Q. Does Kays Financial Advisory Corporation receive compensation from clients other than the fee it charges?
A. No. Very important to the integrity of our service is the fact that the only remuneration we receive are the fees our clients pay us. We believe this eliminates any conflict of interest between our clients and us.
Q. Does KFAC charge a setup fee for its discretionary money management services?
A. No. When a client engages us, the initial quarterly fee is pro-rated for the remainder of the first quarter of service. After that, a client is billed on a calendar quarterly basis.
Q. Are clients locked into a long-term contract?
A. No. A client may terminate their relationship with KFAC at any time. Clients who do so will be provided with a pro-rata refund for the remainder of the quarter in which they cancelled.
Q. How often does KFAC make trades in clients’ accounts?
A. KFAC does not make trades at set intervals, but rather we make trades as we deem them to be appropriate.
Mutual fund/ETF trades may result from changing the allocation of a portfolio. For example, if we eliminate small cap growth stocks from an allocation, then we would liquidate any small cap growth stock funds.
Also, we may not be changing the allocation of a portfolio, but an investment manager we are using may begin to consistently underperform other managers in their category. For instance, maybe we believe that a particular sector of the market continues to offer good value, but the fund we are using for that sector is performing poorly. In that situation, we could transfer clients' assets from the underperforming manager to a better performing manager.
We generally sell an individual stock for any of four reasons: 1. Its price no longer represents a good value, 2. Deteriorating growth prospects or financial condition, 3. We need to sell a current holding to make room in the portfolio for a better opportunity, and 4. We realize we made a mistake in our analysis. It is usually better to admit mistakes early and move on rather than wait and hope a negative situation improves.
If we sell a stock for any of the above reasons and it meets our buy criteria in the future, we may reacquire the stock at a later date.
Q. What protects KFAC’s clients from KFAC personnel running off with clients’ money?
A. We have all read horror stories of advisers running off with their clients' money. To protect our clients, KFAC has put several security measures in place:
First, when advisers abscond with clients' money, generally the adviser has taken a full power of attorney over their clients' assets. In such cases, clients usually make their investment checks payable to the adviser (or an entity controlled by the adviser) who can then distribute the funds as they deem appropriate. The adviser is free to move the client's money around between various accounts at different financial institutions.
KFAC takes only a limited power of attorney over clients' accounts. This gives us the ability to make trades within clients' accounts, but it does not give us access to their money. Clients' investment checks are made payable to the custodian, not to KFAC. This way, clients' investment money never passes through KFAC's hands.
Second, because clients' assets are custodied at a national brokerage firm, clients receive periodic (usually monthly) statements directly from that brokerage firm. This effectively prevents KFAC from sending out fraudulent statements. We reconcile client data in our system with that in the brokerage firm's system on a daily basis. Therefore, the quarterly reports we send clients should tie-in directly to their statements from the brokerage firm.
Third, whenever KFAC makes a trade in a client's account, the custodian immediately sends out a confirmation of the trade to the client. This alerts the client to any activity in their account very quickly. All transactions conducted the previous month are also delineated on the client's monthly brokerage statement. Additionally, clients can track their account information online.
Q. What government entity regulates registered investment advisory firms like Kays Financial Advisory Corporation?
A. Kays Financial Advisory Corporation is registered with the Securities and Exchange Commission as an investment adviser. Therefore, KFAC is required to maintain extensive records regarding activity in clients’ accounts and is subject to periodic inspections by the SEC.
Q. Can I transfer money from another financial institution for KFAC to manage?
A. Certainly. A significant percentage of the money we manage came to us as a result of clients transferring assets from other firms. If the money is invested in securities at the other firm, we will work with clients to determine if the investments themselves should be transferred, or if it would be more appropriate to liquidate the assets and transfer the cash.
Q. Can KFAC manage IRA money?
A. Currently, over half the money we manage is in IRA accounts. The major portion of these assets were rolled over from 401(k) and 403(b) plans, but we can manage contributory and Roth IRA’s as well.
Q. How much does KFAC charge for its full-time money management services?
A. A listing of all fees can be found in our Form ADV Schedule F.
Q. Does KFAC prepare tax returns or legal documents?
A. KFAC does not prepare tax returns or draft legal documents for clients, though we may review these documents for clients. When necessary we will recommend CPAs and/or Estate Planning attorneys.