The primary objective of Spectrum Financial,
Inc. (SFI) is to achieve consistent rates of
return that are in excess of a buy/hold strategy
over a complete market cycle and provide
liquidity by preserving the purchasing power of
the assets under management.
SFI strives to avoid declining markets
and strives to participate in rising markets.
SFI
offers three types of services to clients as
described below:
Tactical Asset Allocation Service
This service aids clients in effecting buy/sell
transactions between defensive (money market)
funds and aggressive (bond or stock) funds in
the same mutual fund family, variable life or
annuity contract, or custodian/platform.
The strategies utilized are based on the
client’s objectives and risk tolerance.
Several strategies may be used to
diversify a client’s portfolio such as bond, US
stock, international, or sector. Exchanges may
result in short‑term capital gains or losses and
dividends may vary depending on investment
strategies.
Large quick profits are not the primary
goal of these investment strategies.
SFI provides its investment services to
individuals, pension/profit sharing plans,
corporations, and other legal entities.
SFI obtains analytical data from many
sources including daily monitoring of prices of
stocks, bonds, oil, US dollar, gold and many
other investments to determine low risk entry
and exit points for mutual funds.
Information is collected and assimilated
from various computer databases, newspapers,
magazines, newsletters and research materials by
the manager or other qualified employees of SFI
to develop different management strategies.
Other factors considered in analysis
include continuous monitoring of mutual fund
performance and relative strength, technical and
fundamental analysis, market sentiment, and
access to other leading professional investment
advisors.
Reviews of investment strategies are done
on a daily basis based on the analysis and
information gathered as explained above. A
quarterly newsletter is provided which shows the
average performance for management strategies on
a quarterly, 12-month, and 24-month period.
3rd Party Custodians:
Certain strategies of SFI may only be offered
through specific custodians. SFI has
arrangements with third party custodians that
allow SFI to choose between several fund
families on a non-commission basis. SFI has
discretion over the fund(s) purchased or sold
without obtaining the consent of the client and
may also recommend the sale or redemption of
fund shares other than for exchange, if, in its
opinion, the fund shares are not conducive to
management. Statements usually are generated
from the custodian on a monthly basis but will
not be generated less than quarterly. There may
be transaction charges involved when purchasing
or selling the funds as well as custodial fees
payable to the third party custodian. The client
is made aware of these charges when the
custodial account is established. SFI does not
participate in these fees.
Representatives:
This service is marketed directly by officers
and employees of SFI and through solicitors
termed “Representatives” who may be associated
with an advisory firm, brokerage firm or
investment company affiliated brokerage firm.
A solicitor’s fee is paid to
Representatives ranging from 25 basis points of
total assets to 50% of the total fee collected.
The fees charged the client for SFI services are
not increased because of this arrangement.
Often, the Representative is also a licensed
sales person with a broker/dealer.
As such, the representative may receive
or have received commissions for the client's
initial purchase of the particular securities
and subsequent commissions (sometimes referred
to as 12b-1 charges) depending on the program
entered into by the client. SFI may also
recommend these types of funds to their clients
but does not receive any portion of these
commissions under the Tactical Asset Allocation
Service. All fees paid to SFI for advisory
services are separate from the fees and expenses
charged to shareholders of mutual fund shares,
variable life or variable annuity contracts. A
complete explanation of expenses charged by the
mutual fund or insurance product contracts is
contained in its prospectus and should be
reviewed by the client prior to investing. Since
the Representative may also be affiliated with a
broker/dealer handling the client's account,
there may be a potential conflict of interest.
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Fee Structure: |
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Investment Amount
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Annual Fee |
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Amounts under $100,000 |
2.5% |
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Amounts $100,000 and over
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1.5%
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1.9% |
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Sector Traded Accounts
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2.5%
- 2.9% |
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In addition to the above fee structure, each
account will also be charged a $100.00
administrative retainer fee annually.
The retainer fee will be reduced to
$50.00 for multiple accounts after the initial
fee of $100.00 is satisfied. It is the opinion
of the SEC that annual management fees in excess
of 2% are considered excessive and other
advisors provide similar services at lower
rates.
The 2.9% fees for sector-managed
strategies involve a higher degree of investment
management skill, as well as a substantial
increase in trading activity and operational
overhead. The higher 2.5% fee for accounts under
$100,000 allows SFI to accept accounts smaller
than our recommended minimum investment.
Although SFI reserves the right to accept
accounts below $50,000, the recommended minimum
account size per contract is $50,000.
The first year fee is due upon signing
the contract. If additional money is contributed
to an existing account, a monthly pro-rata fee
will be due at the time of the deposit or on the
next anniversary date of the agreement.
SFI fees will not be based upon a share
of capital gains or capital appreciation of the
funds or any portion of the funds of an advisory
client. For renewal accounts, a billing will be
generated on the anniversary date and will be
based on the market value of the account. Fees
may be reduced by SFI in certain situations such
as, but not limited to employee or
representative related accounts, adjustments due
to administrative error, or situations where
there is a conflict of interest.
However, generally fees are not
negotiated.
A performance report for the 12-month
period and the current holdings will be reported
to the client along with the renewal invoice by
the Representative.
Contract Processing:
A client should understand that SFI might
require 2‑4 weeks to establish an account, i.e.,
review the documents for proper form, setup
computer records, and implement other procedural
tasks. Delays may occur due to an improper
account number, spelling of name or other
matters. If a signal is generated during the
initial processing, a client may or may not be
moved into the signaled position and thus
possible losses may occur during this period for
which SFI assumes no responsibility in the
implementation of these initial trades. SFI
attempts to process all trade orders within
24-hours of generating a buy/sell signal.
In the event that an SFI administrative
error occurs and it is not corrected within the
24-hour period, SFI will evaluate the error as
follows: 1. Accounts with actual losses above 25
basis points, a credit will be applied to future
management fees.
2. Accounts with lost opportunity above
25 basis points, a credit will be applied in the
amount of an annualized rate of 6% of the
account value and will be based on the number of
days the error was not corrected outside the
24-hour period. 3. Accounts that benefit from
the error will not be adjusted. If a client
cancels all management, the offset of fees would
be negotiated.
If resolution is not obtained, the
arbitration clause in the contract would apply.
Delays could occur due to circumstances beyond
SFI’s control, such as restrictions imposed by
funds or custodians, natural disasters, internet
interruptions, etc. In such event, SFI assumes
no responsibility for any possible losses. SFI
will not honor any request to move an account
contrary to its current recommended signal
position unless the client terminates the
contract and provides specific instructions to
SFI. The client agrees not to cause or permit
any exchange to be made in the account that is
inconsistent with a recommendation of SFI.
Any acts inconsistent with the foregoing
shall relieve SFI of any liability.
Clients should carefully review the
prospectus for possible fund restrictions on
exchanges, as SFI will not be responsible for
losses resulting from any such restriction.
Termination:
The agreement shall remain in effect until
either party to the agreement receives written
notice from the other party of their desire to
cancel the agreement. The withdrawal of funds
from the account being managed does not
constitute giving notice. Non-payment of fees by
the client does not serve as notification of
cancellation.
SFI will make reasonable efforts to
inquire whether services are still required by
the client. SFI reserves the right to continue
managing the account for up to thirty days
following the anniversary date. After the 30-day
period, SFI has the option to give written
notice to the client terminating the contract.
Upon written cancellation of the agreement, all
funds will be exchanged to the defensive (money
market) position unless otherwise instructed in
the written notification of cancellation.
In the event of termination, the retainer
fee charged is not refundable.
The percentage fee will be refundable on
a pro-rata monthly basis. If terminated within
the first 5 days of the month, no fee is charged
for that time period.
Not
withstanding anything else with the agreement,
the investor has the unilateral, uncontrolled
right to terminate the agreement within 5
business days of its execution without penalty.
Fees will be refunded in full if the
termination of the agreement is requested within
5 business days of the agreement date.
Strategic Asset Allocation Service
In this service, SFI builds client’s portfolios
using actively managed mutual funds. The active
management is done internally within the fund
giving the client the benefits of risk
reduction. SFI will aid the client in
determining a portfolio mix of these mutual
funds based on their client profile.
The client’s mix of mutual funds is
designed and intended to be held long-term with
periodic rebalancing among the client’s
holdings.
Annual reporting of the assets held and
ongoing servicing for the account will be
provided under this service.
The actively managed funds will pay SFI a
1% servicing fee (12b-1) as an expense of the
fund, which eliminates additional fees, paid to
SFI by the client.
The managed mutual funds will be
sub-advised by an advisor (owned by a charitable
foundation) that receives donated services from
a SFI principal. SFI also provides donated back
office services to Hundredfold Advisors, LLC.
Termination:
Services provided under the Strategic Asset
Allocation Service are automatically terminated
without penalty when a client closes or
withdraws all funds from the actively managed
mutual funds.
Alternative Investment Asset Allocation
Service
In this service, SFI creates a portfolio of
alternative investments for qualified or
accredited investors only.
The investor must provide information
which will verify what type of investor they are
classified.
The service includes alternative
investment research, client risk analysis and
annual performance reviews but primarily
provides a liaison service between the investor
and individual alternative investment.
This will give the client consolidated
information for their portfolio on a quarterly
basis.
Recommended alternative investments will
likely invest in a wide range of investment
vehicles and strategies, which may involve a
high level of risks. SFI will provide an annual
review to determine if the portfolio is inline
with the client’s objectives. Recommendation for
changes in allocation may be made by SFI;
however, the client must provide written consent
to implement changes. SFI or its officers or
directors do not manage the alternative
investments used in building the clients
portfolio.
Clients are encouraged to understand the
risks involved in alternative investment
investing.
Fees:
The fee for this service will be 1% of the
assets placed in this allocation service and is
payable in advance. Fees may be offset by
compensation received by SFI directly from
alternative investment (in certain
arrangements), which the client is invested, up
to the 1% billed.
Renewals are done annually and it is
recommended the client not liquidate from the
alternative investments owned in the portfolio
due to possible restrictions.
In special circumstances (such as:
charities, employee/rep accounts, accounts over
$5 million), SFI reserves the right to waive or
negotiate fees.
Termination:
The client can cancel this service at any time,
however, there will be no refunds for SFI
service fees since the research and other
preliminary work is done in advance.
SFI will assist the client in processing
the paperwork to withdraw invested funds unless
otherwise requested by the client.
Business Standards & Best Practices
SFI has established policy and procedures to
comply with SEC rules and regulations.
The Policy and Procedures manual is
reviewed on an annual basis by the compliance
officer.
Code of Ethics
– SFI requires all employees/access persons to
adhere to the Code of Ethics adopted.
This document outlines policy and
procedures to avoid conflicts of interest and
places the interest of clients first. Violations
are handled by disciplinary actions. A copy is
available at our website or by calling our
office (757) 463-7600.
Best Execution
– SFI seeks to obtain best execution for client
transactions even though clients are purchasing
mutual funds with end of day pricing.
Brokerage/Custodial relationships are
reviewed periodically to evaluate transaction,
custodial or other fees, which are charged to
the clients.
SFI does not participate in any fees
charged by these firms.
Proxy Voting
– SFI does not provide services for proxy voting
to its clients.
All proxies are sent directly to clients
from the custodian.
Spectrum periodically reviews client
options at each custodian to ensure proper
coding is maintained on all client accounts.
Privacy Notice
- SFI’s policy is to protect personal client
information. SFI does not sell or maintain lists
for any outside nonaffiliated marketing firms.
Disaster Recovery
- SFI
maintains disaster recovery procedures for
operational and investment management system
emergencies to ensure client services are
maintained.
Soft Dollar Policy
– SFI does not engage in soft dollar activity
with broker-dealers or third party providers.
Portfolio Manager
Ralph J. Doudera (DOB: 5-10-46), CEO of SFI, is
a graduate of New Jersey Institute of Technology
where he received an undergraduate degree in
Mechanical Engineering (1969) and a Masters of
Science in Management and Finance (1972). He was
employed as an Account Executive with CIGNA
Corporation for 10 years beginning in 1973,
where he specialized in investment and estate
planning.
During this period, Mr. Doudera received
his certification as Chartered Life Underwriter
(1976) and Chartered Financial Consultant (1979)
from the American College.
He has also been a registered
representative and had his securities license
since 1973. In 1991, Mr. Doudera completed the
Series 24 and became a registered principal for
Royal Alliance Associates, Inc (Royal).
Effective October 2000, Mr. Doudera terminated
his relationship with Royal and does not retain
his security license through any independent
broker-dealership.
Mr. Doudera manages his personal assets
through various brokerage firms and mutual fund
companies, which may be invested in similar
funds as clients and could be considered a
conflict of interest. Employees of SFI may trade
personal accounts, which are monitored by SFI on
a quarterly basis. Mr. Doudera has been
investing in many investment vehicles since
1979, but has offered services to the public
since 1988 when Spectrum Financial, Inc. was
registered as an Investment Advisor under the
Investment Advisors Act of 1940.
Mr. Doudera has a 100% interest in SFI
and his primary role is that of investment
manager for which he is compensated. Mr. Doudera
also owns Financial Technology Associates, Inc.,
which specialized in life insurance products.
Renewal commissions are paid directly to
Financial Technology Associates, Inc.
Current insurance licenses are not held
by Mr. Doudera or the company.
Mr. Doudera has written and published a
book Wealth Conundrum, which discusses a
biblical perspective on the accumulation of
wealth and the responsibilities related to it.
The book is not intended to provide
investment advice.
Mr. Doudera is also a managing member of
Hundredfold Advisors, LLC that manages three
mutual funds used by the SFI’s Strategic Asset
Allocation service.
SFI retains the right to enter into
agreements with third party money managers for
investment advice on management strategies it
offers under its Tactical Asset Allocation
Service.
The advice obtained by these managers may
or may not be used by SFI and do not affect the
fees charged to the client for services. SFI
retains the right to review and use third party
managers for all its management strategies
without the consent of the client. SFI requires
portfolio managers to have at least 10 years
experience in managing investments, including
but not limited to, mutual funds, stocks, bonds,
futures, & ETFs and have verified performance
track records.
SFI Officers –
Mary K. Collins (DOB: 8-1-60),
President/Compliance Officer of SFI is a
graduate of Old
Dominion
University where she
received an undergraduate degree in Business
Administration (1982) with a concentration in
corporate finance.
She was employed with FTA, Inc (1983) as
a financial planner where she earned the
Chartered Financial Consultants designation
(1988).
Ms. Collins began working with Spectrum
in 1986.
Portfolio Reviews – Strategies are reviewed
on a daily basis through the use of charting,
fundamental, technical, cyclical analysis.
The use of external newsletters,
periodicals, and databases are also
incorporated.
This information triggers the buy/sell
signals for all strategies. Clients will receive
anniversary portfolio review as well as a
quarterly newsletter with average data for all
strategies.
Arbitration Clause
Client and SFI agree that all controversies
between the parties concerning any transaction
or the construction, performance or breach of
this or any agreement between us, whether
entered into prior, on, or subsequent to the
date hereof, shall be determined by arbitration
within the Commonwealth of Virginia. Client
understands that this agreement to arbitrate
does not constitute a waiver of the right to
seek a judicial forum where such waiver would be
void under the federal securities laws.
Such arbitration shall be held before three
arbitrators and conducted in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association then applying.
The arbitrators will have no authority to
award punitive or other damages not measured by
the prevailing party’s actual damages, except as
may be required by statute. The award of the
arbitrators or the majority of them shall be
final.
Judgment upon any arbitration award
rendered may be entered in any court, state or
federal, having appropriate jurisdiction.