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.
425 Main St.
Greenwood, SC 29646
Post Office Box 3181
Greenwood, SC 29648
201 W. McBee Ave.
Greenville, SC 29601
Registration does not imply a certain level of skill or training.
Version Date: 2022.3.31
Item 2: Material Changes
The following material changes have been made to the brochure since our last annual filing, March 26, 2021 and are incorporated into this filing effective March 31, 2022:
Greenwood Capital has expanded its investment education consulting and investment management services to qualified group retirement plans that are offered in an unbundled solution, whereby plan sponsors (typically employers) engage a third-party administrator, a record-keeper, and Greenwood Capital as the investment advisor. The plan sponsor may also engage a separate investment adviser for discretionary or non-discretionary investment advice. If the plan sponsor selects Greenwood Capital as a discretionary investment manager, we will also function as a fiduciary as defined by the Employee Retirement Investment Security Act (ERISA).
We made updates in the following sections as it relates to this service:
- Item 4.A: Expanded the definition of our advisory business to include qualified group retirement plans.
- Item 4.B: Added a section to further describe our services in offering qualified group retirement plans utilizing a third-party administrator.
- Item 5: The fee schedule, and payment of fees to include these services.
Other updates are not material in nature and were made to provide clarity.
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
A. Description of the Advisory Firm
Greenwood Capital Associates, LLC is a limited liability company organized under the state laws of South Carolina. Greenwood Capital was formed and registered with the Securities and Exchange Commission (SEC) in 2001. At that time, we acquired substantially all of the assets of Greenwood Capital Associates, Inc., an independent registered investment adviser founded in 1983. 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.
We manage more than $1.5 billion in assets. Our Wealth team of Private Client Advisors provides (B.1) investment advisory services for individuals, families, foundations, endowments and trusts. Our team of Investment Managers develops and provides (B.2) 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.3) group qualified retirement planning consulting services and optional group retirement plan investment management through a third-party administrator.
B. Types of Advisory Services
1. Investment Advisory ServicesOur Private Client Advisors provide investment advice to you regarding your investment assets based on your individual needs. as shared by you through various client profile questions. Depending on if you are a natural person or an institution, and the complexity of your financial situation and specific service requests, advisors will typically document and review the following information: (1) financial situation, (2) risk tolerance, (3) investment horizon, (4) liquidity needs, (5) tax considerations, (6) investment objectives, (7) estate considerations; and, (8) any other issues important to you. You should also notify us promptly of any changes in your financial situation, investment objectives, or needs.
Based on the nature of our relationship with you and your specific needs, a Private Client Advisor can also provide additional advisory services as described below:
Financial Planning: Comprehensive financial planning is an evaluation of a client’s current and future financial state by using currently known variables to model your future overall financial picture. Financial planning typically includes, but is not limited to, investment planning, life insurance, tax concerns, retirement planning, college planning, and debt/credit planning. We typically provide these services to clients with aggregate assets under management greater than $1 million.
In order to make informed recommendations, we gather detailed information through in-depth interviews and a review of personal and financial documents. After careful review and analysis, we make recommendations tailored towards your personal goals and objectives.
Should you choose to implement any of our recommendations, we suggest you work closely with your attorney, accountant, insurance agent, and/or other professional advisers. In the event you do not have established relationships with professional(s) to implement certain recommendations, we are able to suggest professionals to you. Our recommendations for industry professionals could include working with experts from various financial service entities or divisions owned by TCB Corporation, including Countybank, Countybank Trust Services, Countybank Mortgage, Countybanc Insurance Services, Inc., and/or Countybanc Investment Services, Inc. All clients should be aware that the ownership relationship between TCB, its family of financial services, and Greenwood Capital, presents a conflict of interest. We place our clients’ interests at the forefront in any recommendations made for affiliated services, and clients are not obligated to purchase any of these recommended services.
Retirement Advice: In the course of advising on you on your overall investment outlook, we could provide you advice regarding rollovers and distributions from retirement accounts. A recommendation to increase assets under management at Greenwood Capital is a conflict of interest. We place our clients’ interest at the forefront of any recommendations to consolidate assets at Greenwood Capital, and clients are not obligated to act on these recommendations. In providing estimates for required minimum distributions (RMDs), Greenwood Capital, nor its Advisors, provide tax advice, nor assume responsibility for the calculation. It is recommended that you review any RMD calculations with a tax accountant, tax attorney or other professional tax provider.
2. Institutional Investment ManagementOur Investment Managers provide discretionary investment management to individual/ institutional investors as described:
Investment Management: Utilizing our proprietary investment strategies, Greenwood Capital utilizes both Separately Managed Accounts (SMA) and Unified Managed Accounts (UMA) to meet specific investment objectives for investment advisory clients and mandates from institutional clients. Depending on client investment direction and objectives, a single investment strategy or a diversified asset allocation portfolio will be developed. Separately Managed Accounts are monitored for alignment to the established asset allocation (if applicable) and rebalanced on an as needed basis. Unified Managed Accounts are rebalanced quarterly. Accounts could also be rebalanced if a client event (e.g. contribution/distribution) occurs in either the SMA or UMA.
Sub-Advisory Services: A sub-advisory relationship occurs when we contract with another Registered Investment Adviser, Broker-Dealer, or Custodian to provide discretionary investment advisory services to their advisory clients. 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. These clients sign 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 regards 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
In working with a third-party administrator (TPA), Greenwood Capital provides two types of services to qualified group retirement plans: investment education consulting and discretionary investment management. Consulting typically includes education on fiduciary responsibilities for plan sponsors, and general investment education regarding diversification, risk/return, time horizon, etc. for participants. Discretionary investment management includes investment educational consulting services, as well as providing investment allocation models to the TPA, which participants utilize 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.
Services Limited to Specific Types of InvestmentsGreenwood Capital generally limits its Investment Advisory services and institutional Investment Management to equities, fixed income, debt securities, ETFs, real estate, mutual funds, hedge funds, REITs (real estate investment trusts), private placements, and government securities. We might use other securities as well 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 in accordance with 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:
February 28, 2022
A. Fee Schedule
Greenwood Capital offers services on a fee-only basis. Depending on the custodian you select, you could 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 the complexity of the situation; the final fee schedule is included in a written agreement. Greenwood Capital fees are typically paid quarterly in arrears, based on the total market value of the account, including cash. 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|
|Balance above $3,000,000||.60%|
2. Institutional Investment Management
|Type of Account||Annual Management Fee|
|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
|Balance above $3,000,000||.60%|
3. Group Retirement Plans Utilizing a Third-Party Administrator
|Investment Education Consulting||.50% (minimum $500)|
|Discretionary Investment Management||
First $2 million 1.00%
Next $1 million .80%
Balance above $3 million .60%
Financial Planning Fees: Private Client Advisors offer financial planning services on a case-by-case basis as outlined in a Financial Planning Engagement Letter. There is currently no charge for this service; however, we reserve the right to charge clients if services requested are beyond the scope of our typical services. 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 the calculation of their RMD 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, and clients and/or their financial advisor can terminate their contracts by providing written notice as outlined in the Investment Advisory Agreement. The fee is calculated based on the total market value of the account, including cash, based on the terms 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 specific manner in which fees are charged by us is outlined and agreed upon in the written agreement. We calculate fees in arrears on a quarterly or monthly basis. Clients typically authorize us to instruct custodians to debit their account(s) for the calculated fee. Clients can also elect to be invoiced directly for fees.
Payment for Retirement Consulting and/or Investment Management: The specific manner 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: If a fee were charged, payment terms would 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 specific manner in which fees are calculated and paid is outlined and agreed upon in the written agreement. We calculate fees in arrears on a quarterly or monthly basis. 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.
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 “unsupervised.” 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. If this is done, 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, 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. These fees 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. 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.
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.
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.
We generally provide investment advisory services and investment management to the following types of clients:
- 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 account minimum of $250,000 can be waived, based on the needs of the client and the complexity of the situation.
A. Methods of Analysis and Investment Strategies
Methods of Analysis
Our methods of analysis include charting, fundamental, technical, and cyclical analyses. Investment and Asset Allocation analysis and selection, utilizing these methods, are performed by our Investment Committee.
Charting analysis involves the use of patterns in performance charts. We use this technique to search for patterns used to help predict favorable conditions for buying and/or selling a security. Fundamental analysis involves the analysis of financial statements, the general financial health of a company, and/or the analysis of management or competitive advantages. Technical analysis involves the analysis of past market data; primarily price and volume. Cyclical analysis involves the analysis of business cycles to find favorable conditions for buying and/or selling a security.
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, with regard to 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
Charting analysis involves using and comparing various charts to predict long- and short-term performance or market trends. The risk involved in solely using this method is that only past performance data is considered. Using charting analysis without other methods of analysis would be assuming that past performance would be indicative of future performance.
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.
Technical analysis attempts to predict a future stock price or direction based on market trends. 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.
Investment StrategiesLong-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 risk of loss that clients should be prepared to bear. All investments carry a certain amount of risk and Greenwood Capital cannot guarantee that it will achieve specific investment objectives. An investment is not a deposit or obligation of any bank, is not endorsed or guaranteed by any bank, and is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. You could lose money.
With any investment, there is a 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 a management risk that a strategy may fail to 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 utilized 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 risks 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 type 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. 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.
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 risk of loss that you, as a client, should be prepared to bear.
There are no disciplinary matters to report, including criminal or civil actions, administrative proceedings, or self-regulatory organization proceedings.
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 currently owns 83% of Greenwood Capital Associates, LLC. TCB is also the holding company for its wholly-owned subsidiary, Countybank, which includes Countybank Trust Services, and Countybank Mortgage. At the client’s direction Countybank Trust Services provides trustee and/or custodial services for our clients. Clients of Greenwood Capital could also be clients of Countybank or its affiliates Countybanc Insurance Services, Inc., and/or Countybanc Investment Services, Inc. Our clients are not obligated to purchase any products, including insurance and/or investments, through any company within the TCB family of companies.
Greenwood Capital provides sub-advisory services to Countybank Trust Services, an affiliated qualified custodian. Countybank Trust Services is under no obligation to utilize Greenwood Capital to provide investment management services to its clients.
Various firm investment adviser representatives are licensed insurance agents. From time-to-time, they will offer clients insurance advice or recommend products. Clients should be aware that if they act upon a recommendation to purchase life insurance, and/or other insurance solutions, Greenwood Capital and the investment adviser representative (that is also a licensed insurance agent), will share in the revenue received by Countybanc Insurance Services, Inc. for the written insurance policy. Greenwood Capital acts in the best interest of the client; including the recommendation of insurance products and the sale of commissionable products to advisory clients. Clients are in no way required to act upon an insurance recommendation through any representative of Greenwood Capital in their capacity as an insurance agent, or Countybanc Insurance Services, Inc. as 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 Greenwood Capital 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, the employees of Greenwood Capital will buy or sell securities for themselves that are also recommended to clients. This provides an opportunity for employees to buy or sell the same securities before or after recommending the same securities to clients. This could result in an employee benefiting from the market activity generated by recommended client trades in a security also held by an employee. In an effort to mitigate this conflict, Greenwood Capital employees, when aware, are instructed to transact client business before their own when similar securities are being bought or sold. Additionally, Greenwood Capital monitors all employee personal trading activity and evaluates the timing of employee trades in comparison to client trades. If the employee is in a position to have known of a client trade in the same security (C.) and at the same time (D.) as their own trade, the employee relinquishes any profits that resulted above a de minimis amount.
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 maintained in an account at a qualified custodian of your choosing if we receive automated data from your selected custodian. We do not open your account for you, although we can assist you in doing so. 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 the course of providing our investment services, Greenwood Capital will execute trades for clients through various broker-dealers. When selecting broker-dealers to place your trades, we consider the amount and nature of research, existing relationships, price, execution quality, and reputation; and, other services provided by the brokers, and the extent to which we rely on them (described below). Our selection of a broker-dealer to execute transactions for client accounts is not determined by the lowest possible transaction cost. The determining factor is whether the broker-dealer can provide, in our view, the best execution for client accounts.
Research and Other Soft-Dollar BenefitsSection 28(e) of the Securities Exchange Act of 1934 permits us (under certain circumstances) to pay a broker-dealer a commission for effecting a transaction (equity and fixed income trades) in excess of the amount of commission another broker-dealer charged for effecting the same transaction. This additional commission is paid in recognition of the value of brokerage and research services provided by the broker-dealer. This practice is referred to as a “soft dollar” arrangement.
When we use client brokerage commissions (or markups or markdowns) to obtain research or other products or services, we receive a benefit because we do not have to produce or pay for the research, products or services ourselves. Since the amount of compensation or the products or services received vary depending on the broker-dealer recommended for client use we have a conflict of interest in making that 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 you, and our other clients. Therefore, commissions and other fees for transactions executed through the broker-dealer could be higher than commissions, and other fees, available if you use another broker-dealer to execute transactions. Unless a client specifically directs otherwise by indicating a specific broker-dealer where we do not have a soft dollar arrangement, client accounts are available to participate in soft dollar arrangements. 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.
Research products and services we receive are in addition to, and not instead of, the services performed under our advisory agreements. Any advisory or other fees paid are not reduced as a result of the receipt of soft dollar services. These services typically include:
- Furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities;
- Effecting securities transactions and performing functions incidental thereto (such as clearance, allocation, settlement, and custody); and,
- Furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts.
Soft dollar products and services are received in written form, through access to applications/technology, and directly from an individual (such as an analyst). Information as to particular companies and securities, as well as market, economic, or institutional areas and information, that assists in the valuation and pricing of investments could also be included.
Brokerage Step-Outs Greenwood Capital utilizes “step-out trades” when we determine that it facilitates better execution for certain client trades. Step-out trades are transactions which are placed at one broker-dealer and then “stepped out” by that broker-dealer to another broker-dealer for credit. Step-out trades benefit the client by finding a natural buyer or seller of a particular security so that we can trade a larger block of shares more efficiently or by allowing us access to greater liquidity for a particular security. Unless directed otherwise by the client, we can use step-out trades for any account. We also utilize step-out trades to accommodate a client’s directed brokerage mandate. In the case of directed brokerage accounts, trades are often executed through a particular broker-dealer and then “stepped-out” to the directed brokerage firm for credit. In circumstances where we have followed the client’s instructions to direct brokerage, there can be no assurance that we will be able to step-out the trades. If we are able to step-out the trades, there also can be no assurance we will be able to obtain overall best execution than if we had not stepped-out the trades. If we believe it is in the best interest of our client, we will step-out trades to participate in soft dollar benefits.
Brokerage Dual Contract Programs Clients that participate in a dual contract program should understand that the primary investment adviser can direct us to use a designated broker-dealer for securities transactions. In such circumstances, we will not be able to negotiate fees and commissions, and we are not be able to obtain overall best execution from these directed broker-dealers. In order to access all available liquidity, we will utilize step-out trades as permitted by the financial adviser in a dual contract. In the event that 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. Although these clients have already paid a fee that includes commissions on transactions executed through the designated broker, any transactions executed away from the designated broker on a step-out basis can result in the client paying a commission, concession, or a dealer mark-up or mark-down, or other fees associated with the execution and/or settlement of that transaction.
Brokerage for Client Referrals Greenwood Capital does not direct client transactions in exchange for referrals. However, clients who are referred to us by particular broker-dealers typically direct us to execute transactions through the referring broker-dealer. This creates a conflict of interest between client interest in obtaining best execution and our interest in 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 We allow all clients to direct brokerage and custodial services through their written agreement if we have an operational relationship with the client’s preferred broker-dealer/custodian. We may be unable to achieve the most favorable execution of client transactions if clients choose to direct brokerage. This could result in higher trading expenses, as without the ability to direct brokerage we are not be able to aggregate orders to reduce transactions costs which could result in higher brokerage commissions and less favorable prices. If the Financial Adviser in the Managed Account Agreement permits brokerage step-outs, if we believe it is in the best interest of the client, we will step-out transactions for both fixed, and/or equity trades (see description above).
Trade Allocation It is Greenwood Capital’s procedure to place trade orders for non-broker directed clients first, before placing any orders for the same security for 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
We utilize block trading, which is 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 represents the average of the prices at which all of the transactions in a given block were executed. Executing a block trade allows transaction costs to be shared equally and on a pro-rata basis among all of the participating clients. Block trading typically enables us to incur lower transaction costs or achieve better execution for clients. If the order is not completely filled, the security purchased or sold is distributed among participating clients on a pro-rata basis, or in some other equitable manner.
Block trades are placed when it is reasonably believed that the combination of the transactions provides better prices for clients than placing individual transactions. Transactions for our employees are included in block trades. They receive the same average price and pay the same commissions, and other transaction costs as clients. In the case of a partial fill, employee accounts receive a pro-rata distribution of the securities based on their pro-rata portion of the pre-trade order. We are not obligated to include any client account in a block trade. Block trades will not be effected for any client account if doing so is prohibited, or otherwise inconsistent, with that client’s written agreement. No client, including employee accounts, will be intentionally favored over any other client.
A. Frequency & Nature of Periodic Reviews
Client accounts are reviewed at least annually for any changes in suitability factors. In addition, accounts are reviewed quarterly for adherence to client investment and asset allocation strategy. Accounts are also reviewed upon triggering events such as: receipt of new money, change in financial condition, a significant change in the market environment, or request to liquidate and distribute a significant portion of the portfolio. The Advisers assigned to the account, or Investment Committee, are responsible for such reviews.
All financial planning accounts are reviewed upon financial plan creation and plan delivery by the presenting adviser. There is only one level of review and that is the total review conducted to create the financial plan.
B. Factors That Will Trigger a Non-Periodic Review of Client Accounts
Reviews are typically triggered by material market, economic or political events, or by changes in a client’s financial situations (such as retirement, termination of employment, physical move, or inheritance).
C. Content & Frequency of Regular Reports Provided to Clients
Unless the client has instructed the custodian otherwise, each client receives a written statement that details the client’s account assets and value from their selected qualified custodian at least annually (typically quarterly).
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 rendered 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 portion 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 solicitation/marketing 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 Solicitation Agreement between us and each individual participating employee.
Greenwood Capital has also entered into a solicitation 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.
Each client obtained through solicitation efforts will receive a solicitation disclosure document with details of the solicitation agreement and the calculation methodology of the compensation that the solicitor will receive. All solicitation/referral fees paid to individuals are included in the investment advisory fees paid by the client and NO additional charges are added to cover these solicitation/referral fees.
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.
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.
As authorized by the client, Greenwood Capital has authority, pursuant to our written agreement with clients, to vote proxies for all securities maintained in a client’s portfolio. Greenwood Capital has adopted and implemented policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the client’s best interest.
We generally vote with management on routine matters related to the operation of the company that are not expected to have a significant economic impact on the company or shareholders. In instances where material conflicts of interest exist, we will resolve any such conflict by voting any such proxies in the best interest of the clients. In doing so, we will follow the guidelines and factors set forth in our proxy voting procedures. We will work with each custodian to ensure receipt of proxies. However, if the custodian is not able to facilitate this procedure, clients will be notified that we will not be voting the proxies. Clients can request a record of how proxies were voted on behalf of their accounts. Also, clients can request a complete copy of our Proxy Voting Policy & Procedures upon request.
A. Balance Sheet
Greenwood Capital does not require nor solicit 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).