ADV Part 2A
Firm Brochure – Form ADV Part 2A
This brochure provides information about the qualifications and business practices of Greenwood Capital Associates, LLC. If you have any questions about the contents of this brochure, please contact us at (864) 941-4049 or by email at [email protected]. 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.Additional information about Greenwood Capital Associates, LLC is also available on the SEC’s website at www.adviserinfo.sec.gov. Greenwood Capital Associates, LLC’s CRD number is: 115015.
Greenwood Office
425 Main St.
Suite 100
Greenwood, SC 29646
864.941.4049
Mailing Address
Post Office Box 3181
Greenwood, SC 29648
Greenville Office
201 W. McBee Ave.
Suite 300
Greenville, SC 29601
864.335.2425
Registration does not imply a certain level of skill or training.
Version Date: 2024.03.29
Item 2: Material Changes
The following material changes have been made to the brochure since our last annual filing, March 31. 2023 and are incorporated into this filing effective March 29, 2024:
Stand-alone Financial Planning Engagements
Item 4.B: The addition of financial planning engagements as a stand-alone service for a fee.
Item 5: The description of the fee for stand-alone financial planning engagements and the circumstances under which the financial planning fee may be deducted from an investment advisory fee.
Item 13: The frequency of review of financial planning engagements has been added.
Client Class Action Services
Item 4.B: Beginning 2Q 2024, our firm will use Broadridge’s Global Securities Class Action Services to monitor class action shareholder lawsuits and file claims on behalf of its clients to participate in cases where they may be eligible to receive proceeds due to legal settlements.
Item 5.C: In the event a recovery is made, processing class action claims is subject to a contingency fee assessed directly by Broadridge. The client receives 80% of the total reimbursement of securities class actions settlements collected by Broadridge, paid directly to the client account, while 20% is retained by Broadridge as compensation for managing the filing process. Greenwood Capital does not receive any portion of the contingency fee; and there are no fees assessed by Broadridge if a recovery is not made. Clients may opt out of this service by advising us in writing.
Methods of Analysis, Investment Strategies & Risk of Investment Loss
Item 8.A: Has been updated to reflect the current analysis methodology used by the Investment Team in evaluating security selection for client portfolios. Specifically, we have added active risk analysis, which involves being benchmark-aware and measuring and managing exposure to risk elements in relation to the benchmark of the strategy.
Item 8.B: The risks associates with active risk analysis has been added. Active risk analysis encourages awareness of the characteristics or factors that define the relevant benchmark. The risks with this analysis include that: 1) benchmarks can also reduce in value, perhaps meaningfully so, and minimizing active risk would encourage a similar result for the strategy, 2) the characteristics of the benchmark are likely to evolve over time, which would require regular evaluation of the active risk exposure of each strategy, and 3) the strategy lacks sufficient differentiation.
Item 8.C: Risks associated with the use of alternative investments has been expanded with the availability of alternative investment solutions in Greenwood Capital portfolios. Alternative Investments: Alternative investments are often more complex than traditional investment vehicles, and have less transparency, lower liquidity, and higher fees. Because of these factors, alternative investments are generally considered materially more risky than traditional, listed security investing. Even with careful and comprehensive due diligence, alternative investments may be subject to complete loss of principle. If, after the initial investment is made, market conditions change in a manner that is detrimental to the investment, liquidity restrictions may prevent an investor from liquidating the position and avoiding substantial loss. The custodians and broker/dealers often apply additional fees and commissions to alternative assets that are not conventional, listed securities. Commissions to buy and sell alternative assets may be substantially higher than standard commission rates and some custodians charge annual holding fees for alternative assets. High fees diminish the investment returns of alternative assets.
Voting Client Securities (Proxy Voting)
Item 17: Have updated the section to reflect Proxy Voting practices utilizing an independent vendor, Broadridge, to issue proxy voting guidance, manage the voting process in accordance with that guidance, and maintain proxy records. Following Broadridge’s guidelines, we typically vote with management on routine matters that are not anticipated to substantially impact the company or shareholders economically. However, in cases of significant conflicts of interest, we prioritize the client’s best interests and resolve conflicts, accordingly, adhering to our proxy voting policy guidelines.
Should you have any questions about these updates, or other questions after reviewing this document, please let us know.
Item 3: Table of Contents
- Item 4: Advisory Business
- Item 5: Fees and Compensation
- Item 6: Performance Based Fees and Side-By-Side Management
- Item 7: Types of Clients
- Item 8: Methods of Analysis, Investment Strategies & Risk of Investment Loss
- Item 9: Disciplinary Information
- Item 10: Other Financial Industry Activities and Affiliations
- Item 11: Code of Ethics, Participation/Interest in Client Transactions & Personal Trading
- Item 12: Brokerage Practices
- Item 13: Reviews of Accounts
- Item 14: Client Referrals and Other Compensation
- Item 15: Custody
- Item 16: Investment Discretion
- Item 17: Voting Client Securities (Proxy Voting)
- Item 18: Financial Information
Item 4: Advisory Business
A. Description of the Advisory Firm
Greenwood Capital Associates, LLC is a limited liability company organized under the state laws of South Carolina. Established in 1983 as Greenwood Capital Associates, Inc., an independent registered investment adviser, it was reorganized and registered with the Securities and Exchange Commission (SEC) in 2001. Today, Greenwood Capital is principally owned by TCB Corporation (“TCB”), which acquired its ownership interest on July 31, 2008. While TCB is the majority owner of Greenwood Capital, it is not its operator; and as an owner with a long-term horizon, TCB is committed to ensuring we continue as an independent adviser. There are six active employee owners in the Firm.
As of March 1, 2024, Greenwood Capital manages more than $1.6 billion in investment assets. Our Wealth team of Private Client Advisors provides (B.1) financial planning and (B.2) investment advisory services for individuals, families, foundations, endowments, and trusts. Our team of Investment Managers develops and provides (B.3) investment management for institutional clients, including municipalities, healthcare providers, charitable foundations, and higher education institutions, as well as our Wealth clients. In addition to direct retirement advice and investment management, we also provide (B.4) group qualified retirement planning consulting services and optional group retirement plan investment management through a third-party administrator.
B. Types of Advisory Services
1. Financial Planning
Comprehensive financial planning is an evaluation of an individual’s/family’s current and future financial state by using known variables (such as how long you plan to work) to model your future overall financial picture. This typically includes, but is not limited to, investment planning, life insurance, tax concerns, retirement planning, college planning, and debt/credit planning. We primarily offer these services to clients with aggregate assets under management exceeding $1 million. We may also offer financial planning services for a fee (see Item 5), as outlined in our Financial Planning Engagement Letter.
To provide informed recommendations, we conduct in-depth interviews and review personal and financial documents. Following careful analysis, we tailor recommendations to align with your personal goals and objectives. If you choose to implement our recommendations, we prefer collaborating with your attorney, accountant, insurance agent, or other professional advisers. If you do not have established relationships with professionals, we can suggest suitable professionals, which may include entities or divisions affiliated with TCB Corporation (including Countybank, Countybank Trust Services, Countybank Mortgage, Countybanc Insurance Services, Inc., and/or Countybanc Investment Services, Inc.) It is important to note the conflict of interest arising from our ownership relationship with TCB, but we prioritize our clients’ interests in any recommendations involving affiliated services. Clients are not obligated to purchase any recommended services.
2. Investment Advisory Services
Our Private Client Advisors offer investment advice tailored to your individual needs, based on information provided through client profile questions. This includes assessing your financial situation, risk tolerance, investment horizon, liquidity needs, tax considerations, investment objectives, estate considerations, and any other relevant issues. You should promptly inform us of any changes in your financial situation, investment objectives, or needs.
Additionally, based on the nature of our relationship with you and your specific needs, a Private Client Advisor can also provide additional advisory services, such as Financial Planning (as described above) and Retirement Advice:
Retirement Advice: In advising on your overall investment outlook, we may offer guidance regarding rollovers and distributions from retirement accounts. We disclose that recommending an increase in assets under management at Greenwood Capital poses a conflict of interest, but we prioritize our clients’ interests in such recommendations. However, we do not provide tax advice regarding required minimum distributions (RMDs), and we recommend consulting a tax professional for accurate calculations.
2. Institutional Investment Management
Investment Management: Our Investment Managers provide discretionary investment management tailored to individual and institutional investors through various strategies, including Separately Managed Accounts (SMA) and Unified Managed Accounts (UMA). Depending on client direction and objectives, we develop either a single investment strategy or a diversified asset allocation portfolio. Accounts are monitored and rebalanced accordingly.
Sub-Advisory Services: We engage in sub-advisory relationships to provide discretionary investment advisory services to clients of other Registered Investment Advisers, Broker-Dealers, or Custodians. As the sub-adviser, we manage these accounts in accordance with the investment direction provided by the client’s investment adviser.
Dual Contract: We act as a portfolio manager for dual contract programs in which the advisory client has hired both their financial adviser and us to manage their investment assets (as indicated by our Managed Account Program Agreement). Under this Agreement, we typically meet with the client’s financial adviser and not the advisory client. As the investment manager, we manage these accounts in accordance with the investment direction provided by the client’s investment adviser of record.
Consulting Services: We provide investment advice to other Financial Advisers and/or their clients, employee benefit plans, foundations, endowments, corporate funds, and insurance companies on a contractual basis. If we provide consulting services only, this is on a non-managed, non-discretionary basis where we do not manage the individual assets, but instead provide advice in regard to economic, market and investment outlook and investment strategy. We do not manage, and therefore will not execute brokerage (trades) for consulting relationships.
Selection of Other Advisers: In some instances, in order to further diversify a client’s investment portfolio in accordance with a client’s investment policy statement, we will recommend a client utilize additional money manager(s) via a sub-advisory or direct relationship.
3. Group Retirement Plans Utilizing a Third-Party Administrator
Greenwood Capital, in collaboration with a third-party administrator (TPA), provides two types of services to qualified group retirement plans: investment education consulting and discretionary investment management. Consulting includes education on fiduciary responsibilities for plan sponsors, and general investment education about diversification, risk/return, time horizon, etc. for participants. Discretionary investment management includes investment educational consulting services, as well as providing investment allocation models and security recommendations for inclusion in the plan to the TPA (used by participants during the investment selection process).
As a discretionary investment manager, as defined by section 3(38) of ERISA, Greenwood Capital would be a named fiduciary to the retirement plan, developing and monitoring the investment policy statement (IPS), with the authority to make changes to the IPS and investment options on behalf of plan participants and beneficiaries. Plan sponsors would maintain fiduciary responsibility for the oversight of Greenwood Capital’s services, as well as other plan providers.
Class Action Services
Beginning 2Q 2024, our firm will use Broadridge’s Global Securities Class Action Services to monitor class action shareholder lawsuits and file claims on behalf of its clients to participate in cases where they may be eligible to receive proceeds due to legal settlements. Processing of class action claims is subject to a contingency fee assessed directly by Broadridge; in the event a recovery is made. Broadridge pays class action recovery funds directly to our clients, less the contingency fee. Clients may opt out of this service by advising us in writing.
Services Limited to Specific Types of Investments
Greenwood Capital generally limits its Investment Advisory services and Institutional Investment Management to public equities, public interest-bearing securities, ETFs, REITs (real estate investment trusts), and mutual funds. In some instances, we might use other security types – including alternatives such as private equity, private debt, private real estate, hedge funds, and direct placement – to help diversify a portfolio when applicable.
C. Client Tailored Services and Client Imposed Restrictions
Greenwood Capital structures investment portfolio(s) based upon client Investment Advisory (B.1) and Investment Management (B.2) needs, utilizing SMAs or UMAs to customize investment portfolios for each client. Clients can request restrictions in investing in certain securities or types of securities following their values or beliefs. However, if the restrictions prevent us from properly servicing the client account, or if the restrictions would require us to deviate from our standard suite of services, Greenwood Capital reserves the right to end the relationship.
D. Wrap Fee Programs
Greenwood Capital does not currently participate in any wrap fee program.
E. Amounts Under Management
Greenwood Capital Associates, LLC has the following assets under management:
Discretionary Amounts
$1.519Billion
Non-Discretionary Amounts
$0
Date Calculated
February 29, 2024
Item 5: Fees and Compensation
A. Fee Schedule
Greenwood Capital operates on a fee-only basis. Financial planning fees are detailed in the Financial Planning Engagement Letter. For Investment Advice, clients incur separate and additional fees for investment advisory/management, trading execution, and custodial services; or a bundled fee for trading execution and custodial services.
Investment Advisory, Institutional Investment Management, and Group Retirement Plan Fees: These fees are negotiable depending upon the needs of the client and complexity of the situation; the final fee schedule is included in a written agreement. Greenwood Capital fees are calculated and paid quarterly in arrears, based on the average month-end managed market value of the account, including cash, and accrued income. Clients can terminate their contract by providing written notice as outlined in the written agreement.
1. Investment Advisory Fees
| Total Assets Under Management | Annual Advisory Fee |
| First $2,000,000 | 1.00% |
| Next $1,000,000 | .80% |
| Balance above $3,000,000 | .60% |
2. Institutional Investment Management
| Type of Account | Annual Management Fee |
| 100% Equity | |
| Large Cap, Tax-Managed Large Cap, Dividend & Income | .50% |
| Small/Mid (SMID) Cap | 1.00% |
| 100% Fixed Income/Balanced | .50% |
| ETF Diversified Asset Allocation & Passive UMA Strategic Asset Allocation |
|
| First $2,000,000 | 1.00% |
| Next $1,000,000 | .80% |
| Balance above $3,000,000 | .60% |
3. Group Retirement Plans Utilizing a Third-Party Administrator
| Service | Annual Fee |
| Investment Education Consulting | .50% (minimum $500) |
| Discretionary Investment Management |
First $2 million 1.00% Next $1 million .80% Balance above $3 million .60% |
Other Services
Financial Planning Fees: Private Client Advisors offer financial planning services on a case-by-case basis as outlined in a Financial Planning Engagement Letter. As a stand-alone service, Greenwood Capital charges a one-time fee of $3,500, collected prior to commencing the financial plan. If the stand-alone engagement results in investment assets under management with Greenwood Capital, a portion of the $3,500 fee will be deducted each quarter from the first four full calendar quarters after the new account(s) are opened, up to the full amount of the financial planning fee. If the advisory fees during the first four full calendar quarters do not exceed the financial planning fee, Greenwood Capital will retain the difference between the $3,500 financial planning fee and the investment advisory fee. Based on the nature of the financial planning relationship, Greenwood Capital reserves the right to waive the fee as opposed to rebating future investment advisory fees.
We also reserve the right to charge for financial planning services when requested by other Financial Advisers, Broker-Dealers, and/or Custodians through Sub-Advisory and Dual Contract Agreements. Greenwood Capital will fully disclose these fees, which the client must acknowledge in writing before proceeding.
Retirement Advice: Greenwood Capital does not charge separately for assisting clients in reviewing their Required Minimum Distribution or advice regarding retirement plan rollover or distributions.
Sub-Advisory and Dual Contract Fees: Fees are negotiable depending upon the needs of the client and the complexity of the situation; the final fee schedule is included in the written agreement. Greenwood Capital fees are typically paid quarterly in arrears, based on the average month-end managed market value of the account, including cash, and accrued income. Other financial advisors/custodians may have different fee calculation methods, which will be stated in their agreements with their clients. Financial advisors/custodians can terminate their contract with Greenwood Capital by providing written notice as outlined in the written agreement.
Consulting Service Fees: Fees are calculated either as a percentage of assets as described in the section above (“Investment Advisory and Institutional Asset Management Fees”) or some other agreed upon fee as documented in the Consulting Agreement.
Selection of Other Advisers Fees: If Greenwood Capital recommends a client utilize additional money manager(s) via a sub-advisory relationship, the client will pay separate fees to the sub-adviser. Before recommending/selecting sub-advisers for a client, we will ensure those other adviser(s) are a registered investment adviser.
B. Payment of Fees
Payment of Investment Advisory and Institutional Investment Management Fees: The method in which fees are calculated and paid is outlined and agreed upon in the written agreement. Clients typically authorize us to instruct custodians to debit their account(s) for the calculated fee.
Payment for Retirement Consulting and/or Investment Management: The method in which fees are calculated and paid is outlined and agreed upon in the written agreement and are either paid from the Group Retirement Plan assets or directly by the plan sponsor.
Payment of Financial Planning Fees: The specific manner in which fees are calculated and charged will be agreed upon in a Financial Planning Engagement Letter prior to executing a financial plan.
Payment for Retirement Advice: There are no fees for providing retirement advice as described in Item 4: Advisory Business.
Payment of Sub-Advisory and Dual Contract Fees: The method in which fees are calculated and paid is outlined and agreed upon in the written agreement. Fees may be paid by the discretionary advisor or clients will authorize us to instruct custodians to debit their account(s) for the calculated fee.
Payment of Consulting Services: Payment terms are agreed upon in a Consulting Agreement prior to initiating services. Depending on the nature of the client’s investment management relationship, Greenwood Capital consulting clients typically pay fees and expenses related to the investment of their assets for custodians, mutual funds, brokerage, and other transaction costs to those providers. However, Greenwood Capital receives no direct or indirect compensation associated with such transaction/account fees and expenses.
Payment of Other Adviser’s Fees: Client authorizes Greenwood Capital to invoice the custodian directly, when appropriate, for Other Adviser’s fees when due, and client authorizes Greenwood Capital to instruct custodian/broker-dealer to debit the account for said fee, unless otherwise negotiated/documented.
Other Information Regarding the Payment of Fees: Fees are calculated based on the total market value of the account, including cash, based on the terms in a written agreement. Greenwood Capital does not manage or assess a fee on client assets designated as “no fee” as indicated by assets in an unsupervised account. Greenwood Capital assumes no responsibility for the market performance or reporting of unsupervised assets, which may be included on client statements for reference only if provided by the custodian. From time-to-time clients will request that we effect a trade in an unsupervised account. When this occurs, Greenwood Capital charges no fees for this courtesy; the client will incur any transaction fees from the custodian and/or broker-dealer. The trades are recorded as non-discretionary.
Due to the timing of billing, accounts opened or closed during a billing period will be charged a prorated fee. Upon termination of any account, any unpaid fees will be due and payable. Depending on timing during the quarter, and client’s payment method, pro-rated fees could be billed separately instead of debited from a client’s account.
C. Clients are Responsible For Third Party Fees
Clients are responsible for the payment of all third-party fees (for example: custodian fees, brokerage fees, transaction fees, third-party administrators, other investment advisors, recordkeepers, etc.). These fees are separate and distinct from the fees and expenses charged by Greenwood Capital. All fees paid to Greenwood Capital are separate and distinct from the fees and expenses charged by mutual funds and ETFs to their shareholders. These fees and expenses are described in each fund’s prospectus, and will typically include a management fee, other fund expenses, and a possible distribution fee. If the fund also imposes a sales charge, a client could pay an initial or deferred sales charge, which Greenwood Capital does not participate in, but the client’s selected custodian may (refer to your custodial agreement and/or statement for additional information). A client could invest in mutual funds or ETFs directly, without the services of Greenwood Capital. In that case, the client would not receive the services provided by us which are designed, among other things, to assist the client in determining which ETF(s) and/or mutual fund(s) are most appropriate to each client’s financial situation and objectives. Accordingly, the client should review both the fees charged by a fund and the fee charged by us to fully understand the total amount of fees to be paid by the client and to evaluate the advisory services being provided.
Class Action Services: We use Broadridge’s Global Securities Class Action Services to monitor class action shareholder lawsuits and file claims on behalf of clients to participate in cases where they may be eligible to receive proceeds due to legal settlements. In the event a recovery is made, processing class action claims is subject to a contingency fee assessed directly by Broadridge. The client receives 80% of the total reimbursement of securities class actions settlements collected by Broadridge, paid directly to the client account, while 20% is retained by Broadridge as compensation for managing the filing process. Greenwood Capital does not receive any portion of the contingency fee; and there are no fees assessed by Broadridge if a recovery is not made. Clients may opt out of this service by advising us in writing.
D. Prepayment of Fees
Greenwood Capital collects its fees in arrears. It does not collect fees in advance.
E. Outside Compensation for the Sale of Securities to Clients
Greenwood Capital, and its supervised persons, do not accept any compensation for the sale of securities or other investment products, (including asset-based sales charges or service fees from the sale of mutual funds) for assets held in Greenwood Capital accounts.
Item 6: Performance-Based Fees and Side-By-Side Management
Greenwood Capital does not manage performance-based fee accounts (fees based on a share of capital gains on or capital appreciation of the assets of a client) and does not have any side-by-side management agreement in place.
Item 7: Types of Clients
We generally provide investment advisory services and investment management to the following types of clients:
- Individuals
- High-Net-Worth Individuals
- Banks and Thrift Institutions
- Pension and Profit Sharing Plans
- Charitable Organizations
- Corporations or Other Business Entities
- State or Municipal Government Entities
- Other Investment Advisers
Our stated account minimum of $250,000 can be waived, based on the overall client relationship, financial objectives over time, and the complexity of the situation.
Item 8: Methods of Analysis, Investment Strategies & Risk of Investment Loss
A. Methods of Analysis and Investment Strategies
Methods of Analysis
Our methods of analysis include fundamental, technical, cyclical, and active risk analyses. Asset Selection and Asset Allocation analysis, using these methods, are performed by our Investment Committee. Fundamental analysis involves the analysis of financial statements, the general financial health of a company, the relative valuation and growth profile, and/or the analysis of management or competitive advantages. Technical analysis involves the analysis of past market data to identify patterns in performance charts. We use this technique to help identify favorable conditions for buying and/or selling a security. Cyclical analysis involves the analysis of business cycles to find favorable conditions for buying and/or selling securities. Active risk analysis involves being benchmark-aware and measuring and managing exposure to risk elements in relation to the benchmark of the strategy.
Investment Strategies
Our Investment Committee typically meets weekly to determine which sectors and/or companies to overweight or underweight in our actively managed Investment Strategies by evaluating current economic, interest rate, and earnings data; current and potential shifts in monetary and fiscal policy; the strength of the dollar; as well as a broad spectrum of international economic information to identify where the economy is within the current economic cycle.
Similarly, regarding the Firm’s selection of fixed income securities, the Investment Committee incorporates a top-down methodology to determine how fixed income portfolios should be positioned relative to maturity/duration, credit quality, and industry exposure. Our objective is to preserve capital and maximize total return using investment grade corporate bonds, U.S. government and agency bonds and, where appropriate, tax-free municipal bonds.
We can use long-term trading, short-term trading and/or options writing (including covered options).
Investing in securities involves a risk of loss that you, as a client, should be prepared to bear.
B. Material Risks Involved
Methods of Analysis
Fundamental analysis concentrates on factors that determine a company’s value and expected future earnings. This strategy would normally encourage equity purchases in stocks that are undervalued or priced below their perceived value. The risk assumed is that the market will fail to reach expectations of perceived value, or that the market would enter extended periods where such assets were out of favor regardless of relative valuation.
Technical analysis involves using and comparing various charts in attempts to predict a future stock price or direction based on market trends. The risk involved in solely using this method is that only past performance data is considered. Using technical analysis without other methods of analysis would be assuming that past performance would be indicative of future performance. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. The risk is that markets do not always follow patterns, and relying solely on this method is not appropriate in isolation long-term.
Cyclical analysis assumes that the markets react in cyclical patterns, which, once identified, can be leveraged to provide performance. The risks with this strategy are two-fold: 1) the markets do not always repeat cyclical patterns, and 2) if too many investors begin to implement this strategy, it changes the very cycles identified.
Active risk analysis encourages awareness of the characteristics or factors that define the relevant benchmark. The risks with this analysis include that: 1) benchmarks can also reduce in value, perhaps meaningfully so, and minimizing active risk would encourage a similar result for the strategy, 2) the characteristics of the benchmark are likely to evolve over time, which would require regular evaluation of the active risk exposure of each strategy, and 3) the strategy lacks sufficient differentiation.
Investment Strategies
Long-term trading is designed to capture market rates of both return and risk. Frequent trading, when done, can affect investment performance, particularly through increased brokerage, other transaction costs, and taxes. Short-term trading, and options writing generally hold greater risk, and clients should be aware that there is a material risk of loss using any of those strategies.
Investing in securities involves a risk of loss that you, as a client, should be prepared to bear.
C. Risks of Specific Securities Utilized
Summary of Risks
Investing in securities involves a risk of loss, and Greenwood Capital cannot guarantee specific investment goals. Investments are not deposits or obligations of any bank, endorsed or guaranteed by any bank, or insured by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Clients could lose money.
With any investment there is systematic market risk that the value of an investment could decline in price because of a broad stock market decline. Markets generally move in cycles, with periods of rising prices followed by periods of falling prices. The value of the investment will tend to increase or decrease in response to these movements. Further, there is management risk that a strategy may not produce the intended result. There may also be the risk of identifying a buyer for certain illiquid securities.
The specific risk associated with a particular strategy depends on the securities used and the extent to which the strategy employs certain portfolio management techniques. Not all risks apply to each strategy. Core factors used by a specific investment strategy might fall out of favor and underperform versus the overall stock market and/or the benchmark index.
There are also inherent operational and technological risk in managing portfolios, such as the risk of cyber-attacks, disruptions or failures that affect service providers, counterparties, market participants, or issuers of securities that could adversely affect the investment. Greenwood Capital has an information security program intended to identify risks within its infrastructure, and various policies and procedures to address and respond to risks as identified within our infrastructure. These inherent operational and technological risks are also present at third-party providers in managing and servicing your account. Greenwood Capital’s vendor management program is structured to conduct regular due diligence on other providers; however, we must also rely on the policies, procedures and safeguards of third-party providers as communicated to and documented by us.
Security Level Risks
Equity: A security that generally refers to buying shares of stocks in return for receiving a future payment of dividends and capital gains if the value of the stock increases. An equity security could lose value due to company specific factors such as management decisions, adverse events, etc. Risk levels tend to be higher in equity securities the smaller the capitalization scale of the company as smaller companies can be more vulnerable to market and industry changes than investment in larger companies. Lastly, risk levels in equity securities also vary by market sector/industry as risks associated with various types of business can be more pronounced in various market cycles, and by market geography as the risks associated with foreign investments are more pronounced in connection with international and/or emerging markets than domestic (US) markets.
Fixed Income: A security that is designed to pay fixed periodic payments in the future that, depending on duration, will involve economic risks such as inflationary risk, interest rate risk, and default risk. Inflationary risk occurs when the yield on the fixed income investment does not keep pace with the cost of inflation. Interest rate risk is when the value of the investment declines due to an increase in interest rates. Default risk is the risk of the issuer not being able to abide by the terms of the fixed income agreement.
Exchange Traded Funds (ETF) and Mutual Funds: Investing in ETFs/mutual funds carries the risk of capital loss. ETFs/mutual funds have costs that lower investment returns. These securities can be designed to emulate fixed income, equity, investment alternatives, various asset allocations, and risk tolerances; associated risks are in-line with the security the ETF is designed to emulate. There is an inherent risk involved when purchasing an ETF or mutual fund as it could decrease in value and the investment could incur a loss.
Alternative Investments: Alternative investments are often more complex than traditional investment vehicles, and have less transparency, lower liquidity, and higher fees. Because of these factors, alternative investments are generally considered materially more risky than traditional, listed security investing. Even with careful and comprehensive due diligence, alternative investments may be subject to complete loss of principle. If, after the initial investment is made, market conditions change in a manner that is detrimental to the investment, liquidity restrictions may prevent an investor from liquidating the position and avoiding substantial loss. The custodians and broker/dealers often apply additional fees and commissions to alternative assets that are not conventional, listed securities. Commissions to buy and sell alternative assets may be substantially higher than standard commission rates and some custodians charge annual holding fees for alternative assets. High fees diminish the investment returns of alternative assets.
Real Estate Investment Trust (REIT): REITs have specific risks including valuation due to cash flows, dividends paid in stock rather than cash, and the payment of debt resulting in dilution of shares. Real Estate Funds: These funds face several kinds of risk that are inherent in this sector of the market. Liquidity risk, market risk and interest rate risk are just some of the factors that can influence the gain or loss that is passed on to the investor. Liquidity and market risk tend to have a greater effect on funds that are more growth-oriented, as the sale of appreciated properties depends upon market demand. Conversely, interest rate risk impacts the amount of dividend income that is paid by income-oriented funds.
Hedge Funds: These are not suitable for all investors and involve a high degree of risk due to several factors that typically contribute to above average gains or significant losses. Such factors include leveraging or other speculative investment practices, commodity trading, complex tax structures, a lack of transparency in the underlying investments, and generally the absence of a secondary market.
Long-term Trading: Designed to capture market rates of both return and risk. Due to its nature, a long-term investment strategy can expose clients to various other types of risk that will typically surface at various intervals during the time the client owns the investments. These risks include but are not limited to inflation (purchasing power) risk, interest rate risk, economic risk, market risk, and political/regulatory risk. Short-term Trading: Risks include liquidity, economic stability, and inflation.
Options Writing: Involves a contract to purchase/sell a security at a given price, not necessarily at market value, depending on the market. Options writing can lose value over time because there is an expiration date; whereas stocks do not have an expiration date. Options owners also do not receive the benefits of owning stocks unless a call option is exercised; and conversely, an owner of a put option that also owns the underlying stock, would have related risks.
Past performance is not a guarantee of future returns. Investing in securities involves a risks that you should be prepared to bear.
Item 9: Disciplinary Information
There are no disciplinary matters to report, including criminal or civil actions, administrative proceedings, or self-regulatory organization proceedings.
Item 10: Other Financial Industry Activities and Affiliations
A. Registration as a Broker/Dealer or Broker/Dealer Representative
Neither Greenwood Capital, nor its representatives, are registered as, or have pending applications to become, a broker/dealer or representatives of a broker/dealer.
B. Futures Commission Merchant, Commodity Pool Operator, or a Commodity Trading Adviser Registration
Neither Greenwood Capital, nor its representatives, are registered as, or have pending applications to become, a Futures Commission Merchant, Commodity Pool Operator, or a Commodity Trading Adviser.
C. Registration Relationships Material to this Advisory Business and Possible Conflicts of Interests
TCB Corporation presently holds an 83% ownership stake in Greenwood Capital Associates, LLC. Additionally, TCB operates as the parent company for its wholly owned subsidiary, Countybank, which encompasses Countybank Trust Services and Countybank Mortgage. At the direction of clients, Countybank Trust Services provides trustee and/or custodial services for our clients. It is possible that clients of Greenwood Capital may also be clients of Countybank or its affiliates, including Countybanc Insurance Services, Inc., and/or Countybanc Investment Services, Inc. However, clients are under no obligation to procure any products, whether insurance or investments, from any entity within the TCB family of companies.
Greenwood Capital extends sub-advisory services to Countybank Trust Services, an affiliated qualified custodian. Countybank Trust Services retains autonomy in deciding whether to engage Greenwood Capital for investment management services for its clients. Certain representatives of our firm hold licenses as insurance agents. Periodically, they may offer clients insurance advice or recommend insurance products. Clients should understand that if they act on a recommendation to purchase life insurance or other insurance solutions, Greenwood Capital, and the licensed insurance agent, who is also an investment adviser representative, will share in the revenue generated by Countybanc Insurance Services, Inc. from the issued insurance policy. Greenwood Capital consistently operates in the best interests of its clients and clients are under no obligation to act on insurance recommendations provided by any Greenwood Capital representative acting in their capacity as an insurance agent, or through Countybanc Insurance Services, Inc., an affiliate of Greenwood Capital.
D. Selection of Other Advisors or Managers and How This Advisor is Compensated for Those Selections
To further diversify a client’s investment portfolio, we could recommend clients utilize additional money managers via a sub-advisory relationship. We do not receive any direct or indirect compensation from other advisers.
Item 11: Code of Ethics, Participation/Interest in Client Transactions & Personal Trading
A. Code of Ethics
Greenwood Capital utilizes a written Code of Ethics that covers the following areas: Compliance with Laws and Regulations, Standards of Business Conduct, Prohibited Purchases and Sales, Personal Securities Transactions, Reporting Code of Ethics Violations, Disclosure, and Recordkeeping. Our Code of Ethics is available for review upon request to any client or prospective client.
B. Recommendations Involving Material Financial Interests
We do not recommend clients buy or sell any security in which we or a related person has a material financial interest.
C. Investing Personal Money in the Same Securities as Clients; and
D. Trading Securities At/Around the Same Time as Clients’ Securities
From time to time, employees of Greenwood Capital may engage in personal transactions involving securities that are also recommended to clients. This scenario presents an opportunity for employees to buy or sell the same securities before or after recommending them to clients, potentially resulting in the employee benefiting from market activity generated by client trades in the same securities. To address this conflict of interest, Greenwood Capital instructs its employees, when aware, to prioritize client transactions over their own when similar securities are being bought or sold.
Greenwood Capital actively monitors all reportable employee personal trading activity and assesses the timing of employee trades in comparison to client trades. If an employee is found to have been aware of a client trade in the same security at the same time as their own trade, the employee will forfeit any profits earned above a de minimis amount. This measure ensures that the interests of clients are prioritized and that employees conduct themselves with integrity and transparency in their personal trading activities. If the employee is in a position to have known of a client trade in the same security (“investing personal money in the same securities as clients”) and at the same time (“trading securities at/account the same time as clients’ securities) as their own trade, the employee relinquishes any profits that resulted above a de minimis amount.
Item 12: Brokerage Practices
A. Factors Used to Select Custodians and/or Broker-Dealers
Greenwood Capital does not maintain custody of your assets on which we advise, although we are deemed to have constructive custody of your assets if you provide authority to instruct your selected custodian to debit your account to pay our fee (see Item 15—Custody). Your assets must be held in an account at a qualified custodian of your choosing as long as we receive automated data from your selected custodian. We do not open your account for you, although we can assist you in the process. Unless you instruct us otherwise, we are able to utilize additional brokers besides your custodian to execute trades for your account as described in this section.
In executing trades for clients, Greenwood Capital employs various broker-dealers. When selecting broker-dealers, we consider factors such as the amount and nature of research, existing relationships, price, execution quality, and reputation. Our decision is not solely based on transaction cost; rather, it revolves around obtaining the best execution for client accounts. Research and Other Soft-Dollar Benefits
Under Section 28(e) of the Securities Exchange Act of 1934, we may pay a broker-dealer a commission exceeding the amount charged by another broker-dealer for the same transaction, under certain circumstances. This practice, known as a “soft dollar” arrangement, acknowledges the value of brokerage and research services provided. By using client brokerage commissions (or markups/markdowns) to obtain research or other services, we benefit by not having to produce or pay for these services ourselves. However, this creates a conflict of interest in recommending a specific broker-dealer, as we receive an economic benefit in making the recommendation.
The recommendation of a specific broker-dealer is based in part on the economic benefit to us and not solely on the nature, cost or quality of custody, and brokerage services provided to clients. Therefore, commissions/fees for transactions executed through the broker-dealer could be higher than commissions/ fees available if you use another broker-dealer. Unless a client indicates a specific broker-dealer where we do not have a soft dollar arrangement, client accounts are available to participate in soft dollar arrangements. We receive soft dollar products and services in addition to the services outlined in our advisory agreements. Research furnished by broker-dealers is used in servicing some or all clients. We also use this research for accounts that did not pay commissions to the broker-dealer providing the research.
These services include furnishing advice on securities, effecting transactions, and providing analyses and reports on various financial aspects. Soft dollar benefits are received through various channels, including written materials, access to technology, and direct interactions with individuals such as analysts.
Brokerage Step-Outs
Greenwood Capital employs “step-out trades” when we determine that they facilitate better execution for certain client trades. Step-out trades involve transactions initially placed at one broker-dealer and then “stepped out” to another broker-dealer for credit. These trades benefit clients by finding natural buyers or sellers of specific securities, enabling us to execute larger block trades more efficiently, or accessing greater liquidity for particular securities. Unless otherwise directed by the client, we may use step-out trades for any account. Additionally, we utilize step-out trades to accommodate a client’s directed brokerage mandate. However, there is no assurance that we will be able to step-out trades or achieve overall best execution through this method. If we believe it is in the client’s best interest, we may use step-out trades to participate in soft dollar benefits. Brokerage Dual Contract Programs
Clients participating in dual contract programs should understand that the primary investment adviser may direct us to use a designated broker-dealer for securities transactions. In such cases, we may not be able to negotiate fees or obtain overall best execution from these directed broker-dealers. To access all available liquidity, we may utilize step-out trades as permitted by the financial adviser in a dual contract. If we execute a step-out trade for one of these clients to obtain best execution, the client will bear the transaction costs for those stepped out trades. These clients may incur additional commissions, concessions, dealer mark-ups or mark-downs, or other fees associated with the execution and/or settlement of the transaction.
Brokerage for Client Referrals
Greenwood Capital does not direct client transactions in exchange for referrals. However, clients referred to us by broker-dealers typically direct us to execute transactions through the referring broker-dealer. This creates a conflict of interest between obtaining best execution and receiving future client referrals from that broker-dealer when utilizing a broker-dealer other than the referring broker-dealer is an option.
Clients Direction Which Broker-Dealer/Custodian to Use
All clients are allowed to direct brokerage and custodial services through their written agreement if we have an operational relationship with the client’s preferred broker-dealer/custodian. However, directing brokerage may result in higher trading expenses, as we may not be able to aggregate orders to reduce transaction costs. If permitted by the Financial Adviser in the Managed Account Agreement and deemed in the best interest of the client, we may use step-out transactions for both fixed and equity trades. We may be unable to achieve the most favorable execution of client transactions if clients choose to direct brokerage.
Trade Allocation
It is Greenwood Capital’s procedure to prioritize trade orders for non-broker directed clients over directed brokerage clients. If applicable, investment models will be updated in conjunction with our non-broker directed clients. Due to this order placement, directed brokerage clients could be systematically disadvantaged. When multiple Traders are executing a model strategy trade, order placement could occur simultaneously. Not all investment advisers allow their clients to direct brokerage. We evaluate our order placement quarterly to determine if our methodology advantages/disadvantages specific client types.
B. Aggregating (Block) Trading for Multiple Client Accounts
When available, we utilize block trading, which involves the purchase or sale of a security for the accounts of multiple clients in a single transaction. If a block trade is executed, each participating client receives a price that reflects the average of the prices at which all transactions in the given block were executed. Block trading allows transaction costs to be shared equally and on a pro-rata basis among all participating clients, typically resulting in lower transaction costs or better execution. If the order is not entirely filled, the security purchased or sold is distributed among participating clients on a pro-rata basis or in another equitable manner, or in some cases, the trade may not be completed.
Block trades are employed when it is reasonably believed that the combination of transactions provides better prices for clients than individual transactions. Transactions for our employees are also included in block trades, with employees receiving the same average price and paying the same commissions and other transaction costs as clients. In the event of a partial fill, employee accounts receive a pro-rata distribution of the securities based on their portion of the pre-trade order. However, we are not obligated to include any client account in a block trade, and block trades will not be executed for any client account if doing so is prohibited or otherwise inconsistent with the client’s written agreement. No client, including employee accounts, will be intentionally favored over any other client.
Item 13: Reviews of Accounts
A. Frequency & Nature of Periodic Reviews
Client accounts undergo annual reviews to assess any changes in suitability factors. Additionally, accounts are reviewed quarterly to ensure adherence to client investment and asset allocation strategies. Reviews are also conducted in response to triggering events such as the receipt of new funds, changes in financial status, significant shifts in the market environment, or requests to liquidate a substantial portion of the portfolio. The assigned advisers or Investment Committee conduct reviews with support from Compliance and Operations team members.
Financial planning accounts are reviewed upon the creation and delivery of the financial plan by the presenting adviser. There is a single level of review encompassing the entire process of creating the financial plan. Financial plans are typically updated annually based on relevant information provided by the client, such as changes in income, retirement status, and other pertinent factors. B. Factors That Will Trigger a Non-Periodic Review of Client Accounts
Non-periodic reviews are typically triggered by significant market, economic, or political events, or by changes in a client’s financial circumstances, such as retirement, job termination, relocation, or inheritance.
B. Factors That Will Trigger a Non-Periodic Review of Client Accounts
Non-periodic reviews are typically triggered by significant market, economic, or political events, or by changes in a client’s financial circumstances, such as retirement, job termination, relocation, or inheritance.
C. Content & Frequency of Regular Reports Provided to Clients
Unless otherwise instructed by the client, each client receives a written statement detailing their account assets and value from their chosen qualified custodian at least annually, but typically on a quarterly basis. Greenwood Capital generally provides quarterly statements to direct clients, and typically does not provide statements to Dual Contract or Sub-Adviser clients, as these clients receive regular reports directly from those providers.
Item 14: Client Referrals and Other Compensation
A. Economic Benefits Provided by Third Parties for Advice Rendered to Clients
Greenwood Capital does not receive any economic benefit, directly or indirectly from any third party for advice made to our clients. As a result of our various business partnerships, we receive full or partial economic benefit through additional products and services made available to us by those business partnerships, which benefit us but may not directly benefit you or your account. These products and services assist us in managing and administering our clients’ accounts as well as managing our business. They include investment research, educational conferences and events, consulting on technology, compliance, legal and business needs, publications and conferences on practice management, and marketing consulting. We can choose to use none, some or all of these available services.
B. Compensation to Non–Advisory Personnel for Client Referrals
Participating Greenwood Capital employees and consultants that are not advisory personnel will receive a part of the first full year’s investment advisory fee for any client obtained by Greenwood Capital through the employee’s referral. As part of the TCB family of financial services, Greenwood Capital participates in an internal referral program. Employees within TCB Corporation that are not employees of Greenwood Capital will indirectly receive a referral reward for any client obtained by us through the individual’s referral. Greenwood Capital has entered into a cash compensation agreement directly with eligible employees of Countybank, Countybank Mortgage Services (a division of Countybank), and Countybanc Insurance Services, Inc. (a subsidiary of Countybank) for solicitation of accounts. Compensation for these services is detailed in the Agreement between us and each individual participating employee.
Furthermore, Greenwood Capital has entered into a cash compensation agreement with Retirement Strategies & Solutions, LLC (“RS&S”) for the solicitation of accounts. Compensation for these services is detailed in the agreement between us and RS&S. Other cash compensation agreements may be executed as appropriate for applicable parties.
Prospects introduced to us through these referral efforts receive a disclosure document detailing the agreement and the calculation methodology for the compensation provided to the referring party. All paid promoter fees paid under these agreements are included in the investment advisory fees paid by the client, and no additional charges are imposed to cover these fees.
Item 15: Custody
Client assets are maintained with qualified custodians. You should receive regular statements from your qualified custodian unless you have instructed the custodian otherwise. We urge you to carefully review your custodial statements and compare the official custodial records to the portfolio statements we provide you when indicated by your Investment Advisory Agreement. Based on your relationship with us, you may not receive portfolio statements. Our statements will vary from custodial statements based on accounting procedures, reporting dates, pricing sources, or valuation methodologies of certain securities.
Greenwood Capital does not act as a qualified custodian for client assets. However, with written authority, we will invoice your selected custodian directly for payment of our investment advisory fee when due and you have instructed your custodian to debit your account for said fee, unless otherwise negotiated. If you chose to allow this direct fee deduction by your custodian, Greenwood Capital has constructive custody over that account and must have written authorization from you to do so.
At a client’s request, Greenwood Capital will evaluate, and potentially implement the ability for Greenwood Capital to process disbursement requests in accordance with the client’s instructions, as outlined in a Standing Letter of Authorization (SLOA) on file with the client’s qualified custodian.
Item 16: Investment Discretion
For those client accounts where Greenwood Capital provides ongoing supervision, the client has given us written discretionary authority over their accounts with respect to securities to be bought or sold and the amount of securities to be bought or sold. Details of this relationship are fully disclosed to the client before any advisory relationship has commenced. The client provides Greenwood Capital discretionary authority via the written agreement and in the limited power of attorney provision contained in the new account paperwork and contract between the client and the custodian.
Greenwood Capital does not exercise discretion over individual client accounts invested in private funds. Each client investing in private funds determines whether and how much to invest, and in which class(es) to participate.
Item 17: Voting Client Securities (Proxy Voting)
If authorized by the client through the Investment Advisory Agreement, Greenwood Capital assumes responsibility for voting proxies concerning all managed securities within a client’s portfolio. To ensure the utmost diligence and alignment with client interests, Greenwood Capital has adopted and implemented policies and procedures that we believe are reasonably designed to ensure proxies are voted in our clients’ best interest. As per our policy, we engage an independent vendor, Broadridge, to issue proxy voting guidance, manage the voting process in accordance with that guidance, and maintain proxy records.
Following Broadridge’s guidelines, we typically vote with management on routine matters that are not anticipated to substantially impact the company or shareholders economically. However, in cases of significant conflicts of interest, we prioritize the client’s best interests and resolve conflicts, accordingly, adhering to our proxy voting policy guidelines.
We coordinate with each custodian to ensure the timely receipt of proxies. Should any custodian encounter limitations in this process, affected clients will be promptly notified of our inability to vote proxies. Clients retain the right to request a detailed record of proxy votes cast on their behalf, as well as a full copy of our Proxy Voting Policy & Procedures, available upon request.
Item 18: Financial Information
A. Balance Sheet
Greenwood Capital does not require nor ask for prepayment of any fees in advance and therefore does not need to include a balance sheet with this brochure.
B. Financial Conditions Reasonably Likely to Impair Ability to Meet Contractual Commitments to Clients
Neither Greenwood Capital nor its management have any financial conditions that are likely to reasonably impair our ability to meet contractual commitments to clients.
C. Bankruptcy Petitions in Previous Ten Years
Greenwood Capital has not been the subject of a bankruptcy petition in the last ten years (or ever).
