David Wealth Management, LLC ( DWM ) Registered Investment Adviser 8315 Lee Highway, Suite 325 Fairfax, VA (703)

Transcription

1 Form ADV Part 2 Investment Advisor Brochure Item 1: Cover Page Dated March 10, 2016 David Wealth Management, LLC ( DWM ) Registered Investment Adviser 8315 Lee Highway, Suite 325 Fairfax, VA (703) This Investment Advisor Brochure provides information about the business practices of David Wealth Management, LLC, hereafter referred to as DWM. It is intended for the use of clients and prospective clients. If you have any questions about the contents of this brochure, please contact us by calling or by ing jdavid@davidwealth.com. 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. Registration is mandatory for all persons meeting the definition of an investment advisor. Please note that registration does not imply a certain level of skill or training. Additional information about DWM is available on the SEC s website at

2 Item 2: Material Changes This Item is a summary of changes to the brochure and discusses only specific material changes that have been made to the Investment Advisor Brochure dated August 5, Below describes the changes made by Item. Item 4: Advisory Business Assets under management ( AUM ) have been updated to reflect a current figure of approximately $35 million as of the February 29, Within 120 days of the end of the calendar year, DWM will deliver to existing clients an annual Summary of Material Changes if there have been material changes since the last annual updating amendment. 2

3 Item 3: Table of Contents Item No. Item Description Page Item 1 Cover Page 1 Item 2 Material Changes 2 Item 3 Table of Contents 3 Item 4 Advisory Business 4 Item 5 Fees and Compensation 5 Item 6 Performance-Based Fees and Side-by-Side Management 5 Item 7 Types of Clients and Privacy Policy 6 Item 8 Investment Strategies & Risk of Loss and Model Allocations & Client Portfolios 6 Item 9 Disciplinary Information 7 Item 10 Other Financial Industry Activities and Affiliations 7 Item 11 Code of Ethics, Participation in Client Transactions, and Personal Trading 7 Item 12 Brokerage Practices 8 Item 13 Review of Accounts and Reports on Accounts 9 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 Adviser 11 3

4 Item 4: Advisory Business Advisory Firm David Wealth Management, LLC ( DWM ) was formed in July of 2012 and is owned by Maria C. David and James D. David. James D. David has been providing investment advisory services since Prior to forming DWM, he was an investment advisor and member of the Strategic Advisory Group at Brown Advisory for three years. Prior to that, he was an investment advisor at FBR Capital Markets Corporation (and its predecessor companies FBR Investment Management, Inc. and Friedman, Billings, Ramsey & Co., Inc.) for almost ten years. From 1983 to 1999 he was a practicing accountant for both national and local certified public accounting firms. He has been a certified public accountant (CPA) and a member of the Virginia State Board of Accountancy since Advisory Services DWM provides investment advisory and financial planning services and also provides advice to clients on matters not involving securities, including (but not limited to) tax advising, wealth management, investment advising, and portfolio management. DWM services include: the preparation of a financial plan tailored to the specific needs of an individual client; the implementation of a portfolio allocation designed to work with the accepted financial plan; the periodic review of the client s accounts and the financial plan to ensure the client stays the course to achieve the desired results; rebalancing the client accounts as necessary to remain aligned with the model allocation; and the preparation of reports and related information on a periodic basis, or on request. DWM may engage the services of The Colony Group ("CG"), an unrelated, registered investment advisor, to serve as a Sub-Advisor.. In such cases, CG will act upon DWM s instructions or restrictions concerning the management of client accounts when effecting all transactions through the designated custodian. DWM may offer certain clients portfolio management services through Institutional Intelligent Portfolios, an automated, online investment management platform sponsored by Schwab Wealth Investment Advisory, Inc. (the Program and SWIA, respectively). Through the Program, we offer certain clients a range of investment strategies we have constructed and manage, each consisting of a portfolio of exchange traded funds ( ETFs ) and a cash allocation. Clients may instruct us to exclude up to three ETFs from their portfolio. The client s portfolio is held in a brokerage account opened by the client at SWIA s affiliate, Charles Schwab & Co., Inc. ( Charles Schwab ). DWM is independent of and not owned by, affiliated with, or sponsored or supervised by SWIA, Charles Schwab or their affiliates (together, Schwab ). The Program is described in the Schwab Wealth Investment Advisory, Inc. Institutional Intelligent Portfolios Disclosure Brochure (the Program Disclosure Brochure ), which is delivered to clients by SWIA during the online enrollment process. DWM does not receive a portion of a wrap fee for our services to clients through the Program. 4

5 Clients do not pay fees to SWIA in connection with the Program. The fees charged to clients for our services are listed below under Item 5. Client Agreement The services, the rights, and obligations of the parties to a relationship are spelled out in the client agreement between the client and DWM. Either the client or DWM may terminate the agreement at any time, and for any reason, upon written notice. If the agreement is terminated, any fees will be prorated for the billing period and the client refunded or DWM paid the outstanding balance, as appropriate. The client may terminate the agreement by written notice to DWM. Services provided by DWM do not include publications or reports offered for a fee or under a subscription basis. As of the February 29, 2016 DWM had approximately $35 million of client assets under management. Item 5: Fees and Compensation DWM s fee schedule is included as a part of the client agreement. All advisory and financial planning client fees are negotiable based on the facts and circumstances of a particular client s situation. DWM accepts direct payment of fees from clients or, where authorized by a client, takes fees from client accounts. The fees are payable quarterly in arrears. In any partial calendar quarter, the fee will be prorated based on the number of days the account was open during the quarter. Clients should be aware that lower fees for comparable services might be available from other sources. The following standard fees are charged annually on managed client assets. The first $500,000 in assets charged at 1.25%. The next $500,000 up to $2,000,000 in assets charged at 1.00%. The next $2,000,000 up to $5,000,000 in assets charged at 0.75%. Amounts over $5,000,000 in assets are charged 0.50%. There is a minimum annual fee assessed on a household basis of $2,500. This would include all accounts within a single household. The standard fees are negotiable on client-by-client basis. Advisory fees do not include mutual fund, ETF management, or other fees and expenses disclosed by such funds or ETFs in each fund's prospectus, or commissions or fees charged directly by the client's other financial advisors, brokers, custodians, or money market funds internal expense and management fees. In some cases, DWM may receive commissions related to the sale of insurance products sold to clients through an insurance agency. 5

6 As described in Item 4 Advisory Business, clients do not pay fees to SWIA or brokerage commissions or other fees to Charles Schwab as part of the Program. Schwab does receive other revenues in connection with the Program, as described in the Program Disclosure Brochure. Brokerage arrangements are further described below in Item 12 Brokerage Practices. Item 6: Performance-Based Fees and Side-By-Side Management DWM does not assess or collect any performance-based fees. Performance-based fees are based on a share of the capital appreciation of a client s account. DWM s fees are determined as discussed in the Fees and Compensation section above and are not based on the capital appreciation or gains in a client s account. DWM does not engage in side-by-side management. Side-by-side management is the practice of managing some accounts on a performance-fee basis while at the same time managing other accounts on a basis other than performance-based fees. Item 7: Types of Clients Types of Clients DWM provides investment advice to individuals, trusts and estates, corporations, and other business entities. Privacy Policy DWM takes the privacy of client information seriously and has instituted a privacy policy and associated procedures to protect the non-public, personal information of its natural person clients and customers. A copy of this privacy policy may be requested at any time by contacting DWM by mail using the address on the cover page of this disclosure document, by telephone at (703) , or by using the address jdavid@davidwealth.com. Clients are provided with a copy of the privacy policy when they first become clients of DWM and annually thereafter. Item 8: Investment Strategies & Risk of Loss and Model Allocations & Client Portfolios Investment Strategies & Risk of Loss DWM offers a variety of types of investments including: equity securities (listed on exchanges, traded over the counter and foreign issues), corporate debt and municipal securities, mutual fund shares, exchange traded fund shares and U.S. government securities. These investments are subject to a variety of risks, including (but not limited to) market risk, asset allocation/strategy/diversification risk, trading/liquidity risk, credit risk, interest rate risk, tracking risk, exchange risk, political risk, etc. There are no investments that do not carry some level of risk, although some investments will have more or less risk than others. There is a risk that the entire amount of an investment could be lost. 6

7 DWM does not offer other types of investments, including: variable insurance, variable annuities, options, futures, warrants, commercial paper, certificates of deposit, or interests in partnerships. The investment strategies used by DWM to implement advice given to clients include both longand short-term purchases. Model Allocations & Client Portfolios DWM has designed, monitors, and manages a number of model portfolio allocations. Typically, DWM recommends for each client the model determined to be the most appropriate and consistent with that client s objectives. Once the client has accepted the recommendation, DWM monitors the selected portfolio model on an ongoing basis. The client s investments are periodically rebalanced to the model as needed. Each of the model portfolios is designed and managed by DWM to meet the particular investment risk and return characteristics of the model. A client may direct the retention or purchase of specified securities, and DWM will implement the portfolio in accordance with client restrictions, liquidity needs, tax considerations, and other relevant factors. DWM may, where appropriate, change the client s target portfolio based on the client's objectives evidenced by the financial plan or upon consultation with the client directly. Item 9: Disciplinary Information Neither DWM nor James D. David has any disciplinary events to report. Item 10: Other Financial Industry Activities and Affiliations DWM does not engage in any other business activities beyond the provision of investment advisory, financial planning, and tax advising services other than those discussed above. DWM does not have any related persons. James D. David is not engaged in any other investment advisory and financial planning services other than as offered by DWM as a registered investment advisor. DWM provides investment management services, including reporting, trading, and rebalancing client accounts, under the Financial Advisory and Discretionary Investment Management Agreement with the clients. DWM does not have any other financial industry activities or affiliations. Item 11: Code of Ethics, Participation in Client Transactions, and Personal Trading 7

8 Code of Ethics DWM has established high standards of integrity, as well as personal and professional ethics in both its conduct within the firm, and with interactions with clients, business vendors, and partners. All employees are required to review and sign a formal Code of Ethics. The Code of Ethics provides guidance and standards for: a high ethical standard of conduct for all professionals and employees; compliance with federal securities laws; policies and procedures for the reporting of certain personal securities transactions on a quarterly basis; and initial and annual securities holdings by professionals and employees of DWM. The Code of Ethics requires supervisory reviews, enforcement, and record keeping. A copy of DWM s Code of Ethics is available to our advisory clients upon the receipt of a written request submitted to David Wealth Management, LLC, 8315 Lee Highway, Suite 325, Fairfax, VA DWM s Insider Trading policy prohibits any employee from acting upon, misusing, or disclosing any material non-public information, known as inside information. Any instances or questions regarding possible inside information must be immediately brought to the attention of the designated officer, Legal/Compliance Officer, or senior management. Any violations of the firm s policy will result in disciplinary action and/or termination. Participation in Client Transactions DWM does not buy securities from clients and does not sell securities to clients. DWM does not act as an agent or broker for its clients and does not act as a broker or agent for any third parties selling or buying securities from a client. DWM does not recommend for purchase or sale by a client any securities in which DWM or our related persons have a financial interest. DWM may buy or sell for itself securities it also recommends to clients. This practice may create a situation where DWM and/or representatives of DWM are in a position to materially benefit from the sale or purchase of those securities. Therefore, this situation creates a potential conflict of interest. Practices such as scalping (defined as a practice whereby the owner of shares of a security recommends that security for investment and then immediately sells it at a profit upon the rise in the market price which follows the recommendation ) could take place if DWM did not have adequate policies in place to detect such activities. In addition, this requirement can help detect insider trading, front-running (defined as personal trades executed prior to those of DWM s clients ), and other potentially abusive practices. Personal Trading DWM's Personal Securities Transactions and Records policy requires that any personal investing by an employee in any accounts in which the employee has beneficial interest, including any accounts for any immediate family or household members, is consistent with the firm s fiduciary duty to its clients and consistent with regulatory requirements. Each employee must identify any personal investment accounts and report all reportable transactions and investment activity on (at least) a quarterly basis to the firm s Compliance Officer or other designated person. 8

9 Item 12: Brokerage Practices DWM does suggest brokers to clients. Charles Schwab & Co., Inc. (Charles Schwab) is DWM s preferred broker and custodian. The primary basis for suggesting a broker is the existence of a servicing or other business arrangement with DWM or where DWM has a business relationship that enables DWM efficient and cost-effective access to brokerage services. Clients enrolled in the IIP Program are required to use Charles Schwab as custodian/broker. If the client does not wish to place his or her assets with Charles Schwab, then we cannot manage the client s account through the Program. As described in the Program Disclosure Brochure, SWIA may aggregate purchase and sale orders for ETFs across accounts enrolled in the Program, including both accounts for our clients and accounts for clients of other independent investment advisory firms using the Program. DWM recommends that a client direct DWM to execute transactions through Charles Schwab. DWM is not affiliated with Charles Schwab and does not recommend that clients utilize Charles Schwab in return for product and research services received by DWM from Charles Schwab. DWM does not receive any commissions or other financial consideration from any broker-dealer or custodian it recommends. By directing brokerage to Charles Schwab, DWM may be unable to achieve the most favorable execution of client transactions and this could cost clients more money. No client is obligated to use any recommended broker-dealer. A client may direct that a particular broker-dealer be used for transactions in the client s accounts. This may prevent DWM from obtaining favorable net price and execution and may prevent the aggregation of trades. Aggregation of trades means that when multiple clients trade in the same security, all of these trades may be aggregated into a single transaction, possibly resulting in lower costs to the client than if multiple transactions were performed. DWM s trading procedures call for aggregating trades whenever possible. DWM does not have any formal or informal arrangements or commitments to obtain any research or research-related products or services from broker-dealers or custodians based on the commissions paid by clients for the services of the broker-dealers or custodians. Item 13: Reviews of Accounts and Reports on Accounts DWM monitors client portfolio holdings on an ongoing basis. Client portfolio holdings may be reallocated either as may be appropriate based on client objectives or on a periodic basis, depending on the terms of the client agreement. Additional reviews may be triggered by a change in market conditions, a change in client's objectives or circumstances, or upon a client request. As the Managing Member of DWM, James D. David has the sole responsibility of monitoring and reviewing the accounts. Clients receive monthly statements from the custodian reporting portfolio activity, holdings, and values, as well as other information. Clients may also receive confirmations of any account transactions. Clients may also receive quarterly reports from DWM, reporting portfolio holdings, 9

10 performance, and values, as well as other information. Upon execution of an advisory agreement with a client, the client receives a copy of our Privacy Policy and acknowledges prior receipt of the firm's Form ADV Part 2, including the brochure for the investment adviser representative servicing the client relationship. In addition, every March, DWM distributes the most current Form ADV Part 2 and Privacy Policy to each advisory client. Item 14: Client Referrals and Other Compensation DWM and its members do not receive any additional compensation from third party, non-clients in connection with giving advice to clients. DWM does not directly or indirectly compensate any person for referrals. Item 15: Custody DWM does not maintain custody of customer funds or securities, except for the limited and specific purpose of the direct advance billing of its advisory fees under a limited power of attorney, as authorized by the client in writing. DWM does not have physical custody of clients securities or funds and DWM does not receive any payments for any reason from any custodian. Clients will receive account statements directly from the broker-dealer, bank, or other qualified custodian. Clients should carefully review these statements. These statements are provided on a quarterly or more frequent basis. Clients will also receive account statements directly from DWM on a quarterly basis, and clients should compare the account statements received from DWM with those received from the qualified custodian. Item 16: Investment Discretion Clients provide DWM with written authority through the discretionary investment management agreement to determine the specific securities, and the amount thereof, to be bought or sold for the client s account. Client-imposed limitations on this discretionary authority are included in the written agreement between the client and DWM. Clients may amend such limitations, in writing, at any time. Item 17: Voting Client Securities 10

11 DWM does not accept the authority to and does not vote proxies on behalf of its advisory clients. Clients retain the responsibility for receiving and voting proxies for any and all securities maintained in their portfolios. Clients are notified in writing of this policy at the inception of the relationship. Each client is provided with notice of any material change to the proxy policy. Clients typically will receive proxies or other solicitations directly from their custodian or transfer agent. In the event DWM receives any written or electronic proxy materials, we will forward the materials to the client by mail or, if so authorized by the client, by . As described in the Program Disclosure Brochure, clients enrolled in the Program designate SWIA to vote proxies for the ETFs held in their accounts. DWM has directed SWIA to process proxy votes and corporate actions through and in accordance with the policies and recommendations of a third party proxy voting service provider retained by SWIA for this purpose. Additional information about this arrangement is available in the Program Disclosure Brochure. Clients who do not wish to designate SWIA to vote proxies may designate DWM to vote proxies or may retain the ability to vote proxies themselves by signing a special Charles Schwab form available from us. If a client has a question about a particular solicitation, they may contact DWM by at jdavid@davidwealth.com or by telephone at (703) Item 18: Financial Information DWM is not required to provide financial information because DWM does not: have custody of client funds or securities and does not require the prepayment of fees of more than $500 and six or more months in advance; take physical custody of client securities or funds; or have a financial condition reasonably likely to impair our ability to meet our commitments to our clients. Neither the firm, nor its partners, has been the subject of a bankruptcy petition at any time during the past ten years. Item 19: Requirements for State-Registered Advisors Supervision: As the Managing Member of DWM, James D. David has the sole responsibility for the performance and delivery of investment advisory and financial planning services and for compliance with the policies and procedures established by DWM for the provision of these services. Education: 11

12 The formal education of James D. David is as follows: , Cornell University, BS; , College of William and Mary, MBA; and , Georgetown University, MS Taxation. Other Business Activities: James D. David is a Managing Member of the Fred Astaire Dance Studio, FADS DC, LLC. The studio is located in Fairfax, Virginia, and offers ballroom dance instruction. FADS DC, LLC employs a full time professional Dance Director whom manages the operations of the studio. DWM does not advise any private funds. James D. David has not been the subject of a bankruptcy petition at any time. There are no other applicable disclosures for this section. 12

13 Part 2B of Form ADV: Brochure Supplement Item 1: Cover Page Updated March 10, 2016 James D. David Investment Adviser Representative David Wealth Management, LLC 8315 Lee Highway, Suite 325 Fairfax, VA (703) This Brochure Supplement provides information about James D. David that supplements the David Wealth Management, LLC brochure. You should have received a copy of that brochure. Please contact David Wealth Management, LLC if you have any questions about the contents of this supplement. Additional information about James D. David is available on the SEC s website at CRD:

14 Item 2: Educational Background and Business Experience James D. David Born: 1957 Education: , Cornell University, BS , College of William and Mary, MBA , Georgetown University, MS Taxation Investment Advisory Representative (Series 65) Certified Public Accountant Employment: 5/2009-5/2012, Investment Advisor, Brown Advisory 12/1999-5/2009, Investment Advisor, FBR Investment Management, Inc. and Friedman, Billings, Ramsey & Co., Inc. Item 3: Disciplinary Information There is no disciplinary information to report for James D. David. There are no legal events to report for James D. David. Item 4: Other Business Activities James D. David is not engaged in any other investment advisory and financial planning services other than as offered by David Wealth Management, as a registered investment adviser. James D. David is a Managing Member of the Fred Astaire Dance Studio, FADS DC, LLC. The studio is located in Fairfax, Virginia, and offers ballroom dance instruction. FADS DC, LLC employs a full time professional Dance Director whom manages the operations of the studio. Item 5: Additional Compensation Other than salary and benefits paid by David Wealth Management, LLC, James D. David does not receive any additional compensation from any source in exchange for providing clients advisory services through David Wealth Management, LLC. Item 6: Supervision As a principal and owner of David Wealth Management, James D. David has the sole responsibility for the performance and delivery of investment advisory and financial planning services and for compliance with the policies and procedures established by David Wealth Management, LLC for the provision of these services. 14

15 Item 7: Requirements for State-Registered Advisers This disclosure is required by state securities authorities and is provided for your use in evaluating this investment advisor representative s suitability. A. James D. David has NOT been involved in any of the events listed below. 1. An award or otherwise being found liable in an arbitration claim alleging damages in excess of $2,500, involving any of the following: a) an investment or an investment-related business or activity; b) fraud, false statement(s), or omissions; c) Theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. 2. An award or otherwise being found liable in a civil, self-regulatory organization, or administrative proceeding involving any of the following: a) an investment or an investment-related business or activity; b) fraud, false statement(s), or omissions; c) Theft, embezzlement, or other wrongful taking of property; d) bribery, forgery, counterfeiting, or extortion; or e) dishonest, unfair, or unethical practices. B. James D. David has NOT been the subject of a bankruptcy petition at any time. 15