree Ln #100 Eden Prairie, MN December 31, 2017 This brochure provides information about the qualifications and business practices of Independent Investment Advisors Inc. If you have any questions about the contents of this brochure, please contact us at The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Registration as a registered investment adviser does not imply a certain level of skill or training. Additional information about Independent Investment Advisors Inc. also is available on the SEC s website at - Independent website:

2 Item 2 Material Changes This is an updated brochure December 31, 2017 * Fees section 4 pages 3,4 (.25% 1.25%) * Section 12 page 8 B2B robo-adviser (client trading) * The material changes discussed above are only those changes that have been made to this brochure since the firm s last annual update of the brochure. The date of the last annual update of the brochure was July 20, 2016

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4 Item 3 Table of Contents Brochure Item 2 Material Changes...ii Item 3 Table of Contents...iii Item 4 Advisory Business...2 Item 5 Fees and Compensation...3 Item 6 Performance-Based Fees and Side-by-Side Management...4 Item 7 Types of Clients...5 Item 8 Methods of Analysis, Investment Strategies and Risk of Loss...5 Item 9 Disciplinary Information...6 Item 10 Other Financial Industry Activities and Affiliations...7 Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading...7 Item 12 Brokerage Practices...7 Item 13 Review of Accounts...8 Item 14 Client Referrals and Other Compensation...9 Item 15 Custody...9 Item 16 Investment Discretion...10 Item 17 Voting Client Securities...10 Item 18 Financial Information...10 Item 19 Requirements for State-Registered Advisers...11 Brochure Supplement - Steven C. Walstad Item 1 Cover Page for Brochure Supplement...12 Item 2 Educational Background and Business Experience...13 Item 3 Disciplinary Information...13 Item 4 Other Business Activities...13 Item 5 Additional Compensation...13 Item 6 Supervision...14 Item 7 Requirements for State-Registered Advisers

5 2) Item 4 Advisory Business Independent Investment Advisors Inc. is a registered investment adviser firm with registration in the State Minnesota securities regulators. The principal owner of Independent Investment Advisors Inc. is Steven C. Walstad, President. Independent has 106 discretionary clients with $16,750,000 AUM as of December 31,2017. Advisory Services Independent Investment Advisers Inc. ( Independent or Adviser ) principal service is providing fee-based investment advisory services and planning services. The Adviser practices custom management of portfolios, on a discretionary basis, according to the client s objectives. The Adviser s primary approach is to use a tactical allocation strategy aimed at reducing risk and increasing performance. The Adviser may use any of the following: exchange listed securities, over-the-counter securities, corporate debt securities, CDs, variable annuities, municipal securities, United States government securities to accomplish this objective. The Adviser may recommend, on occasion, redistributing investment allocations to diversify the portfolio in an effort to reduce risk and increase performance. The Adviser may recommend specific stocks to increase sector weighting and/or dividend potential. The Adviser may recommend employing cash positions as a possible hedge against market movement which may adversely affect the portfolio. The Adviser may recommend selling positions for reasons that include, but are not limited to, harvesting capital gains or losses, business or sector risk exposure to a specific security or class of securities, overvaluation or over weighting of the position(s) in the portfolio, change in risk tolerance of client, or any risk deemed unacceptable for the client s risk tolerance. Pension Consulting Services Independent will offer pension consulting services and participant fiduciary advice to plan participants for assets held at Qualified Plans, pursuant to the Pension Protection Act of The Adviser s pension consulting services and participant fiduciary advice will be based on information obtained from the plan participant about goals and investment objectives, time horizon, risk tolerance and the plan participant's financial situation. Independent will utilize Investment Policy Statements when providing standardized asset allocation recommendations for the investment assets of plan participants within Qualified Plans. The plan participant is responsible for implementation of recommendations and Independent will not act on the plan participants behalf to implement these recommendations. Independent may offer other pension consulting services that include but are not limited to educational seminars, plan surveys, evaluations of vendor's services or special projects on behalf of the plan sponsor. Selection of Other Advisers Independent may recommend and refer clients to unaffiliated money managers or investment advisers through Managed Account programs sponsored by a third-party provider. In these

6 3) arrangements, the client will then enter into a program and investment advisory agreement with the program sponsor and sub-advisers. Independent will assist and advise the client in establishing investment objectives for the sub-advisers and continue to provide oversight of the client account and ongoing monitoring of the activities of the sub-advisers. The sub-advisers will Develop an investment strategy to meet those objectives by identifying appropriate investments and monitoring such investments. In consideration for such services, the program sponsor will charge a program fee that includes the investment advisory fee of the sub-advisers, the administration of the program and trading, clearance and settlement costs. The program sponsor will add Independent's investment advisory fee (described below in Item 5) and will deduct the overall fee from the client account quarterly in advance based on the fair market value at the end of the preceding quarter. The asset-based program fee is tiered and varies depending on the size of the account, the asset class of the underlying securities and the sub-ad visor selected. The annual fee ranges from 0.25% to 1.25% depending on factors such as the type of underlying securities and the amount of assets invested in the program. The client, prior to entering into an agreement with a third party money manager selected by Independent, will be provided with that manager s Brochure. In addition, Independent and its client will agree in writing that the client s account will be managed by that selected third party money manager on a discretionary basis. Independent will tailor its advisory services to its client s individual needs based on meetings and conversations with the client. If clients wish to impose certain restrictions on investing in certain securities or types of securities, the Adviser will address those restrictions with the client to have a clear understanding of the client s requirements. Independent does not provide portfolio management services to wrap fee programs. Item 5 Fees and Compensation Asset Management Fees Pursuant to an Investment Advisory contract signed by each client, the client will pay Independent either a monthly or quarterly Investment Advisory fee in advance, as agreed, based on the value of portfolio assets of the account managed by the Adviser as of the opening of business on the first business day of each month or quarter as applicable. New account fees will be prorated from the inception of the account to the end of the first month or quarter. Clients introduced to third-party managers through Managed Accounts platforms as described in Item 4, Selection of Other Advisers, will be charged fees quarterly in advance based on the value of portfolio assets of the account managed by the Adviser as of the opening of business on the first business day of each quarter. New account fees will be prorated from the inception of the account to the end of the first quarter. Upon termination of client/adviser agreement, fees will be refunded for the portion through the quarter during which services were not provided.

7 4) The Investment Advisory fee ranges from.25% to 1.25% per annual depending on the type and complexity of the investment management strategy employed as well as the size of the account or overall client relationship. Investment Advisory fees may be reduced or waived for directors, officers, and employees of Independent at the discretion of management. The fee may be negotiated by the Adviser at its sole discretion. The Custodian will directly deduct Investment Advisory fees from the client account on a monthly or quarterly basis, as agreed with the client. The client will give written authorization permitting the Adviser to be paid directly from their account held by the custodian. The custodian will send a quarterly statement to the client and the Adviser will also send a quarterly invoice to the client outlining the fee calculation and the amount withdrawn from the client account. The Adviser s Investment Advisory fee is separate from any Managed Account platform fees, if applicable, as noted in Item 4, Selection of Other Advisers. For each of the Adviser s services described above, the Client may terminate these services within five business days of the effective date of an Agreement signed with the Adviser without any payment of the Adviser s fee. Pension Consulting Fees Plan Sponsor will pay the Adviser pursuant to a consulting agreement a consulting fee at an annual rate of 0.25 to 1.00% of assets in the Plan including the value of any outstanding loans from the Plan to Participants. The consulting fee is payable quarterly in advance, based on the fair market value of assets in the Plan at the end of each quarter. The consulting fee in the first quarter of the Agreement shall be prorated from the inception date to the end of the quarter. The Adviser shall invoice the Plan Sponsor for the consulting fee. The Plan Sponsor may, at its election, submit invoices for this consulting fee to the custodian of the Plan's assets for payment. The Plan Sponsor agrees to payment of these invoices, whether directly from the Plan Sponsor or from the Plan's custodian, promptly, and, under normal circumstances, by the end of the month in which the invoice is submitted. Fees are negotiable. All fees paid to Independent for investment advisory services are separate and distinct from the expenses charged by mutual funds to their shareholders and the product sponsor in the case of variable insurance products. These fees and expenses are described in each fund s or variable product s prospectus. These fees will generally include a management fee and other fund expenses. At no time will Independent accept or maintain custody of a client s funds or securities except for authorized fee deduction. Client is responsible for all custodial and securities execution fees charged by the custodian and executing broker-dealer. The Advisers fee is separate and distinct from the custodian and execution fees. Independent s management fee is payable in advance. Upon termination, any fees paid in advance will be prorated to the date of termination and any excess will be refunded to client.

8 5) Neither Independent nor its supervised persons accepts compensation for the sale of securities or other investment products, including asset-based sales charges or service fees from the sale of mutual funds. Item 6 Performance-Based Fees and Side-by-Side Management Independent does not charge performance-based fees. Item 7 Types of Clients The typical client that we serve is to individuals, corporations or business entities. The Adviser does not have any minimum requirements for opening or maintaining an account. Item 8 Methods of Analysis, Investment Strategies and Risk of Loss The Adviser utilizes fundamental analysis techniques in formulating investment advice or managing assets for clients. Fundamental analysis of businesses involves analyzing its financial statements and health, its management and competitive advantages and its competitors and markets. Fundamental analysis is performed on historical and present data but with the goal of making financial forecasts. There are several possible objectives; to conduct a company stock valuation and predict its probable price evolution; to make a projection on its business performance; to evaluate its management and make internal business decisions and to calculate its credit risk. The investment strategies the Adviser will implement may include long-term purchases of securities held at least for one year and short-term purchases for securities sold within a year. Clients need to be aware that investing in securities involves risk of loss that clients need to be prepared to bear. The methods of analysis and investment strategies followed by the Adviser are utilized across all of the Advisers clients, as applicable. One method of analysis or investment strategy is not more significant than the other as the Adviser is considering the client s portfolio, risk tolerance, time horizon and individual goals. However, the client should be aware that with any trading that occurs in the client account, the client will incur transaction and administrative costs. Investing includes the risk that the value of an investment can be negatively affected by factors specifically related to the investment (e.g., capability of management, competition, new inventions by other companies, lawsuits against the company, labor issues, patent expiration, etc.), or to factors related to investing and the markets in general (e.g., the economy, wars, civil unrest or terrorism around the world, concern about oil prices or unemployment, etc.). Clients

9 6) need to be aware that investing in securities involves risk of loss of some or all of their investment that clients need to be prepared to bear. Risks of fundamental analysis may include risks that market actions, natural disasters, government actions, world political events or other events not directly related to the price or valuation of a specific company s fundamental analysis can adversely impact the stock price of a company causing a portfolio containing that security to lose value. Risks may also include that the historical data and projections on which the fundamental analysis is performed may not continue to be relevant to the operations of a company going forward, or that management changes or the business direction of management of the company may not permit the company to continue to produce metrics that are consistent with the prior company data utilized in the fundamental analysis, which may negatively affect the Adviser s estimate of the valuation of the company. The Adviser does not primarily recommend a particular type of security. However, clients are advised that many unexpected broad environmental factors can negatively impact the value of portfolio securities causing the loss of some or all of the investment, including changes in interest rates, political events, natural disasters, and acts of war or terrorism. Further, factors relevant to specific securities may have negative affects on their value, such as competition or government regulation. Also, the factors for which the company was selected for inclusion in a client portfolio may change, for example, due to changes in management, new product introductions, or lawsuits. Item 9 Disciplinary Information Independent has no legal or disciplinary events to disclose, currently or in the past. On December 1, 2014, Mr. Walstad agreed to settle with FINRA regarding allegations concerning certain trades he made in mutual fund A shares in Six customers were inadvertently charged A share front end loads or commissions on some trades that Mr. Walstad believed were executed without commissions. Mr. Walstad s supervisor at the time also believed these trades executed without commissions because Cambridge Investment Research s trading platform indeed showed the trades did not generate commissions. The commissions these customers paid were approximately commensurate with otherwise suitable mutual fund trades. Mr. Walstad also engaged in discretionary trading in one client s account pursuant to her oral instructions, but did not obtain her prior written consent. Nevertheless, rather than engage in a protracted administrative process, Mr. Walstad agreed to settle this matter with FINRA pursuant to a settlement document called an Acceptance, Waiver

10 7) and Consent ( AWC ). Independent will provide a copy of the FINRA AWC to any client who so requests. Item 10 Other Financial Industry Activities and Affiliations Neither Independent nor any of its management persons are registered, or have an application pending to register, as a broker-dealer or a registered representative of a broker-dealer. Neither Independent nor any of its management persons are registered or have an application pending to register, as a futures commission merchant, commodity pool operator, a commodity trading adviser, or an associated person of the foregoing entities. Independent does not currently have any relationships or arrangements that are material to its advisory business or clients with either a broker-dealer, municipal securities dealer, or government securities dealer or broker, investment company or other pooled investment vehicle (including a mutual fund, closed-end investment company, unit investment trust, private investment company or hedge fund and offshore fund), other investment adviser or financial planner, futures commission merchant, commodity pool operator, or commodity trading adviser, banking or thrift institution, accountant or accounting firm, lawyer or law firm, pension consultant, real estate broker or dealer or sponsor of syndicator of limited partnerships. Steven C. Walstad, President of Independent is also licensed and registered as an insurance agent to sell life, accident and other lines of insurance for various insurance companies. Therefore, he will be able to purchase insurance products for any client in need of such services and will receive separate compensation in the form of commissions for the purchase of insurance products. This creates a conflict of interest. A conflict of interest exists because of the receipt of additional compensation by Mr. Walstad. Clients are not obligated to use Independent or Mr. Walstad for insurance products services. However, in such instances, there is no advisory fee associated with these insurance products. Independent may recommend or select other investment advisers for clients. For more specific detail see the response to 4 above. Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Independent is registering as a state registered investment adviser registered with the Minnesota securities regulators and has adopted as an industry best practice a Code of that sets forth the basic policies of ethical conduct for all managers, officers, and employees of the adviser. In addition, the Code of Ethics governs personal trading by each employee of Independent deemed to be an Access Person and is intended to ensure that securities transactions effected by Access

11 8) Persons of Independent are conducted in a manner that avoids any conflict of interest between such persons and clients of the adviser or its affiliates. Independent collects and maintains records of securities holdings and securities transactions effected by Access Persons. These records are reviewed to identify and resolve conflicts of interest. Independent will provide a copy of the Code of Ethics to any client or prospective client upon request. Independent and/or its investment advisory representatives may purchase or sell products that they may recommend to clients. Independent and/or its investment advisory representatives have a fiduciary duty to put the interests of their clients ahead of their own. Independent requires that its investment advisory representatives follow its basic policies and ethical standards as set forth in its Code of Ethics. Item 12 Brokerage Practices If requested by the client, Independent may suggest brokers or dealers to be used based on execution and custodial services offered, cost, quality of service and industry reputation. Independent will consider factors such as commission price, speed and quality of execution, client management tools, and convenience of access for both the Adviser and client in making its suggestion. Independent does not receive research or other products or services other than execution from a broker-dealer or third party as a result of client securities transactions. Independent does not receive client referrals from any broker-dealer or third party as a result of the firm selecting or recommending that broker-dealer to clients. Independent does not recommend, request or require that a client direct it to execute transactions through a specified broker-dealer. Independent does not permit clients to direct brokerage, however Client may use B2B roboadviser through Trade PMR. Independent may combine orders into block trades when more than one account is participating in the trade. This blocking or bunching technique must be equitable and potentially advantageous for each such account (e.g. for the purposes of reducing brokerage commissions or obtaining a more favorable execution price). Block trading is performed when it is consistent with the duty to seek best execution and is consistent with the terms of Independent s investment advisory agreements. Equity trades are blocked based upon fairness to client, both in the participation of their account, and in the allocation of orders for the accounts of more than one client. Allocations of all orders are performed in a timely and efficient manner. All managed accounts participating in a block execution receive the same execution price (average share

12 price) for the securities purchased or sold in a trading day. Any portion of an order that remains unfilled at the end of a given day will be rewritten on the following day as a new order with a 9) new daily average price to be determined at the end of the following day. Due to the low liquidity of certain securities, broker availability may be limited. Open orders are worked until they are completely filled, which may span the course of several days. If an order is filled in its entirety, securities purchased in the aggregated transaction will be allocated among the accounts participating in the trade in accordance with the allocation statement. If an order is partially filled, the securities will be allocated pro rata based on the allocation statement. Independent may allocate trades in a different manner than indicated on the allocation statement (non-pro rata) only if all managed accounts receive fair and equitable treatment. Item 13 Review of Accounts The firm reviews client accounts on a quarterly basis, or when conditions would warrant a review based on market conditions or changes in client circumstances. Steven Walstad, President, performs the reviews. Triggering factors may include Independent becoming aware of a change in client s investment objective, a change in market conditions, change of employment, or a change in recommended asset allocation weightings in the account that exceed a predefined guideline. The client is encouraged to notify the Adviser and Investment Adviser Representative if changes occur in his/her personal financial situation that might materially affect his/her investment plan. The client will receive written statements no less than quarterly from the custodian. In addition, the client will receive other supporting reports from mutual funds, asset managers, trust companies or other custodians, insurance companies, broker-dealers and others who are involved with client accounts. Item 14 Client Referrals and Other Compensation Independent is not compensated by anyone for providing investment advice or other advisory services except as previously disclosed in this Brochure. Independent does not directly or indirectly compensate any person who is not a supervised person for client referrals.

13 Item 15 Custody 10) Independent does not have custody of client funds or securities, except for the withdrawal of advisory fees directly from client accounts. However, as noted in Item 13 above, clients will receive statements not less than quarterly from the qualified custodian, and we encourage you to review those statements carefully. Any discrepancies should be immediately brought to the firm s attention. Item 16 Investment Discretion Independent generally has discretion over the selection and amount of securities to be bought or sold in client accounts without obtaining prior consent or approval from the client for each transaction. However, these purchases or sales may be subject to specified investment objectives, guidelines, or limitations previously set forth by the client and agreed to by Independent. Discretionary authority will only be provided upon full disclosure to the client. The granting of such authority will be evidenced by the client s execution of an Investment Advisory Agreement containing all applicable limitations to such authority. All discretionary trades made by Independent will be in accordance with each client s investment objectives and goals. Item 17 Voting Client Securities Independent will not vote, nor advise clients how to vote, proxies for securities held in client accounts. The client clearly keeps the authority and responsibility for the voting of these proxies. Also, Independent cannot give any advice or take any action with respect to the voting of these proxies. The client and Independent agree to this by contract. Clients will receive proxy solicitations from their custodian and/or transfer agent. Item 18 Financial Information Independent does not require or solicit prepayment of more than $500 in fees per client, six months or more in advance, and is not required to file a balance sheet. Independent has discretionary authority over client accounts and is not aware of any financial condition that will likely impair its ability to meet contractual commitments to clients. If Independent does become aware of any such financial condition, this brochure will be updated and clients will be notified. Independent has never been subject to a bankruptcy petition.

14 11) Item 19 Requirements for State Registered Advisers Steven C. Walstad, President, born in 1963, attended the University of Minnesota for three years and studied sales and marketing. Mr. Walstad has been President of Independent Investment Advisors Inc. since he founded it in 1997 (however Independent only became a registered investment adviser in 2013). Mr. Walstad was previously an Investment Adviser Representative at Securus Wealth Management, LLC (08/ /2012), and a Registered Representative at Cambridge Investment Research, Inc. (04/ /2012). He was also a Financial Adviser at Raymond James Financial Services, Inc. (11/ /2008). Independent is not engaged in any other business other than giving investment advice. Management of Independent has not been found liable in any arbitration, civil or disciplinary actions or administrative proceedings. There are no material relationships maintained by Independent or its management persons with any issuers of securities.

15 12) Item 1 Cover Page for Brochure Supplement Steven C. Walstad, President Independent Investment Advisors Inc Singletree Ln #100 Eden Prairie, MN December 31, 2017 This brochure supplement provides information about Steven C. Walstad that supplements the Independent Investment Advisors Inc. brochure. You should have received a copy of that brochure. Please contact Steven C. Walstad if you did not receive Independent Investment Advisors Inc. s brochure or if you have any questions about the contents of this supplement.

16 13) Additional information about Steven C. Walstad is available on the SEC s website at Item 2 Educational Background and Business Experience Steven C. Walstad, President, born in 1963, attended the University of Minnesota for three years and studied sales and marketing. Mr. Walstad has been President of Independent Investment Advisors Inc. since he founded it in 1997 (however Independent only became a registered investment adviser in 2013). Mr. Walstad was previously an Investment Adviser Representative at Securus Wealth Management, LLC (08/ /2012), and a Registered Representative at Cambridge Investment Research, Inc. (04/ /2012). He was also a Financial Adviser at Raymond James Financial Services, Inc. (11/ /2008). Item 3 Disciplinary Information 1) There is a FINRA disciplinary events or proceedings to report concerning Mr. Walstad. Suspension from 12/01/ /31/2015 & $15,000 fine for unsuitable A share trading in six customer accounts. No Broker Dealer affiliation and not a FINRA member as of 11/31/2012 Item 4 Other Business Activities Mr. Walstad is also licensed and registered as an insurance agent to sell life, accident and other lines of insurance for various insurance companies. Therefore, he will be able to purchase insurance products for any client in need of such services and will receive separate compensation in the form of commissions for the purchase of insurance products. This creates a conflict of interest. A conflict of interest exists because of the receipt of additional compensation by Mr. Walstad. Clients are not obligated to use Independent or Mr. Walstad for insurance products services. However, in such instances, there is no advisory fee associated with these insurance products. Item 5 Additional Compensation Mr. Walstad does not receive compensation or other economic benefit from anyone who is not a client for providing advisory services. 14) Item 6 Supervision Steven Walstad President acting Chief Compliance Officer, monitors the investment advisory activities, personal investing activities, and adherence to the Adviser s compliance program and code of ethics of the Independent Investment Advisers Inc. supervised persons on a continuous basis using various methods, including periodic inspection and review of client securities

17 positions and transaction activity, obtaining certifications of compliance with company policies and procedures from those supervised, and obtaining and reviewing brokerage statements or transactions and holdings reports of the supervised persons. Steven Walstad can be reached at Item 7 Requirements for State-Registered Advisers Mr. Walstad has been involved in a self-regulatory organization FINRA event or Suspension. See item #9 page 8

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