Form CRS

Relationship Summary

June 2020

Item 1: Introduction

Carmichael Hill and Associates, Inc. is an investment adviser registered with Securities and Exchange Commission (SEC). Our services and compensation structure differ from that of a registered broker-dealer, and it is important that you understand the differences. Free and simple tools are available to research firms and financial professionals at investor.gov/CRS. The site also provides educational materials about broker-dealers, investment advisers, and investing. The italicized questions appearing in the text boxes below are intended to be “conversation starters” for you to ask us.

Item 2: Relationships and Services

What investment services and advice can you provide me?

We provide discretionary portfolio management and financial planning services to individuals, trusts, and estates (i.e. retail investors) on a fee-only basis as part of our standard investment advisory engagement. We manage portfolios based on your unique investment objectives, risk tolerance, investment time horizon, withdrawal requirements and other special circumstances. We manage portfolios on a discretionary basis, which means we have the authority to buy and sell investments in your account without speaking to you before doing so. However, you can place reasonable restrictions on the securities that we buy and sell by notifying us in writing. We do not limit the type of securities we trade, but primarily construct and manage portfolios consisting of exchange listed securities, mutual funds, exchange traded funds (ETFs), individual bonds, bond funds, and cash.

In limited circumstances, we may choose to provide financial planning services on a separate fee basis. When we provide financial planning services, we rely upon the information provided by you for our financial analysis and do not verify any such information. We do not have a minimum account size or any proprietary investment offerings. Securities are monitored continually and discussed weekly at investment committee meetings.

For more detailed information about our services, please see items two and five of the firm’s disclosure Form ADV Part 2A brochure. This brochure can be found here: https://adviserinfo.sec.gov/firm/summary/105213

Given my financial situation, should I choose an investment advisory service? Why or why not?

How will you choose investments to recommend to me?

What is your relevant experience, including your licenses, education, and other qualifications? What do these qualifications mean?

Item 3 – Fees, Costs, Conflicts, and Standard of Conduct

What fees will I pay?

We offer financial planning and investment advisory services for a single combined fee. The fee is billed quarterly in arrears and is based upon the amount of assets under our management at the end of the quarter. The annual fee will typically be charged as a percentage of assets under management at a tiered rate ranging from 1.5% to .35%. These fees are typically collected directly from the accounts that we manage; however, you also have the option to pay directly by check. We also offer fixed project fees and hourly fees for financial planning clients without ongoing investment monitoring. Our fees may be negotiable in certain circumstances. Your investment assets will be held with a qualified custodian. Our fees do not include brokerage commissions, transaction fees, account fees, and other related costs and expenses charged by brokers, custodians, and other third parties. Mutual funds, closed-end funds, exchange traded funds, and exchanged traded notes may also charge expenses that are exclusive of and in addition to our fee.

Our fees are assessed regardless of whether any securities are bought or sold during the billing period. You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.

For more detailed information about fees and costs related to our services, please see item three of our Form ADV Part 2A brochure. This brochure can be found here: https://adviserinfo.sec.gov/firm/summary/105213

Help me understand how these fees and costs might affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?

What are your legal obligations to me when acting as my investment adviser? How else does your firm make money and what conflicts of interest do you have?

When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the investment advice we provide you. As an example, we may recommend a custodian to custody your assets and we may receive support services and/or products from the same custodian. This may help us to better monitor and service your account(s) while a portion of the support may be for the benefit of our firm. In addition, we may recommend rollovers out of employer-sponsored retirement plans into individual retirement accounts that we manage for an asset-based fee. If we don’t currently manage your account held with your employer’s plan, this will increase our compensation.

How might your conflicts of interest affect me, and how will you address them?

For more detailed information about our conflicts of interest, please see our Form ADV Part 2A brochure. This brochure can be found here: https://adviserinfo.sec.gov/firm/summary/105213

How do your financial professionals make money?

Financial professionals receive a fixed salary, discretionary year-end bonuses and potentially variable incentive pay. The incentive pay is based on the total amount of money the professional brings to and subsequently maintains at the firm. This presents a conflict of interest as financial professionals may give more attention to clients for whom they receive incentive pay over clients for whom they do not.

Item 4: Disciplinary History

Do you or your financial professionals have legal or disciplinary history?

No. We encourage you to visit investor.gov/CRS for a free and simple search tool to research our financial professionals.

Item 5 – Additional Information

You can request up to date information by contacting our Chief Compliance Officer at (301) 217-9300. You can also visit our website at https://carmichael-hill.com or request a copy of the firm’s disclosure Form ADV Part 2A found here: https://adviserinfo.sec.gov/firm/summary/105213

As a financial professional, do you have any disciplinary history? For what type of conduct?

Who is my primary contact person? Is he or she a representative of an investment adviser or a broker-dealer?

Who can I talk to if I have concerns about how this person is treating me?

Form CRS

Conversation Starters

June 2020

 

Given my financial situation, should I choose an investment advisory service? Why or why not?

It depends. Many people seek out an advisor when there is a big change in their life, such as a new baby, retirement, inheritance, or a job change to name a few. This isn’t an exhaustive list and you may find additional value in other areas. Utilizing an investment advisor can give you greater confidence in your investment plan, potentially reduce your anxiety around market fluctuations and provide you with additional time in your day by performing tasks you would otherwise be required to do.

It is important to understand the fees you will pay, as this is arguably a drawback to utilizing an investment advisory service. Moreover, you should ensure that you trust and have confidence in the advisory service.

We encourage you to take advantage of a complementary first meeting with us to see if we can help in your situation. We believe that there is value added from using a fee only investment advisory service and working with a financial professional.

 

How will you choose investments to recommend to me?

We gather information on your goals, time horizon, risk tolerance, and tax situation to determine what kinds of investments may be appropriate for you. We then select specific securities from the wide universe of investments offered through our custodian, Charles Schwab & Co. We primarily use fundamental analysis to select the specific securities for you, but also consider charting, technical, and cyclical analysis in making our decisions. We also use third-party investment research providers to help inform our opinions of capital markets and certain individual securities.

 

What is your relevant experience including your licenses, education, and other qualifications? What do these qualifications mean?

We have over three decades of experience providing retirement planning and investment advisory services as an independent, fee-only registered investment advisor. Our advisors are college educated, hold either the FINRA series 65 or series 66 license, and carry the CERTIFIED FINANCIAL PLANNER™ designation (CFP®).

FINRA is a self-regulatory organization. By law, any individual offering investment advisory services in the United States must hold either the series 65 or series 66 license.

The CFP® certification is awarded by the Certified Financial Planner Board of Standards, Inc, a non-governmental 501(c)(3) non-profit, and is considered one of the highest standards in the industry. It is the formal recognition of expertise in financial planning, including insurance, taxes, estate planning, retirement planning, investment management, and college planning.

 

Help me understand how these fees and costs affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?

Our fee schedule is published on our website and filed with the Securities and Exchange Commission (SEC). The fee for assets under our management that total less than $250,000 is 1.5% of the balance management. For a $10,000 investment, our total annual fee would be $150 (assuming no growth or loss in the account). Our fee does not include other third-party expenses which serve to increase your total cost, such as custodial fees or internal fund management fees.

Our fees are billed quarterly in arrears, which means that we asses fees after the current quarter has drawn to a close. Fees are typically deducted directly from the account and are based on the total value of all your investments under our management on the last day of the quarter. Billing in this way will reduce your amount invested. You may also pay fees out-of-pocket with a check to avoid having them drawn from your account(s).

 

How might your conflicts of interests affect me and how would you address them?

We are a fiduciary advisor, which means that we have a legal obligation to do what is in your best interest at all times and to put your interests ahead of our own. However no advisory relationship can ever completely eliminate conflicts of interest.

The firm has written policies and adopted a code of ethics to help mitigate conflicts of interest. We take reasonable measures to avoid and/or manage conflicts of interest when they appear. The firm’s Chief Compliance Officer (CCO) regularly reviews and updates the policies to ensure ongoing compliance with applicable state and federal laws. We’ve highlighted several examples of these conflicts below:

  • Our advisors are eligible to receive incentive pay above and beyond their regular salaries based on the total amount of money the advisor brings to and subsequently maintains at our firm. This creates a conflict of interest as the advisor may favor and spend more time with clients for whom they receive incentive pay over clients for whom they do not. The CCO monitors this through the prior required approval of all new business and ongoing supervisory reviews of accounts.
  • With our billing structure, we have an incentive to encourage you to move your investment accounts to our management as it would increase our revenue. Moving your account to our management may not always be in your best interest, particularly if it would materially increase the total costs you pay and/or would require you to realize a substantial tax consequence. We mitigate this by informing you of this conflict of interest at the time of the recommendation and explaining the alternative options to what we recommend. The decision to utilize our services must ultimately come from you.
  • We receive free access to third-party research and technology services from Charles Schwab & Co, Inc. as part of our partnership with them. This could create a conflict of interest if the benefits we receive from Schwab take precedent over your needs, which includes fess and expenses charged by the custodian as well as the overall quality of their platform. We mitigate this through our annual vendor due diligence review, which includes a review of their financial strength, reputation, our historical relationship with them, execution capabilities, pricing, research, and service.

 

As a financial professional, do you have any disciplinary history? For what type of conduct?

None of the financial professionals at Carmichael Hill have any disciplinary history.

 

Who is my primary contact person? Is he or she a representative of an investment adviser or broker-dealer? Who can I talk to if I have concerns about how that person has treated me?

We employ a firm-wide, team approach to managing our client relationships. We encourage you to get to know our full team as any employee will generally be able to help you, however the advisor that normally emails you and performs reviews and meetings would generally be the primary contact person. Our back-office team may be the main point of contact for certain perfunctory administrative tasks.

All financial professionals at Carmichael Hill are investment advisor representatives and are not affiliated with a broker-dealer.

We do our best to make sure that our clients feel respected and valued. We encourage open communication and in the unlikely event that you feel you were treated unfairly, please let us know. All concerns should be ultimately directed to James Stewart, who is the owner and CCO at Carmichael Hill.