Legal

 

EXHIBITS

________

 

1

Firm Brochure……………………….. 3

2

Wrap Account Brochure...….....22

3

4

5

6

Services Agreement ………….….. 42Covers Automated Services:

  • Basic Account
  • Premium Account

Full Service Agreement………. 57

  • Institutional & Family

Wealth Advisory Account

Notice and Consent to ………….. 59

Electronic Signatures

Privacy Policy………………….…….. 61

 

Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at www.adviserinfo.sec.gov.

Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, the brochures are available to the public on the IAPD website.

 

WRAP FEE BROCHURE

Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at www.adviserinfo.sec.gov.

Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, the brochures are available to the public on the IAPD website.

 

Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at www.adviserinfo.sec.gov.

Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, the brochures are available to the public on the IAPD website.

Part 2A of Form ADV: Firm Brochure

ITEM 1 – COVER PAGE

EF Hutton Investments LLC

One Main Street

Springfield, OH 45502

937-323-2000

www.efhutton.com/investments

Date of Disclosure Brochure:   July 2017

This brochure provides information about the qualifications and business practices of EF Hutton Investments LLC (also referred to we, us, and “EF Hutton”), a registered investment adviser.

Registration does not imply a certain level of skill or training.  If you have any questions about the contents of this brochure, please contact us at support@efhutton.com.    

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 EF Hutton is available on the SEC’s website at www.adviserinfo.sec.gov.  You can view our firm’s information on this website by searching for EF Hutton Portfolio Solutions, LLC or our firm’s CRD number 285108.

ITEM 2 – MATERIAL CHANGES

Since filing the last annual amendment to this brochure in March 2017, we have moved the firm’s principal office location and place of business to Springfield, Ohio.  See the cover page of the brochure for the address and contact information.  Slight changes were made to Item 5 to emphasis services provided through our firm’s interactive website.  We also removed Dave Winn from Item 13 and replaced him with Hugh Rhodes as responsible for developing investment models, determining appropriate rebalancing procedures and leading all reviews.

 

We will ensure that you receive a summary of any material changes to this and subsequent disclosure brochures within 120 days after our firm’s fiscal year ends.  Our firm’s fiscal year ends on December 31, so you will receive the summary of material changes no later than April 30 each year.  At that time we will also offer or provide a copy of the most current disclosure brochure.  We may also provide other ongoing disclosure information about material changes as necessary.

ITEM 3 – TABLE OF CONTENTS

ITEM 2 – MATERIAL CHANGES 2

ITEM 3 – TABLE OF CONTENTS 3

ITEM 4 – ADVISORY BUSINESS 3

ITEM 5 – FEES AND COMPENSATION 7

ITEM 6 - PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT 10

ITEM 7 – TYPES OF CLIENTS 10

ITEM 8 – METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS 11

ITEM 9 – DISCIPLINARY INFORMATION 13

ITEM 10 – OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS 14

ITEM 11 – CODE OF ETHICS, PARTICIPATION IN CLIENT TRANSACTIONS AND PERSONAL TRADING 15

ITEM 12 – BROKERAGE PRACTICES 15

ITEM 13 – REVIEW OF ACCOUNTS 17

ITEM 14 – CLIENT REFERRALS AND OTHER COMPENSATION 18

ITEM 15 – CUSTODY 18

ITEM 16 – INVESTMENT DISCRETION 18

ITEM 17 – VOTING CLIENT SECURITIES 19

ITEM 18 – FINANCIAL INFORMATION 19

CUSTOMER PRIVACY POLICY NOTICE 20

ITEM 4 – ADVISORY BUSINESS

EF Hutton Investments, LLC (“EF Hutton”) is an SEC registered investment adviser firm formed as a Wyoming limited liability company.  We provide investment management services primarily through a web-based application to our clients.  We are also available to work with clients on an individual, in-person basis. 

Christopher J. Daniels is the controlling owner of EF Hutton through intermediary subsidiaries.  Stanley Hutton Rumbough holds a material ownership stake.

Formed in May 2015, we have been in business as an investment adviser since August 25, 2016.  EF Hutton acquired the investment advisor registration of Phoenix Investments through a proper succession filing.  Phoenix Investments deemed it appropriate to transfer its investment adviser registration to EF Hutton effective August 25, 2016. 

Description of Interactive Web-Based Investment Management Services

EF Hutton offers investment management services by providing you continuous and ongoing supervision over your specified accounts.  Our services are provided through an interactive website using computer-based models and applications to collect your information and provide investment advice.

Services are provided through our website at www.efhutton.com/investments; our mobile apps and through co-branded pages and widgets hosted by third-party vendors that have contracted to offered our platform (collectively the “Website”).  EF Hutton’s online platform allows clients to:

• View financial accounts in an easily accessible interface;

• Monitor and analyze investment positions;

• Receive real-time and delayed market data and news;

• Determine portfolio performance and other analytics;

• Create and modify mock portfolios and back-test investment ideas;

• Receive recommendations and information about investments; and,

EF Hutton’s technology enables you to transfer their account data securely onto EF Hutton’s secure user platform. You then have the ability to see their entire consolidated portfolio in one place, regardless of which account or how many accounts they have or what firms at which those accounts are held.

To determine your financial situation and investment objectives, we will need to obtain certain information from you through our interactive website.  You will be responsible for providing any changes to your financial situation or investment objectives by updating your responses on our interactive website.   

Investment recommendations and decisions are made based solely upon algorithms that determine your needs based on existing investment position, risk tolerance, investment goals and transaction history (as provided by you via the EF Hutton website).

Each individualized portfolio is designed to be consistent with your investment objectives and risk tolerances. We create an investment plan and manage your portfolio by seeking to identify: 1) the optimal asset classes in which to invest, 2) efficient investments to represent each of those asset classes, 3) the ideal mix of asset classes based on your specific risk tolerance, 4) the most appropriate time to rebalance your portfolio to maintain intended risk tolerance and optimal return for your risk level.  EF Hutton will tailor its allocation and investment management strategies based on your risk tolerance. 

EF Hutton primarily utilizes mutual funds and Exchange Traded Funds (ETFs) for client portfolios.  We may also use individual stock and bond positions for tax loss harvesting purposes and investment style. Please see Item 8 - Methods of Analysis, Investment Strategies and Risk of Loss for a description of the types of investments we provide advice on and strategies we use. EF Hutton’s online also allows you to:

• View financial accounts in an easily accessible interface;

• Monitor and analyze investment positions;

• Receive real-time and delayed market data and news;

• Determine portfolio performance and other analytics;

• Create and modify mock portfolios and back-test investment ideas; and

• Receive recommendations and information about investments.

You must appoint our firm as your investment adviser of record on specified accounts (collectively, the “Account”).  The Account consists only of separate account(s) held by qualified custodian(s) under your name by TD Ameritrade, Inc. which serves as qualified custodian and broker/dealer.  As qualified custodian, TD Ameritrade, Inc., maintains physical custody of all funds and securities of the Account, and you retain all rights of ownership (e.g., right to withdraw securities or cash, exercise or delegate proxy voting and receive transaction confirmations) of the Account.  Please see Item 12 – Brokerage Practices for more information regarding TD Ameritrade, Inc. 

It is important that you understand that we manage investments for other clients and may give them advice or take actions for them or for our personal accounts that is different from the advice we provide to you or actions taken for you.  We are not obligated to buy, sell or recommend to you any security or other investment that we may buy, sell or recommend for any other clients or for our own accounts.

Conflicts may arise in the allocation of investment opportunities among accounts that we manage.  We strive to allocate investment opportunities believed to be appropriate for your account(s) and other accounts advised by our firm among such accounts equitably and consistent with the best interests of all accounts involved.  However, there can be no assurance that a particular investment opportunity that comes to our attention will be allocated in any particular manner.  If we obtain material, non-public information about a security or its issuer that we may not lawfully use or disclose, we have absolutely no obligation to disclose the information to any client or use it for any client’s benefit.

Standard vs. Premium Services

EF Hutton offers standard Web-Based Investment Services that are available to any investor for a lower cost compared to the Premium service which is available to investors seeking a wider range of investment choices and a more complex set of portfolio components.  Such portfolios are designed to focus on   more specialized investment goals.

Administrative Service Providers

EF Hutton has contracted with and pays unaffiliated, third-party service providers to utilize their investment software technology.  The service providers are not investment advisers or broker/dealers, but work with investment advisory firms, like EF Hutton, to help develop, customize, and implement web based, interactive investment advisory services and deliver services to clients. Service providers support our firm by providing such things as a customized website, website administration, risk questionnaire, portfolio implementation and rebalancing.  They also provide assistance with fee calculation, billing, and provide other functions related to the administrative tasks of managing client accounts.  Due to this arrangement, service providers will have access to EF Hutton client accounts and client information, but will not serve as an investment advisor to EF Hutton clients.  Service providers will obtain access to client account and client information.  Fees we pay to service providers for their administrative and platform services come from the management fees we charge to client accounts.  You will not pay a separate or additional fee directly to the service provider.  Please refer to Item 5 – Fees and Compensation for details about the fees charged for our services.

Direct-Client Asset Management Services

In addition to our internet-based service, we work with a select number of clients on a traditional, one-on-one, in-person basis by providing continuous and ongoing supervision over your specified accounts. Through this service we will typically utilize our web-based platform to manage your account and provide services.

For the one-on-one services, you must appoint EF Hutton as your investment adviser of record on specified accounts (collectively, the “Account”). The Account consists only of separate account(s) held under your name by TD Ameritrade, which serves as custodian and broker/dealer for execution of certain transactions.

The Account is managed by us based on your financial situation, investment objectives and risk tolerance.  We actively monitor the Account and provide advice regarding buying, selling, reinvesting, or holding securities, cash or other investments of the Account.

We will need to obtain certain information from you to determine your financial situation and investment objectives. You will be responsible for notifying us of any updates regarding your financial situation, risk tolerance or investment objective and whether you wish to impose or modify existing investment restrictions; however we will contact you at least annually to discuss any changes or updates regarding your financial situation, risk tolerance or investment objectives.  We are always reasonably available to consult with you about the status of your Account.  You have the ability to impose reasonable restrictions on the management of your accounts, including the ability to instruct us not to purchase certain securities.

It is important that you understand that we manage investments for other clients and may give them advice or take actions for them or for our personal accounts that is different from the advice we provide to you or actions taken for you.  We are not obligated to buy, sell or recommend to you any security or other investment that we may buy, sell or recommend for any other clients or for our own accounts.

Conflicts may arise in the allocation of investment opportunities among accounts that we manage.  We strive to allocate investment opportunities believed to be appropriate for your account(s) and other accounts advised by our firm among such accounts equitably and consistent with the best interests of all accounts involved.  However, there can be no assurance that a particular investment opportunity that comes to our attention will be allocated in any particular manner.  If we obtain material, non-public information about a security or its issuer that we may not lawfully use or disclose, we have absolutely no obligation to disclose the information to any client or use it for any client’s benefit.

Recommendation of Unaffiliated Sub-Advisers 

For certain investment strategies, we utilize unaffiliated, third-party investment advisers serving as “Sub-Advisers” to manage all or a portion of your assets.  Therefore, we may recommend Sub-Advisers to you that we have screened and qualified.  EF Hutton evaluates all such Sub-Advisers pursuant to a predetermined set of criteria prior to accepting any Sub-Adviser onto the EF Hutton network. EF Hutton will review the investment adviser’s assets under management, investment experience, disciplinary history, past performance, and numerous other factors. Further the investment adviser must agree to share a percentage of any investment advisory fees from the clients with EF Hutton. Clients are encouraged to conduct their own research into any recommended investment adviser, including, but not limited to consulting with independent tax, legal or financial advisers as necessary. Clients are encouraged to consider their individual circumstances, risk tolerance and needs prior to following any EF Hutton generated recommendation.

Any Sub-Adviser selected by EF Hutton shall be registered or exempt from registration in your home state. The recommendation of a Sub-Adviser shall be made on a non-discretionary basis.  The decision to use a Sub-Adviser is always based on each client’s individual needs. A complete description of the third-party investment advisor’s services acting as Sub-Adviser, fee schedules and account minimums will be disclosed in the third-party investment advisor’s Form ADV Disclosure Brochure which will be provided to clients at the time an account is established with the Sub-Adviser. 

We are always available to answer questions you may have regarding the portion of your account managed by the Sub-Adviser and act as the communication conduit between you and the Sub-Adviser.  Sub-Advisers will generally take discretionary authority to determine the securities to be purchased and sold for your accounts. 

Tailor Advisory Services to Individual Needs of Clients

Investment recommendations are generated from an algorithm that incorporates each Clients’ existing investment portfolio, risk profile and investment objectives as provided to EF Hutton by the Client. EF Hutton utilizes the Client’s existing portfolio information to make recommendations for investments in similar securities based on a limited number of factors (for example, past performance of the securities, associated fees, etc.). Such recommendations are based solely on the on the information and data filed by the issuers of securities with various government regulators or made directly available to EF Hutton by such issuers, or indirectly through other third party sources. Although EF Hutton, through its software, evaluates such information and data, EF Hutton is not in a position to confirm the completeness, genuineness or accuracy of such information and data, and in some cases complete and accurate information is not readily available.

Our services are always provided based on the individual needs of each client.  This means, for example, that you are given the ability to impose restrictions on the accounts we manage for you, including specific investment selections and sectors.  We determine client information through questionnaires and fact-finding information to determine the client’s investment objectives and suitability information.

We manage client accounts in accordance with one or more investment models.  When client accounts are managed using models, investment selections are based on the underlying model and we do not develop customized (or individualized) portfolio holdings for each client.  However, the determination to use a particular model or models is always based on each client’s individual investment goals, objectives and mandates.

Wrap Fee Programs

Our investment management services are considered wrap-fee programs.  A wrap-fee program is defined as any advisory program under which a specified fee or fees not based directly upon transactions in a client’s account is charged for investment advisory services (which may include portfolio management or advice concerning the selection of other investment advisers) and the execution of client transactions.  Whenever a fee is charged to a client for services described in this brochure (whether wrap fee or non wrap fee), we will receive portion of the fee charged.

Assets Under Management

As a newly registered investment adviser, EF Hutton has no assets under management to report as of the date of this Brochure (July 2017).

ITEM 5 – FEES AND COMPENSATION

Fees charged for our services are charged based on a percentage of assets under management, billed in arrears (at the end of the billing period) on a quarterly monthly basis and calculated based on the fair market value of your accounts as of the last business day of the current billing period. 

Fees are prorated (based on the number of days service is provided during the initial billing period) for your account opened at any time other than the beginning of the billing period.  If asset management services are commenced in the middle of the billing period, then the prorated fee for that billing period will be billed in arrears at the end of that billing period.

Fees are charged in accordance with the following fee schedule which covers the compensation earned by our firm and any Sub-Advisers selected to assist with the management of your accounts.  In addition to the investment advisory services, fees collected also cover all brokerage transaction (i.e. trade ticket) expenses and fees assessed by TD Ameritrade. 

Criteria

Type

Account

Balance

(based on average balance)

Fees

Interactive Web-Based Investment Management Services

Standard

Fully-Self Directed

Automated Investment Management

  • No assigned advisor representative
  • E-mail statement
  • Can open account with a little as $200
  • Advisor Representative Web Consultation for:

o Financial Planning Advice

o Review of Investment Strategies

o No individualized advice

Less than $25,000

40 basis points per year

$3.00 account opening fee

$3.00 per month

$25,000 to $100,000

30 basis points per year

No account opening fee

No monthly charge

Online chat Consult with Advisor available

Over $100,000

25 Basis points per year

No account opening fee

No monthly charge

Online chat consult with Advisor available

     

Premium

Self-Directed With Advisor Assistance

Automated Investment Management

  • Wider range of portfolio choices and investment alternatives
  • Assigned advisor representative

o Available for interactive web

  • E-mail Statement
  • Requires $250,000 minimum to open account

Minimum $250,000

No account opening fee

No monthly fee

50 basis points

Full  Client Asset Management Services

Full Service – Dedicated Advisor

EF Hutton Full Service Advisor Representative

For Client’s with more complex investment needs requiring a dedicated personal advisor

  • Dedicated EF Hutton investment advisor representative
  • Investment recommendations
  • Wider set of investment choices including alternatives and Reg. D investments
  • Use of automated / personal service
  • Quarterly performance review
  • Interaction with Client’s Tax Advisor
  • E-mail Statement
  • Requires $500,000 minimum to open account

  

Minimum

$500,000

No account opening fee.

$100 quarterly fee.

-and-

7 basis points (0.07%) per month for a total of 84 basis points (0.84%) annually.

For Investment Accounts, each month the monthly portion of the annual fee based on average daily balance will be charged.

Your exact fee schedule will be detailed in your agreement for services.  Fee schedules are subject to change 60 days after written notice, which may be given via electronic mail. Our fee schedule is fixed and non-negotiable. 

EF Hutton believes that its annual fee is reasonable in relation to:  (1) services provided and (2) the fees charged by other investment advisers offering similar services/programs.  However, our annual investment advisory fee may be higher than that charged by other investment advisers offering similar services/programs.  In addition to our compensation, you may also incur charges imposed at the mutual fund level (e.g., advisory fees and other fund expenses).

How Fees are Collected

Our investment advisory fees will be deducted from your account and paid directly to our firm by TD Ameritrade.  You must designate EF Hutton as your investment adviser on the accounts you’d like EF Hutton to manage.  EF Hutton will be granted limited power-of-attorney on the account to implement trades within the account and (when agreed to by the client) deduct the EF Hutton advisory fees from the account.  TD Ameritrade will send client statements, at least quarterly, showing all disbursements for the account including the amount of the advisory fee deducted directly from the account. 

You should review your account statements received from the qualified custodian(s) and verify that appropriate investment advisory fees are being deducted.  TD Ameritrade will not verify the accuracy of the investment advisory fees deducted.  It is EF Hutton and client’s responsibility to verify the accuracy of EF Hutton’s fee calculation.

Other Fees and Expenses

In addition to the fee charged by our firm which covers our investment advisory services and the transaction/execution services provided by TD Ameritrade, you may incur certain charges imposed by third parties other than EF Hutton in connection with investments made through your account including, but not limited to surrender charges, internal mutual fund expenses IRA and qualified retirement plan fees and non-transaction/execution fees and charges imposed by TD Ameritrade.  Management fees charged by EF Hutton are separate and distinct from the fees and expenses charged by mutual funds that are held in your account.  A description of these fees and expenses are available in each mutual fund prospectus.  We do not receive any portion of such fees or expenses.

We do not accept or receive compensation based on the sale of securities or other investment products such as asset-based sales charges or service fees from the sale of mutual funds, or as a placement agent for any type of securities.

Termination

A client may terminate its advisory relationship at any time upon no more than 30 days prior notice. Upon termination of any account, any earned, unpaid fees will be due and payable. Such fees are prorated based on the number of days left in the billing period

There will be no termination fee; however, client accounts may be subject to a modest cost of reimbursement of fees related to transferring client's account. Such fees would be charged by the client's account custodian and EF Hutton will not receive any portion of such fee.

ITEM 6 - PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT

Not applicable to EF Hutton. EF Hutton does not charge performance-based fees.

ITEM 7 – TYPES OF CLIENTS

EF Hutton provides investment management services to natural person, individual clients and their family accounts.

Our Direct-Client Asset Management Services are available only to high-net worth clients which we define as clients with at least $1,000,000 of investable assets; or income for the last two years that is greater than $200,000 individually or $300,000 with a spouse.

You are required to execute a written agreement with EF Hutton specifying the particular advisory services in order to establish a client arrangement with EF Hutton.

Minimum Investment Amounts Required and Other Conditions

EF Hutton requires a minimum of $200 in order to open an account through our Website.   

Investors evaluating EF Hutton’s web based investment management service should be aware that EF Hutton’s relationship with clients is likely to be different from the “traditional” investment advisor relationship in several aspects:

1. EF Hutton’s internet advisory service is a software based investment advisor which means each client must acknowledge her ability and willingness to conduct her relationship with EF Hutton on an electronic basis. Under the terms of our agreement, each client agrees to receive all account information and account documents (including this Brochure), and any updates or changes to same, through their access to our website and EF Hutton’s electronic communications. Unless noted otherwise on the website or within this Brochure, EF Hutton’s advisory service, the signature for our client agreement, and all documentation related to the advisory services are managed electronically. EF Hutton does make individual representatives available to discuss servicing matters with clients.

2. To provide its advisory services and tailor its investment decisions to each client’s specific needs, EF Hutton collects information from each client, including specific information about their investing profile such as financial situation, investment experience, and investment objectives. EF Hutton maintains this information in strict confidence subject to our Privacy Policy. When customizing our investment solutions, EF Hutton relies upon the information received from a client.  Although EF Hutton contacts its clients periodically as described further in Item 13 below, a client must promptly notify EF Hutton of any change in her financial situation or investment objectives that might require a review or revision of her portfolio.

3. The software based financial advisor service includes preselected ETFs and mutual funds for each asset class within the plan recommended to a client. EF Hutton does not allow clients to select their own investments because each mutual fund and asset class is considered to be part of the overall investment plan. Investors with overly restrictive investment restrictions may not be permitted to become clients.

ITEM 8 – METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

Methods of Analysis and Investment Strategies

As described previously in this brochure, EF Hutton formulates and provides Clients with investment advice via its Website. In all cases, including those where the services are made available through a co-branded partner website, EF Hutton’s web-based platform is powering the investment advisory services and hosting Client data.

As it pertains to Securities and Brokerage Recommendations, EF Hutton’s software platform generates recommendations on the basis of an analysis of investment data, trading patterns and your existing portfolio investments.

When making Securities recommendations, EF Hutton’s algorithms seek to identify better performing and/or lower cost (e.g. lower fees, loads and/or expenses) investment options within the same or a similar category (e.g. tracks the same index, has similar holdings or is within the same category of investment) of investment that your currently hold in your portfolio.

Unlike other types of recommendations generated by EF Hutton, EF Hutton considers your personal characteristics and risk tolerance when assessing the suitability of various Sub-Advisers on our platform. EF Hutton analyzes various information from Sub-Advisers on our platform and then makes a recommendation if EF Hutton deems a Sub-Adviser to be generally suitable for a client.

EF Hutton only recommends Sub-Advisers that utilize the EF Hutton platform. As such EF Hutton recommends Sub-Advisers from a limited group. Clients should be aware that similar investment advisers may be available and Clients are encouraged to compare any investment advisers recommended by EF Hutton to similar investment advisers that do not utilize the EF Hutton platform.

Risk of Loss

Clients are strongly encouraged to conduct their own analysis of, and investigation into, the methodologies employed by EF Hutton in making its recommendations. The fact that a recommendation is generated by EF Hutton’s investment software cannot be interpreted as a guarantee of future performance. Investing in securities involves risk of loss that Clients should be prepared to bear.

EF Hutton conducts its analyses primarily using detailed historical information. As with any investment, past performance is no guarantee of its future success.

EF Hutton relies on third parties for the provision of market statistics, fund details, performance, and related information and although these parties are generally reliable and reputable, there may be inaccuracies or discrepancies in the information that is beyond EF Hutton’s control.

EF Hutton bases its recommendations on information provided by Clients and relies on the Client to provide accurate information. If the Client provides inaccurate information, or does not verify that EF Hutton’s portfolio tracker has accurately captured the Client’s portfolio holdings when syncing with the Client’s account, this will impact the quality and relevance of EF Hutton’s recommendations. As such, Clients are urged to verify any account holdings synced to the user platform for accuracy, as recommendations are based upon such information.

EF Hutton provides recommendations to Clients based on investment software that utilizes various quantitative and qualitative models. Such computer generated recommendations, like all investment recommendations, may be subject to system error. No guarantee or representation is made that the investment recommendations will be successful. EF Hutton may simply fail to identify favorable investment opportunities or to evaluate those investments recommendations accurately that it does make to Clients. Further, as market dynamics (for example, due to changed market conditions and participants) shift over time, a previously highly successful model may become outdated or inaccurate, perhaps without the computer software system recognizing the change before further recommendations are made. As such, Clients are urged to verify any recommendations generated by the EF Hutton software platform with their own legal, financial, tax and economic advisors and to conduct their own due diligence on recommended Securities before following any recommendation. Additionally, there are certain risks associated with utilizing automated investment tools like the one offered by EF Hutton.

  • Our investment tool is programmed to use certain economic assumptions that may not be updated in a timely manner or shifts in the market.
  • The output of the automated investment tool depends upon the accuracy of the information inputted into the tool.
  • There may be certain factors or variables which have not been included in the automated investment tool.  To the extent some questions are over-generalized, ambiguous or designed to fit a pre-determined option, the output may not be right for all investor’s needs or goals.
  • By only using the automated investment service, investors could lose out on the value of human judgment and oversight.  Investors may lose out on these qualities when interacting with only a computer program.

There is no guarantee that a mutual fund or ETF will achieve its objective. The Securities share price fluctuates and investors can lose money by investing in the Securities. Securities may differ from each other in terms of investment style, objectives, management, geographical markets, holdings and numerous other factors. For a full description of the risks inherent in any specific Security, Clients should read the prospectus of the particular Security recommended. EF Hutton only recommends investment advisers that utilize the EF Hutton platform. As such EF Hutton recommends investment advisers from a limited group. Clients should be aware that similar investment advisers may be available and Clients are encouraged to compare any investment advisers recommended by EF Hutton to similar investment advisers that do not utilize the EF Hutton platform.

In making investment recommendations there are a number of factors that EF Hutton does not consider, including but not limited to:

Tax Implications: With the exception of its tax loss harvesting recommendations, EF Hutton does not consider the Client specific tax implications with respect to the recommendations that it makes. In making recommendations to Clients, EF Hutton does not consider the tax characteristics of the individual Client, holding periods of securities, or other similar factors. Each Client must rely on its own examination, and that of its financial, tax and legal advisors in evaluating the merits and risks involved in selecting the Security. Clients should not construe the contents of the Website or any recommendation made by EF Hutton as tax advice. Each Client must rely upon its own representatives as to tax and other aspects of an investment in Securities and as to its suitability for such Client.

Frequency of Trading: With the exception of recommendations specifically focused on the frequency of the Client’s trading (e.g., a recommendation that the Client trade less frequently), EF Hutton does not consider the frequency of a Client’s trading when the proprietary software generates a recommendation. If a Client’s investment approach involves a high level of trading and turnover of the Client’s investments such approach may generate tax implications (such as short-term capital gains) and other similar consequences that could negatively impact the value of the Client’s investment portfolio.

Certain Characteristics of Existing Portfolios: EF Hutton does not consider the restrictions that may be inherent in a Client’s existing investment accounts when making investment recommendations. For example, when making a recommendation to sell a security and replace it with a similar security, EF Hutton does not consider (but attempts to disclose) whether the existing security would be subjected to an early redemption fee if the Client sells such security.

Material Risks of Investing in Mutual Funds and ETF’s Exchange Traded Funds:  An ETF generally is an investment company, unit investment trust or a portfolio of securities deposited with a depository in exchange for depository receipts. The portfolios of ETFs generally consist of common stocks that closely track the performance and dividend yield of specific securities indices, either broad market, sector or international. ETFs provide investors the opportunity to buy or sell throughout the day an entire portfolio of stocks in a single security. Although index mutual funds are similar, their shares are generally issued and redeemed only once per day at market close. Investment in an ETF involves payment of such company’s pro rata share of administrative fees charged by such company, in addition to those paid by a Client.  Mutual Funds. An investment in mutual funds could lose money over short or even long periods. Clients should expect the fund’s share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. A mutual fund’s performance could be impacted by a number of factors including but not limited to: Investment style risk, the chance that returns from small and mid capitalization growth stocks will trail returns from the overall stock market. Historically, small and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Small and mid-size companies tend to have greater stock volatility because, among other things, these companies are more sensitive to changing economic conditions. Stock market risk, the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Manager risk, the chance that a mutual fund manager may make a poor security selection or focus on securities in a particular sector, category, or group of companies will cause the mutual fund to underperform relevant benchmarks or other funds with a similar investment objective.

ITEM 9 – DISCIPLINARY INFORMATION

Neither EF Hutton nor any of its employees have had any administrative proceedings before the SEC, any other federal regulatory agency, any state regulatory agency, or any foreign financial regulatory authority. Neither EF Hutton, nor any of its employees, has had any proceedings before a self-regulatory organization.

ITEM 10 – OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS

EF Hutton is not and does not have a related person that is a broker/dealer, municipal securities dealer, government securities dealer or broker, an investment company or other pooled investment vehicle (including a mutual fund, closed-end investment company, unit investment trust, private investment company or "hedge fund," and offshore fund), a futures commission merchant, commodity pool operator, or commodity trading advisor, a banking or thrift institution, an accountant or accounting firm, a lawyer or law firm, an insurance company or agency, a pension consultant, a real estate broker or dealer, and a sponsor or syndicator of limited partnerships.

Third – Party Investment Advisor Arrangements

As described in Item 4 – Advisory Business, Item 5 – Fees and Compensation, and Item 8 - Methods of Analysis, Investment Strategies and Risk of Loss we recommend independent, third-party investment advisors to serve as Sub-Advisers. 

We do not receive a referral fee or solicitor fee from third-party Sub-Advisers we recommend from clients.  The only compensation we receive is the management fee we charge directly to our clients.   This policy helps us avoid selecting Sub-Advisers based on our economic interests.  Instead, we select Sub-Advisers we believe are most appropriate for our clients absent additional economic benefits we could receive from a money manager.  We will compensate Sub-Advisers from our management fees as described in Item 5.

No Commission Trading Service

EF Hutton enables its clients to trade stocks and options with no commission payment.  EF Hutton offers this service for a single monthly fee in association with a strategic partner whose subsidiary, Tradier Brokerage Inc., is a FINRA-registered broker-dealer.  This trading service is intended to be a convenient method for clients to conduct their personal trading and investing activities through the EF Hutton website which can be accessed online or through any web-enabled mobile device. 

All trade execution is through Tradier Brokerage Inc. and details are provided at trading.efhutton.com.  This service is for clients that want to establish a self-directed account, not managed or using the strategies offered by EF Hutton as described in Item 4 and Item 5 of this brochure.  With this service, EF Hutton also provides a list of high-risk stocks that investors should take extra care to evaluate before investing.  Clients may open one or more trading accounts with Tradier Brokerage Inc. to manage on their own.   Clients utilizing this service will be solely responsible for all investment decisions made in the account and solely responsible for implementing all securities transactions in the account.  EF Hutton will not have access to or authority over, the client’s trading accounts. 

 

Although we do not receive a referral fee or other form of payment from Tradier Brokerage Inc., clients pay a monthly fee to EF Hutton for this service.  The fee covers all applicable trading, transaction and other brokerage related costs and expenses assessed by Tradier Brokerage Inc., excluding exchange fees and certain clearing fees that are charged separately – see trading.efhutton.com for details.  EF Hutton splits a portion of the monthly fee with Tradier Brokerage Inc.  Monthly fees are available on the website at efhutton.com.

 

Clients are not obligated or required to utilize the brokerage services of Tradier Brokerage Inc. and can select the broker/dealer or other custodian of their choosing.  EF Hutton has a right to acquire a minority ownership stake in the parent company of Tradier Brokerage Inc.  Therefore, EF Hutton’s recommendation that clients utilize the self-directed brokerage services of Tradier Brokerage Inc. is based partially on EF Hutton’s consideration of a partial ownership stake.  To mitigate this conflict of interest, Tradier Brokerage Inc. offers unlimited trading with no commission so that EF Hutton has no interest in promoting a volume of trading activity.    

Clients electing to open a trading account must execute all required brokerage new account paperwork and an agreement with Tradier Brokerage Inc. as detailed at trading.efhutton.comClients must also execute an agreement with EF Hutton and agree to pay EF Hutton a monthly charge for electronic trading using Tradier Brokerage Inc.

ITEM 11 – CODE OF ETHICS, PARTICIPATION IN CLIENT TRANSACTIONS AND PERSONAL TRADING

Code of Ethics Summary

As part of EF Hutton’s broader compliance policies and procedures, EF Hutton has established a Code of Ethics that will apply to all of its supervised persons. As a fiduciary, it is an investment adviser’s responsibility to provide fair and full disclosure of all material facts and to act solely in the best interest of each of my clients at all times. EF Hutton has a fiduciary duty to all clients. This fiduciary duty is considered the core underlying principle for EF Hutton’s Code of Ethics which also covers its Insider Trading and Personal Securities Transactions Policies and Procedures.  EF Hutton has the responsibility to make sure that the interests of all clients are placed ahead of EF Hutton’s or its supervised person’s own investment interest. Full disclosure of all material facts and potential conflicts of interest will be provided to clients prior to any services being conducted. EF Hutton strives to conduct business in an honest, ethical and fair manner and avoid all circumstances that might negatively affect or appear to affect my duty of complete loyalty to all clients. This disclosure is provided to give all clients a summary of EF Hutton’s Code of Ethics.

This section is intended to provide a summary description of the Code of Ethics of EF Hutton.  You may receive the EF Hutton Code of Ethics by requesting it from support@efhutton.com.

Affiliate and Employee Personal Securities Transactions Disclosure

EF Hutton or its supervised persons may buy or sell for their personal accounts, investment products identical to those recommended to clients.  This creates a potential conflict of interest. To help control for this conflict of interest, it is the express policy of EF Hutton that all persons associated in any manner with the firm must place the interests of our clients ahead of their own when implementing personal investments.  EF Hutton and its supervised persons shall not buy or sell securities for their personal account(s) where their decision is derived, in whole or in part, by information obtained as a result of his/her employment unless the information is also available to the investing public upon reasonable inquiry.  In addition, securities recommended by EF Hutton are widely held and publicly traded.  Finally, the firm has develop policies and procedures under our Code of Ethics requiring all access persons to report their personal securities holdings and positions to the firm for review and approval.

EF Hutton and its supervised persons do not recommend to clients securities in which EF Hutton or a related person has a material financial interest.  We do not act as principal to our clients; we do not act as general partner in a partnership in which we solicit client investments; and we do not act as an investment adviser to an investment company that we recommend to clients.

ITEM 12 – BROKERAGE PRACTICES

EF Hutton requires that you establish brokerage accounts with TD Ameritrade through their Institutional Platform.  TD Ameritrade, Inc. (“TD Ameritrade”) is a member of FINRA/SIPC. TD Ameritrade is an independent (and unaffiliated) SEC-registered broker-dealer and is utilized by EF Hutton to maintain custody of clients' assets and to effect trades for their accounts. 

At least annually, we will review alternative custodians in the marketplace for comparison to the currently used custodian, evaluating criteria such as overall expertise, cost competitiveness, and financial condition.  Quality of execution for custodians will be reviewed through trade journal evaluations.

EF Hutton is independently owned and operated and not affiliated with TD Ameritrade.

The primary factor in suggesting a broker/dealer or custodian is that the services of the recommended firm are provided in a cost-effective manner. While quality of execution at the best price is an important determinant, best execution does not necessarily mean lowest price and it is not the sole consideration. The trading process of any broker/dealer and money manager suggested by EF Hutton must be efficient, seamless, and straight-forward.  Overall custodial support services, trade correction services, and statement preparation are some of the other factors determined when suggesting a broker/dealer.

TD Ameritrade, Inc. provides us with access to their institutional trading and custody services, which are typically not available to retail investors. These services generally are available to independent investment advisors at no charge to them so long as the independent investment advisors maintain a minimum amount of assets with the custodian.

TD Ameritrade does not charge separately for custody but is compensated by account holders through commissions or other transaction-related fees for securities trades that are executed by recommended money managers through the custodian or that settle into a custodian account.

These benefits include, but are not necessarily limited to: receipt of duplicate client confirmations and bundled duplicate statements; access to a trading desk; access to block trading which provides the ability to aggregate securities transactions and allocate the appropriate shares to client accounts; the ability to have investment advisory fees deducted directly from client accounts; access to an electronic communications network for client order entry and account information; and access to mutual funds that generally require significantly higher minimum initial investments or are generally only available to institutional investors.

TD Ameritrade, Inc. also makes available to us other products and services that benefit our firm but may not benefit clients' accounts. Some of these other products and services assist us in managing and administering clients' accounts. These include software and other technology that provide access to client account data (such as trade confirmation and account statements); provide research, pricing information and other market data; facilitate payment of the firm’s fees from its clients' accounts; and assist with back-office functions; record keeping and client reporting. Many of these services generally may be used to service all or a substantial number of our accounts, including accounts not maintained at a recommended custodian. EF Hutton is also providing other services intended to help our firm manage and further develop our business enterprise. These services may include consulting, publications and conferences on practice management, information technology, business succession, regulatory compliance and marketing.

Directed Brokerage

Clients should understand that not all investment advisors require the use of a particular broker/dealer or custodian.  For compliance and operational efficiencies, EF Hutton has decided to require our clients to use broker/dealers and other qualified custodians determined by EF Hutton.  Some investment advisors allow their clients to select whichever broker/dealer the client decides.  However, EF Hutton believes use of a specific custodian broker/dealer provides long-term value.  It’s important to understand that by requiring clients to use a particular broker/dealer, EF Hutton may not achieve the most favorable execution of client transactions and the practice requiring the use of specific broker/dealers may cost clients more money than if the client used a different broker/dealer or custodian. 

Block Trading Policy

We may elect to purchase or sell the same securities for several clients at approximately the same time.  This process is referred to as aggregating orders, batch trading or block trading and is used by our firm when EF Hutton believes such action may prove advantageous to clients.  If and when we aggregate client orders, allocating securities among client accounts is done on a fair and equitable basis.  Typically, the process of aggregating client orders is done in order to achieve better execution, to negotiate more favorable commission rates or to allocate orders among clients on a more equitable basis in order to avoid differences in prices and transaction fees or other transaction costs that might be obtained when orders are placed independently. 

EF Hutton uses the average price method for transaction allocation.  Under this procedure, transactions will be averaged as to price and will be allocated among the firm’s clients in proportion to the purchase and sale orders placed for each client account on any given day. If and when we determine to aggregate client orders for the purchase or sale of securities, including securities in which EF Hutton or our associated persons may invest, we will do so in accordance with the parameters previously explained and our supervised persons’ personal accounts will not receive favorable or special treatment.  Neither we nor our associated persons receive any additional compensation as a result of block trades.

ITEM 13 – REVIEW OF ACCOUNTS

Account Reviews and Reviewers

EF Hutton’s software based investment advisor service assumes that a portfolio will not stay optimized over time and must be periodically rebalanced back to its original targets to maintain the intended risk level and asset allocations. EF Hutton reviews each client’s account when it is opened, and continuously monitors and periodically rebalances each client’s portfolio to seek to maintain a client’s targeted risk tolerance and optimal return for the client’s risk level. EF Hutton also conducts reviews when material changes may have occurred to a client’s portfolio or investment objectives.

On a quarterly basis, EF Hutton contacts each client to remind them to review and update the profile information they previously provided. EF Hutton also requests that clients reconfirm the same information on an annual basis. These notifications and confirmations include a link to the client’s current information and contact information.

Currently Hugh Rhodes, EF Hutton’s Director of Individual Investments and Investment Adviser Representative, is responsible for developing investment models, determining appropriate rebalancing procedures and leading all reviews.

Statements and Reports

EF Hutton sends periodic account summary emails to clients, which periodic reports include information regarding your portfolio, including performance, top movers (up and down) and performance versus a relevant index. The reports also include top news stories. EF Hutton also sends other periodic or event inspired reports based upon market or portfolio activity. In addition, when clients login to the EF Hutton service, they can view their portfolio performance, asset allocation, dividends, key statistics and portfolio ratios and geographic allocation data, among other information.

Additionally, clients will receive monthly or quarterly brokerage account statements and confirmations from TD Ameritrade.

ITEM 14 – CLIENT REFERRALS AND OTHER COMPENSATION

EF Hutton does not directly or indirectly compensate anybody for client referrals.

Other than the receipt of investment advisory fees detailed in Item 5 of this brochure, EF Hutton receives no other compensation in connection with our web-based, investment management services.

ITEM 15 – CUSTODY

Custody, as it applies to investment advisors, has been defined by regulators as having access or control over client funds and/or securities.  In other words, custody is not limited to physically holding client funds and securities.  If an investment adviser has the ability to access or control client funds or securities, the investment adviser is deemed to have custody and must ensure proper procedures are implemented. 

EF Hutton is deemed to have custody of client funds and securities whenever EF Hutton is given the authority to have fees deducted directly from client accounts.  However, this is the only form of custody EF Hutton will ever maintain.  It should be noted that authorization to trade in client accounts is not deemed by regulators to be custody.

We have established procedures to ensure all client funds and securities are held at a qualified custodian in a separate account for each client under that client’s name.  Clients or an independent representative of the client will direct, in writing, the establishment of all accounts and therefore are aware of the qualified custodian’s name, address and the manner in which the funds or securities are maintained.  Finally, account statements are delivered directly from the qualified custodian to each client, or the client’s independent representative, at least quarterly.  Clients should carefully review those statements and are urged to compare the statements against reports received from EF Hutton.  When clients have questions about their account statements, they should contact EF Hutton or the qualified custodian preparing the statement.

ITEM 16 – INVESTMENT DISCRETION

When providing our Interactive Web-Based Investment Management Services and our Direct-Client Asset Management Services, EF Hutton maintains trading authorization over your Account and will most often provide management services on a discretionary basis.  When discretionary authority is granted, we will have the authority to determine the type of securities, the amount of securities that can be bought or sold for your portfolio without obtaining your consent for each transaction. 

If agreed upon by our firm at the request of a client, a client may grant trading authorization on a non-discretionary basis.  In these cases, we will be required to contact you prior to implementing changes in your account.   Therefore, you will be contacted and required to accept or reject our investment recommendations including:

  • The security being recommended
  • The number of shares or units
  • Whether to buy or sell

Once the above factors are agreed upon, we will be responsible for making decisions regarding the timing of buying or selling an investment and the price at which the investment is bought or sold.  If your accounts are managed on a non-discretionary basis, you need to know that if we are not able to reach you or you are slow to respond to our request, it can have an adverse impact on the timing of trade implementations and we may not achieve the optimal trading price. 

You will have the ability to place reasonable restrictions on the types of investments that may be purchased in your Account.  You may also place reasonable limitations on the discretionary power granted to EF Hutton so long as the limitations are specifically set forth or included as an attachment to the client agreement.

ITEM 17 – VOTING CLIENT SECURITIES

EF Hutton does not vote proxies on behalf of clients.  We have determined that taking on the responsibilities for voting client securities does not add enough value to the services provided to you to justify the additional compliance and regulatory costs associated with voting client securities.  Therefore, it is your responsibility to vote all proxies for securities held in Account.

You will receive proxies directly from the qualified custodian or transfer agent; we will not provide you with the proxies.  You are encouraged to read through the information provided with the proxy-voting documents and make a determination based on the information provided.

ITEM 18 – FINANCIAL INFORMATION

This Item 18 is not applicable to this brochure.  EF Hutton does not require or solicit prepayment of more than $1,200 in fees per client, six months or more in advance.  Therefore, we are not required to include a balance sheet for the most recent fiscal year.  We are not subject to a financial condition that is reasonably likely to impair our ability to meet contractual commitments to clients.  Finally, EF Hutton has not been the subject of a bankruptcy petition at any time.

CUSTOMER PRIVACY POLICY NOTICE

Regulation S-P, Privacy of Consumer Financial Information, requires financial institutions, including EF Hutton to provide notice to current clients and prospective clients about their policies and practices concerning the collection and use of customer, non-public information.  This privacy policy notice is given to all prospective clients of EF Hutton upon entering into a contract with EF Hutton and annually thereafter.

Privacy Disclosure Statement.  A primary goal of EF Hutton is to protect the privacy of its clients.  EF Hutton does not sell the personal information of clients to anyone. To conduct regular business, EF Hutton may collect non-public personal information from clients.  This information is provided by clients to EF Hutton on applications and other forms provided by clients to EF Hutton as well as transactions with the firm, our affiliates, or others.

Information Safeguarding.  EF Hutton has implemented strict policies and procedures aimed at protecting the sensitive nature of client information.  EF Hutton restricts access to client information to only those members of EF Hutton that must provide products and services to clients in order to service client accounts.  EF Hutton has implemented physical, electronic, and procedural safeguards aimed at meeting EF Hutton’ duty to protect non-public client information.

Use and Disclosure of Customer Information to Provide Customer Service for Client Accounts To administer, manage and service customer accounts, process transactions and provide related services for client accounts, it is necessary for EF Hutton to provide access to Customer Information within the Firm and its affiliated companies and to non-affiliated companies such as other investment advisers, broker-dealers, trust companies, custodians and insurance companies.  EF Hutton may also provide Customer Information outside of the Firm as permitted by law, such as to government entities, consumer reporting agencies or other third parties in response to subpoenas.

Since EF Hutton shares nonpublic information solely to service client accounts, our firm does not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.  However, we may also provide customer information outside of the firm as required by law, such as to government entities, consumer reporting agencies or other third parties in response to subpoenas.  In the event that our firm has a change to its customer privacy policy that would allow it to disclose non-public information not covered under applicable law, we will allow our clients the opportunity to opt out of such disclosure.

If you have any questions concerning EF Hutton’s customer privacy policy or concerns about your personal information please feel free to contact us at the phone number listed on the cover page of this brochure.

Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at www.adviserinfo.sec.gov.

Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, the brochures are available to the public on the IAPD website.

 

Part 2A Appendix 1 of Form ADV: Wrap Fee Program Brochure

ITEM 1 – COVER PAGE

EF Hutton Investments LLC

One Main Street

Springfield, OH 45502

937-323-2000

www.efhutton.com/investments

Date of Disclosure Brochure:   July 2017

This wrap fee program brochure provides information about the qualifications and business practices of EF Hutton Investments LLC (also referred to we, us, and “EF Hutton”), a registered investment adviser.

Registration does not imply a certain level of skill or training.  If you have any questions about the contents of this brochure, please contact us at support@efhutton.com.    

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 EF Hutton is available on the SEC’s website at www.adviserinfo.sec.gov.  You can view our firm’s information on this website by searching for EF Hutton Portfolio Solutions, LLC or our firm’s CRD number 285108.

ITEM 2 – MATERIAL CHANGES

Since filing the last annual amendment to this brochure in March 2017, we have moved the firm’s principal office location and place of business to Springfield, Ohio.  See the cover page of the brochure for the address and contact information.  Slight changes were made to Item 4 to emphasis services provided through our firm’s interactive website.  We also removed Dave Winn from Item 9 and replaced him with Hugh Rhodes as responsible for developing investment models, determining appropriate rebalancing procedures and leading all reviews.

 

We will ensure that you receive a summary of any material changes to this and subsequent disclosure brochures within 120 days after our firm’s fiscal year ends.  Our firm’s fiscal year ends on December 31, so you will receive the summary of material changes no later than April 30 each year.  At that time we will also offer or provide a copy of the most current disclosure brochure.  We may also provide other ongoing disclosure information about material changes as necessary.

ITEM 3 – TABLE OF CONTENTS

ITEM 2 – MATERIAL CHANGES 2

ITEM 3 – TABLE OF CONTENTS 3

ITEM 4 – SERVICES, FEES AND COMPENSATION 3

ITEM 5 – ACCOUNT REQUIREMENTS AND TYPES OF CLEINTS 10

ITEM 6 – PORTFOLIO MANAGER SELECTION AND EVALUATION 11

ITEM 7 – CLIENT INFORMATION PROVIDED TO PORTFOLIO MANAGERS 15

ITEM 8 – CLIENT CONTACT WITH PORTFOLIO MANAGERS 16

ITEM 9 – ADDITIONAL INFORMATION 16

CUSTOMER PRIVACY POLICY NOTICE 19

ITEM 4 – SERVICES, FEES AND COMPENSATION

EF Hutton Investments, LLC (“EF Hutton”) provides investment management services primarily through a web-based application to our clients.  We are also available to work with clients on an individual, in-person basis. 

Our investment management services are considered wrap-fee programs.  A wrap-fee program is defined as any advisory program under which a specified fee or fees not based directly upon transactions in a client’s account is charged for investment advisory services (which may include portfolio management or advice concerning the selection of other investment advisers) and the execution of client transactions.  Whenever a fee is charged to a client for services described in this brochure (whether wrap fee or non wrap fee), we will receive portion of the fee charged.

Description of Interactive Web-Based Investment Management Services

EF Hutton offers investment management services by providing you continuous and ongoing supervision over your specified accounts.  Our services are provided through an interactive website using computer-based models and applications to collect your information and provide investment advice.

Services are provided through our website at www.efhutton.com/investments; our mobile apps and through co-branded pages and widgets hosted by third-party vendors that have contracted to offered our platform (collectively the “Website”).  EF Hutton’s online platform allows clients to:

• View financial accounts in an easily accessible interface;

• Monitor and analyze investment positions;

• Receive real-time and delayed market data and news;

• Determine portfolio performance and other analytics;

• Create and modify mock portfolios and back-test investment ideas;

• Receive recommendations and information about investments; and,

EF Hutton’s technology enables you to transfer their account data securely onto EF Hutton’s secure user platform. You then have the ability to see their entire consolidated portfolio in one place, regardless of which account or how many accounts they have or what firms at which those accounts are held.

To determine your financial situation and investment objectives, we will need to obtain certain information from you through our interactive website.  You will be responsible for providing any changes to your financial situation or investment objectives by updating your responses on our interactive website.   

Investment recommendations and decisions are made based solely upon algorithms that determine your needs based on existing investment position, risk tolerance, investment goals and transaction history (as provided by you via the EF Hutton website).

Each individualized portfolio is designed to be consistent with your investment objectives and risk tolerances. We create an investment plan and manage your portfolio by seeking to identify: 1) the optimal asset classes in which to invest, 2) efficient investments to represent each of those asset classes, 3) the ideal mix of asset classes based on your specific risk tolerance, 4) the most appropriate time to rebalance your portfolio to maintain intended risk tolerance and optimal return for your risk level.  EF Hutton will tailor its allocation and investment management strategies based on your risk tolerance. 

EF Hutton primarily utilizes mutual funds and Exchange Traded Funds (ETFs) for client portfolios.  We may also use individual stock and bond positions for tax loss harvesting purposes and investment style. Please see Item 8 - Methods of Analysis, Investment Strategies and Risk of Loss for a description of the types of investments we provide advice on and strategies we use. EF Hutton’s online also allows you to:

• View financial accounts in an easily accessible interface;

• Monitor and analyze investment positions;

• Receive real-time and delayed market data and news;

• Determine portfolio performance and other analytics;

• Create and modify mock portfolios and back-test investment ideas; and

• Receive recommendations and information about investments.

You must appoint our firm as your investment adviser of record on specified accounts (collectively, the “Account”).  The Account consists only of separate account(s) held by qualified custodian(s) under your name by TD Ameritrade, Inc. which serves as qualified custodian and broker/dealer.  As qualified custodian, TD Ameritrade, Inc., maintains physical custody of all funds and securities of the Account, and you retain all rights of ownership (e.g., right to withdraw securities or cash, exercise or delegate proxy voting and receive transaction confirmations) of the Account. 

It is important that you understand that we manage investments for other clients and may give them advice or take actions for them or for our personal accounts that is different from the advice we provide to you or actions taken for you.  We are not obligated to buy, sell or recommend to you any security or other investment that we may buy, sell or recommend for any other clients or for our own accounts.

Conflicts may arise in the allocation of investment opportunities among accounts that we manage.  We strive to allocate investment opportunities believed to be appropriate for your account(s) and other accounts advised by our firm among such accounts equitably and consistent with the best interests of all accounts involved.  However, there can be no assurance that a particular investment opportunity that comes to our attention will be allocated in any particular manner.  If we obtain material, non-public information about a security or its issuer that we may not lawfully use or disclose, we have absolutely no obligation to disclose the information to any client or use it for any client’s benefit.

Standard vs. Premium Services

EF Hutton offers standard Web-Based Investment Services that are available to any investor for a lower cost compared to the Premium service which is available to investors seeking a wider range of investment choices and a more complex set of portfolio components.  Such portfolios are designed to focus on   more specialized investment goals. 

Administrative Service Providers

EF Hutton has contracted with unaffiliated, third-party service providers to utilize their software technology.  The service providers are not investment advisers or broker/dealers. These service providers support our firm by providing such things as a customized functionality, website administration, risk questionnaire, portfolio implementation and rebalancing.  They also provide assistance with fee calculation, billing, and provide other functions related to the administrative tasks of managing client accounts.  Due to this arrangement, service providers will have access to EF Hutton client accounts and client information, but will not serve as an investment advisor to EF Hutton clients.  Fees we pay to service providers for their administrative and platform services come from the management fees we charge to client accounts.  You will not pay a separate or additional fee directly to the service provider.  Please refer below for details about the fees charged for our services.

Direct-Client Asset Management Services

In addition to our internet-based service, we work with a select number of clients on a traditional, one-on-one, in-person basis by providing continuous and ongoing supervision over your specified accounts. Through this service we will typically utilize our web-based platform to manage your account and provide services.

For the one-on-one services, you must appoint EF Hutton as your investment adviser of record on specified accounts (collectively, the “Account”). The Account consists only of separate account(s) held under your name by TD Ameritrade, which serves as custodian and broker/dealer for execution of certain transactions.

The Account is managed by us based on your financial situation, investment objectives and risk tolerance.  We actively monitor the Account and provide advice regarding buying, selling, reinvesting, or holding securities, cash or other investments of the Account.

We will need to obtain certain information from you to determine your financial situation and investment objectives. You will be responsible for notifying us of any updates regarding your financial situation, risk tolerance or investment objective and whether you wish to impose or modify existing investment restrictions; however we will contact you at least annually to discuss any changes or updates regarding your financial situation, risk tolerance or investment objectives.  We are always reasonably available to consult with you about the status of your Account.  You have the ability to impose reasonable restrictions on the management of your accounts, including the ability to instruct us not to purchase certain securities.

It is important that you understand that we manage investments for other clients and may give them advice or take actions for them or for our personal accounts that is different from the advice we provide to you or actions taken for you.  We are not obligated to buy, sell or recommend to you any security or other investment that we may buy, sell or recommend for any other clients or for our own accounts.

Conflicts may arise in the allocation of investment opportunities among accounts that we manage.  We strive to allocate investment opportunities believed to be appropriate for your account(s) and other accounts advised by our firm among such accounts equitably and consistent with the best interests of all accounts involved.  However, there can be no assurance that a particular investment opportunity that comes to our attention will be allocated in any particular manner.  If we obtain material, non-public information about a security or its issuer that we may not lawfully use or disclose, we have absolutely no obligation to disclose the information to any client or use it for any client’s benefit.

Brokerage Practices

EF Hutton requires that you establish brokerage accounts with TD Ameritrade through their Institutional Platform.  TD Ameritrade, Inc. (“TD Ameritrade”) is a member of FINRA/SIPC. TD Ameritrade is an independent (and unaffiliated) SEC-registered broker-dealer and is utilized by EF Hutton to maintain custody of clients' assets and to effect trades for their accounts. 

At least annually, we will review alternative custodians in the marketplace for comparison to the currently used custodian, evaluating criteria such as overall expertise, cost competitiveness, and financial condition.  Quality of execution for custodians will be reviewed through trade journal evaluations.

EF Hutton is independently owned and operated and not affiliated with TD Ameritrade.

The primary factor in suggesting a broker/dealer or custodian is that the services of the recommended firm are provided in a cost-effective manner. While quality of execution at the best price is an important determinant, best execution does not necessarily mean lowest price and it is not the sole consideration. The trading process of any broker/dealer and money manager suggested by EF Hutton must be efficient, seamless, and straight-forward.  Overall custodial support services, trade correction services, and statement preparation are some of the other factors determined when suggesting a broker/dealer.

TD Ameritrade, Inc. provides us with access to their institutional trading and custody services, which are typically not available to retail investors. These services generally are available to independent investment advisors at no charge to them so long as the independent investment advisors maintain a minimum amount of assets with the custodian.

TD Ameritrade does not charge separately for custody but is compensated by account holders through commissions or other transaction-related fees for securities trades that are executed by recommended money managers through the custodian or that settle into a custodian account.

These benefits include, but are not necessarily limited to: receipt of duplicate client confirmations and bundled duplicate statements; access to a trading desk; access to block trading which provides the ability to aggregate securities transactions and allocate the appropriate shares to client accounts; the ability to have investment advisory fees deducted directly from client accounts; access to an electronic communications network for client order entry and account information; and access to mutual funds that generally require significantly higher minimum initial investments or are generally only available to institutional investors.

TD Ameritrade, Inc. also makes available to us other products and services that benefit our firm but may not benefit clients' accounts. Some of these other products and services assist us in managing and administering clients' accounts. These include software and other technology that provide access to client account data (such as trade confirmation and account statements); provide research, pricing information and other market data; facilitate payment of the firm’s fees from its clients' accounts; and assist with back-office functions; record keeping and client reporting. Many of these services generally may be used to service all or a substantial number of our accounts, including accounts not maintained at a recommended custodian. EF Hutton is also providing other services intended to help our firm manage and further develop our business enterprise. These services may include consulting, publications and conferences on practice management, information technology, business succession, regulatory compliance and marketing.

Directed Brokerage

Clients should understand that not all investment advisors require the use of a particular broker/dealer or custodian.  For compliance and operational efficiencies, EF Hutton has decided to require our clients to use broker/dealers and other qualified custodians determined by EF Hutton.  Some investment advisors allow their clients to select whichever broker/dealer the client decides.  However, EF Hutton believes use of a specific custodian broker/dealer provides long-term value.  It’s important to understand that by requiring clients to use a particular broker/dealer, EF Hutton may not achieve the most favorable execution of client transactions and the practice requiring the use of specific broker/dealers may cost clients more money than if the client used a different broker/dealer or custodian. 

Block Trading Policy

We may elect to purchase or sell the same securities for several clients at approximately the same time.  This process is referred to as aggregating orders, batch trading or block trading and is used by our firm when EF Hutton believes such action may prove advantageous to clients.  If and when we aggregate client orders, allocating securities among client accounts is done on a fair and equitable basis.  Typically, the process of aggregating client orders is done in order to achieve better execution, to negotiate more favorable commission rates or to allocate orders among clients on a more equitable basis in order to avoid differences in prices and transaction fees or other transaction costs that might be obtained when orders are placed independently. 

EF Hutton uses the average price method for transaction allocation.  Under this procedure, transactions will be averaged as to price and will be allocated among the firm’s clients in proportion to the purchase and sale orders placed for each client account on any given day. If and when we determine to aggregate client orders for the purchase or sale of securities, including securities in which EF Hutton or our associated persons may invest, we will do so in accordance with the parameters previously explained and our supervised persons’ personal accounts will not receive favorable or special treatment.  Neither we nor our associated persons receive any additional compensation as a result of block trades.

Investment Discretion

When providing our Interactive Web-Based Investment Management Services and our Direct-Client Asset Management Services, EF Hutton maintains trading authorization over your Account and will most often provide management services on a discretionary basis.  When discretionary authority is granted, we will have the authority to determine the type of securities, the amount of securities that can be bought or sold for your portfolio without obtaining your consent for each transaction. 

If agreed upon by our firm at the request of a client, a client may grant trading authorization on a non-discretionary basis.  In these cases, we will be required to contact you prior to implementing changes in your account.   Therefore, you will be contacted and required to accept or reject our investment recommendations including:

  • The security being recommended
  • The number of shares or units
  • Whether to buy or sell

Once the above factors are agreed upon, we will be responsible for making decisions regarding the timing of buying or selling an investment and the price at which the investment is bought or sold.  If your accounts are managed on a non-discretionary basis, you need to know that if we are not able to reach you or you are slow to respond to our request, it can have an adverse impact on the timing of trade implementations and we may not achieve the optimal trading price. 

You will have the ability to place reasonable restrictions on the types of investments that may be purchased in your Account.  You may also place reasonable limitations on the discretionary power granted to EF Hutton so long as the limitations are specifically set forth or included as an attachment to the client agreement.

Fees and Compensation

Fees charged for our services are charged based on a percentage of assets under management, billed in arrears (at the end of the billing period) on a quarterly monthly basis and calculated based on the fair market value of your accounts as of the last business day of the current billing period. 

Fees are prorated (based on the number of days service is provided during the initial billing period) for your account opened at any time other than the beginning of the billing period.  If asset management services are commenced in the middle of the billing period, then the prorated fee for that billing period will be billed in arrears at the end of that billing period.

Fees are charged in accordance with the following fee schedule which covers the compensation earned by our firm and any Sub-Advisers selected to assist with the management of your accounts.  In addition to the investment advisory services, fees collected also cover all brokerage transaction (i.e. trade ticket) expenses and fees assessed by TD Ameritrade. 

Criteria

Type

Account

Balance

(based on average balance)

Fees

Interactive Web-Based Investment Management Services

Standard

Fully-Self Directed

Automated Investment Management

  • No assigned advisor representative
  • E-mail statement
  • Can open account with a little as $200
  • Advisor Representative Web Consultation for:

o Financial Planning Advice

o Review of Investment Strategies

o No individualized advice

Less than $25,000

40 basis points per year

$3.00 account opening fee

$3.00 per month

$25,000 to $100,000

30 basis points per year

No account opening fee

No monthly charge

Online chat Consult with Advisor available

Over $100,000

25 Basis points per year

No account opening fee

No monthly charge

Online chat consult with Advisor available

     

Premium

Self-Directed With Advisor Assistance

Automated Investment Management

  • Wider range of portfolio choices and investment alternatives
  • Assigned advisor representative

o Available for online web consult

  • E-mail Statement
  • Requires $250,000 minimum to open account

Minimum $250,000

No account opening fee

No monthly fee

50 basis points

Full Client Asset Management Services

Full Service – Dedicated Advisor

EF Hutton Full Service Advisor Representative

For Client’s with more complex investment needs requiring a dedicated personal advisor

  • Dedicated EF Hutton investment advisor representative
  • Investment recommendations
  • Wider set of investment choices including alternatives and Reg. D investments
  • Use of automated / personal service
  • Quarterly performance review
  • Interaction with Client’s Tax Advisor
  • E-mail Statement
  • Requires $500,000 minimum to open account

  

Minimum

$500,000

No account opening fee.

$100 quarterly fee.

-and-

7 basis points (0.07%) per month for a total of 84 basis points (0.84%) annually.

For Investment Accounts, each month the monthly portion of the annual fee based on average daily balance will be charged.

Your exact fee schedule will be detailed in your agreement for services.  Fee schedules are subject to change 60 days after written notice, which may be given via electronic mail. Our fee schedule is fixed and non-negotiable. 

EF Hutton believes that its annual fee is reasonable in relation to:  (1) services provided and (2) the fees charged by other investment advisers offering similar services/programs.  However, our annual investment advisory fee may be higher than that charged by other investment advisers offering similar services/programs.  In addition to our compensation, you may also incur charges imposed at the mutual fund level (e.g., advisory fees and other fund expenses).

How Fees are Collected

Our investment advisory fees will be deducted from your account and paid directly to our firm by TD Ameritrade.  You must designate EF Hutton as your investment adviser on the accounts you’d like EF Hutton to manage.  EF Hutton will be granted limited power-of-attorney on the account to implement trades within the account and (when agreed to by the client) deduct the EF Hutton advisory fees from the account.  TD Ameritrade will send client statements, at least quarterly, showing all disbursements for the account including the amount of the advisory fee deducted directly from the account. 

You should review your account statements received from the qualified custodian(s) and verify that appropriate investment advisory fees are being deducted.  TD Ameritrade will not verify the accuracy of the investment advisory fees deducted.  It is EF Hutton and client’s responsibility to verify the accuracy of EF Hutton’s fee calculation.

Other Fees and Expenses

In addition to the fee charged by our firm which covers our investment advisory services and the transaction/execution services provided by TD Ameritrade, you may incur certain charges imposed by third parties other than EF Hutton in connection with investments made through your account including, but not limited to surrender charges, internal mutual fund expenses IRA and qualified retirement plan fees and non-transaction/execution fees and charges imposed by TD Ameritrade.  Management fees charged by EF Hutton are separate and distinct from the fees and expenses charged by mutual funds that are held in your account.  A description of these fees and expenses are available in each mutual fund prospectus.  We do not receive any portion of such fees or expenses.

We do not accept or receive compensation based on the sale of securities or other investment products such as asset-based sales charges or service fees from the sale of mutual funds, or as a placement agent for any type of securities.

Termination

A client may terminate its advisory relationship at any time upon no more than 30 days prior notice. Upon termination of any account, any earned, unpaid fees will be due and payable. Such fees are prorated based on the number of days left in the billing period

There will be no termination fee; however, client accounts may be subject to a modest cost of reimbursement of fees related to transferring client's account. Such fees would be charged by the client's account custodian and EF Hutton will not receive any portion of such fee.

ITEM 5 – ACCOUNT REQUIREMENTS AND TYPES OF CLEINTS

EF Hutton provides investment management services to natural person, individual clients and their family accounts.

Our Direct-Client Asset Management Services are available only to high-net worth clients which we define as clients with at least $1,000,000 of investable assets; or income for the last two years that is greater than $200,000 individually or $300,000 with a spouse.

You are required to execute a written agreement with EF Hutton specifying the particular advisory services in order to establish a client arrangement with EF Hutton.

Minimum Investment Amounts Required and Other Conditions

EF Hutton requires a minimum of $200 in order to open an account through our Website.   

Investors evaluating EF Hutton’s web based investment management service should be aware that EF Hutton’s relationship with clients is likely to be different from the “traditional” investment advisor relationship in several aspects:

1. EF Hutton’s internet advisory service is a software based investment advisor which means each client must acknowledge her ability and willingness to conduct her relationship with EF Hutton on an electronic basis. Under the terms of our agreement, each client agrees to receive all account information and account documents (including this Brochure), and any updates or changes to same, through their access to our website and EF Hutton’s electronic communications. Unless noted otherwise on the website or within this Brochure, EF Hutton’s advisory service, the signature for our client agreement, and all documentation related to the advisory services are managed electronically. EF Hutton does make individual representatives available to discuss servicing matters with clients.

2. To provide its advisory services and tailor its investment decisions to each client’s specific needs, EF Hutton collects information from each client, including specific information about their investing profile such as financial situation, investment experience, and investment objectives. EF Hutton maintains this information in strict confidence subject to our Privacy Policy. When customizing our investment solutions, EF Hutton relies upon the information received from a client.  Although EF Hutton contacts its clients periodically as described further in Item 13 below, a client must promptly notify EF Hutton of any change in her financial situation or investment objectives that might require a review or revision of her portfolio.

3. The software based financial advisor service includes preselected ETFs and mutual funds for each asset class within the plan recommended to a client. EF Hutton does not allow clients to select their own investments because each mutual fund and asset class is considered to be part of the overall investment plan. Investors with overly restrictive investment restrictions may not be permitted to become clients.

ITEM 6 – PORTFOLIO MANAGER SELECTION AND EVALUATION

For certain investment strategies, we utilize unaffiliated, third-party investment advisers serving as “Sub-Advisers” to manage all or a portion of your assets.  There could be a conflict of interest in that we could prefer our internal strategies when selecting portfolio strategies or rather than selecting strategists developed by Sub-Advisers.  Currently, we use a combination of strategies developed by Sub-Advisers and strategies developed internally by our firm. 

EF Hutton is ultimately responsible for Sub-Adviser due diligence along with portfolio monitoring.  Therefore, we may recommend Sub-Advisers to you that we have screened and qualified.  EF Hutton evaluates all such Sub-Advisers pursuant to a predetermined set of criteria prior to accepting any Sub-Adviser onto the EF Hutton network. EF Hutton will review the investment adviser’s assets under management, investment experience, disciplinary history, past performance, and numerous other factors. Further the investment adviser must agree to share a percentage of any investment advisory fees from the clients with EF Hutton. Clients are encouraged to conduct their own research into any recommended investment adviser, including, but not limited to consulting with independent tax, legal or financial advisers as necessary. Clients are encouraged to consider their individual circumstances, risk tolerance and needs prior to following any EF Hutton generated recommendation.

Any Sub-Adviser selected by EF Hutton shall be registered or exempt from registration in your home state. The recommendation of a Sub-Adviser shall be made on a non-discretionary basis.  The decision to use a Sub-Adviser is always based on each client’s individual needs. A complete description of the third-party investment advisor’s services acting as Sub-Adviser, fee schedules and account minimums will be disclosed in the third-party investment advisor’s Form ADV Disclosure Brochure which will be provided to clients at the time an account is established with the Sub-Adviser. 

We are always available to answer questions you may have regarding the portion of your account managed by the Sub-Adviser and act as the communication conduit between you and the Sub-Adviser.  Sub-Advisers will generally take discretionary authority to determine the securities to be purchased and sold for your accounts. 

Types of Advisory Services Offered

Currently, the only types of investment advisory services offered by our firm are those described within this brochure.   Refer to Item 4 of this brochure for details about our services. 

Tailor Advisory Services to Individual Needs of Clients

Investment recommendations are generated from an algorithm that incorporates each Clients’ existing investment portfolio, risk profile and investment objectives as provided to EF Hutton by the Client. EF Hutton utilizes the Client’s existing portfolio information to make recommendations for investments in similar securities based on a limited number of factors (for example, past performance of the securities, associated fees, etc.). Such recommendations are based solely on the on the information and data filed by the issuers of securities with various government regulators or made directly available to EF Hutton by such issuers, or indirectly through other third party sources. Although EF Hutton, through its software, evaluates such information and data, EF Hutton is not in a position to confirm the completeness, genuineness or accuracy of such information and data, and in some cases complete and accurate information is not readily available.

Our services are always provided based on the individual needs of each client.  This means, for example, that you are given the ability to impose restrictions on the accounts we manage for you, including specific investment selections and sectors.  We determine client information through questionnaires and fact-finding information to determine the client’s investment objectives and suitability information.

We manage client accounts in accordance with one or more investment models.  When client accounts are managed using models, investment selections are based on the underlying model and we do not develop customized (or individualized) portfolio holdings for each client.  However, the determination to use a particular model or models is always based on each client’s individual investment goals, objectives and mandates.

Wrap Fee Programs

Currently, the only investment advisory services offered are through our wrap-fee program.  Refer to Item 4 for an explanation of what is a wrap-fee program and the services provided by our firm.

Performance Based Fees and Side-by-Side Management

Not applicable to EF Hutton. EF Hutton does not charge performance-based fees.

Methods of Analysis and Investment Strategies

As described previously in this brochure, EF Hutton formulates and provides Clients with investment advice via its Website. In all cases, including those where the services are made available through a co-branded partner website, EF Hutton’s web-based platform is powering the investment advisory services and hosting Client data.

As it pertains to Securities and Brokerage Recommendations, EF Hutton’s software platform generates recommendations on the basis of an analysis of investment data, trading patterns and your existing portfolio investments.

When making Securities recommendations, EF Hutton’s algorithms seek to identify better performing and/or lower cost (e.g. lower fees, loads and/or expenses) investment options within the same or a similar category (e.g. tracks the same index, has similar holdings or is within the same category of investment) of investment that your currently hold in your portfolio.

Unlike other types of recommendations generated by EF Hutton, EF Hutton considers your personal characteristics and risk tolerance when assessing the suitability of various Sub-Advisers on our platform. EF Hutton analyzes various information from Sub-Advisers on our platform and then makes a recommendation if EF Hutton deems a Sub-Adviser to be generally suitable for a client.

EF Hutton only recommends Sub-Advisers that utilize the EF Hutton platform. As such EF Hutton recommends Sub-Advisers from a limited group. Clients should be aware that similar investment advisers may be available and Clients are encouraged to compare any investment advisers recommended by EF Hutton to similar investment advisers that do not utilize the EF Hutton platform.

Risk of Loss

Clients are strongly encouraged to conduct their own analysis of, and investigation into, the methodologies employed by EF Hutton in making its recommendations. The fact that a recommendation is generated by EF Hutton’s investment software cannot be interpreted as a guarantee of future performance. Investing in securities involves risk of loss that Clients should be prepared to bear.

EF Hutton conducts its analyses primarily using detailed historical information. As with any investment, past performance is no guarantee of its future success.

EF Hutton relies on third parties for the provision of market statistics, fund details, performance, and related information and although these parties are generally reliable and reputable, there may be inaccuracies or discrepancies in the information that is beyond EF Hutton’s control.

EF Hutton bases its recommendations on information provided by Clients and relies on the Client to provide accurate information. If the Client provides inaccurate information, or does not verify that EF Hutton’s portfolio tracker has accurately captured the Client’s portfolio holdings when syncing with the Client’s account, this will impact the quality and relevance of EF Hutton’s recommendations. As such, Clients are urged to verify any account holdings synced to the user platform for accuracy, as recommendations are based upon such information.

EF Hutton provides recommendations to Clients based on investment software that utilizes various quantitative and qualitative models. Such computer generated recommendations, like all investment recommendations, may be subject to system error. No guarantee or representation is made that the investment recommendations will be successful. EF Hutton may simply fail to identify favorable investment opportunities or to evaluate those investments recommendations accurately that it does make to Clients. Further, as market dynamics (for example, due to changed market conditions and participants) shift over time, a previously highly successful model may become outdated or inaccurate, perhaps without the computer software system recognizing the change before further recommendations are made. As such, Clients are urged to verify any recommendations generated by the EF Hutton software platform with their own legal, financial, tax and economic advisors and to conduct their own due diligence on recommended Securities before following any recommendation. Additionally, there are certain risks associated with utilizing automated investment tools like the one offered by EF Hutton.

  • Our investment tool is programmed to use certain economic assumptions that may not be updated in a timely manner or shifts in the market.
  • The output of the automated investment tool depends upon the accuracy of the information inputted into the tool.
  • There may be certain factors or variables which have not been included in the automated investment tool.  To the extent some questions are over-generalized, ambiguous or designed to fit a pre-determined option, the output may not be right for all investor’s needs or goals.
  • By only using the automated investment service, investors could lose out on the value of human judgment and oversight.  Investors may lose out on these qualities when interacting with only a computer program.

There is no guarantee that a mutual fund or ETF will achieve its objective. The Securities share price fluctuates and investors can lose money by investing in the Securities. Securities may differ from each other in terms of investment style, objectives, management, geographical markets, holdings and numerous other factors. For a full description of the risks inherent in any specific Security, Clients should read the prospectus of the particular Security recommended. EF Hutton only recommends investment advisers that utilize the EF Hutton platform. As such EF Hutton recommends investment advisers from a limited group. Clients should be aware that similar investment advisers may be available and Clients are encouraged to compare any investment advisers recommended by EF Hutton to similar investment advisers that do not utilize the EF Hutton platform.

In making investment recommendations there are a number of factors that EF Hutton does not consider, including but not limited to:

Tax Implications: With the exception of its tax loss harvesting recommendations, EF Hutton does not consider the Client specific tax implications with respect to the recommendations that it makes. In making recommendations to Clients, EF Hutton does not consider the tax characteristics of the individual Client, holding periods of securities, or other similar factors. Each Client must rely on its own examination, and that of its financial, tax and legal advisors in evaluating the merits and risks involved in selecting the Security. Clients should not construe the contents of the Website or any recommendation made by EF Hutton as tax advice. Each Client must rely upon its own representatives as to tax and other aspects of an investment in Securities and as to its suitability for such Client.

Frequency of Trading: With the exception of recommendations specifically focused on the frequency of the Client’s trading (e.g., a recommendation that the Client trade less frequently), EF Hutton does not consider the frequency of a Client’s trading when the proprietary software generates a recommendation. If a Client’s investment approach involves a high level of trading and turnover of the Client’s investments such approach may generate tax implications (such as short-term capital gains) and other similar consequences that could negatively impact the value of the Client’s investment portfolio.

Certain Characteristics of Existing Portfolios: EF Hutton does not consider the restrictions that may be inherent in a Client’s existing investment accounts when making investment recommendations. For example, when making a recommendation to sell a security and replace it with a similar security, EF Hutton does not consider (but attempts to disclose) whether the existing security would be subjected to an early redemption fee if the Client sells such security.

Material Risks of Investing in Mutual Funds and ETF’s Exchange Traded Funds:  An ETF generally is an investment company, unit investment trust or a portfolio of securities deposited with a depository in exchange for depository receipts. The portfolios of ETFs generally consist of common stocks that closely track the performance and dividend yield of specific securities indices, either broad market, sector or international. ETFs provide investors the opportunity to buy or sell throughout the day an entire portfolio of stocks in a single security. Although index mutual funds are similar, their shares are generally issued and redeemed only once per day at market close. Investment in an ETF involves payment of such company’s pro rata share of administrative fees charged by such company, in addition to those paid by a Client. 

Mutual Funds. An investment in mutual funds could lose money over short or even long periods. Clients should expect the fund’s share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. A mutual fund’s performance could be impacted by a number of factors including but not limited to: Investment style risk, the chance that returns from small and mid capitalization growth stocks will trail returns from the overall stock market. Historically, small and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Small and mid-size companies tend to have greater stock volatility because, among other things, these companies are more sensitive to changing economic conditions. Stock market risk, the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Manager risk, the chance that a mutual fund manager may make a poor security selection or focus on securities in a particular sector, category, or group of companies will cause the mutual fund to underperform relevant benchmarks or other funds with a similar investment objective.

Voting Client Securities

EF Hutton does not vote proxies on behalf of clients.  We have determined that taking on the responsibilities for voting client securities does not add enough value to the services provided to you to justify the additional compliance and regulatory costs associated with voting client securities.  Therefore, it is your responsibility to vote all proxies for securities held in Account.

You will receive proxies directly from the qualified custodian or transfer agent; we will not provide you with the proxies.  You are encouraged to read through the information provided with the proxy-voting documents and make a determination based on the information provided.

ITEM 7 – CLIENT INFORMATION PROVIDED TO PORTFOLIO MANAGERS

EF Hutton is responsible for gathering information from clients. We will correspond with clients to gather information needed relative to their investment objectives and needs in order to provide management services.  Clients need to contact our firm whenever there are changes to their financial situation that will impact or materially influence the way EF Hutton manages accounts.  It is important for clients to reply and correspond in a timely manner with EF Hutton in order to provide updated financial information so that EF Hutton can make appropriate investment decisions.

Sub-Advisers will have access to your personal identifiable information, investment profile, objectives and other important financial information.  We may have a brief discussion with Sub-Advisers about the client in terms of risk, age and why their firm was chosen.  Sub-Advisers very rarely, and typically never, get to meet the client.  It is the responsibility of EF Hutton to assess each client’s risk tolerance, time frame, investment objectives, portfolio size and prior investment experience to decide if separate accounts would be an effective solution. 

ITEM 8 – CLIENT CONTACT WITH PORTFOLIO MANAGERS

There are no restrictions placed on clients’ ability to contact and consult directly with EF Hutton.  It is the policy of EF Hutton to provide an “open channel” of communication between EF Hutton and their clients.  Clients are encouraged to contact our firm whenever they have questions about the management of their account. 

When a Sub-Adviser is selected for a client, the client does not typically communicate or interact with the Sub-Adviser.  Instead, EF Hutton will serve as communication conduit between the Sub-Adviser and the client if needed. 

ITEM 9 – ADDITIONAL INFORMATION

Disciplinary Information

Neither EF Hutton nor any of its employees have had any administrative proceedings before the SEC, any other federal regulatory agency, any state regulatory agency, or any foreign financial regulatory authority. Neither EF Hutton, nor any of its employees, has had any proceedings before a self-regulatory organization.

Other Financial Industry Activities and Affiliations

EF Hutton is not and does not have a related person that is a broker/dealer, municipal securities dealer, government securities dealer or broker, an investment company or other pooled investment vehicle (including a mutual fund, closed-end investment company, unit investment trust, private investment company or "hedge fund," and offshore fund), a futures commission merchant, commodity pool operator, or commodity trading advisor, a banking or thrift institution, an accountant or accounting firm, a lawyer or law firm, an insurance company or agency, a pension consultant, a real estate broker or dealer, and a sponsor or syndicator of limited partnerships.

As described in Item 4 – Advisory Business, Item 5 – Fees and Compensation, and Item 8 - Methods of Analysis, Investment Strategies and Risk of Loss we recommend independent, third-party investment advisors to serve as Sub-Advisers. 

We do not receive a referral fee or solicitor fee from third-party Sub-Advisers we recommend from clients.  The only compensation we receive is the management fee we charge directly to our clients.   This policy helps us avoid selecting Sub-Advisers based on our economic interests.  Instead, we select Sub-Advisers we believe are most appropriate for our clients absent additional economic benefits we could receive from a money manager.  We will compensate Sub-Advisers from our management fees as described in Item 5.

No Commission Trading Service

EF Hutton enables its clients to trade stocks and options with no commission payment.  EF Hutton offers this service for a single monthly fee in association with a strategic partner whose subsidiary, Tradier Brokerage Inc., is a FINRA-registered broker-dealer.  This trading service is intended to be a convenient method for clients to conduct their personal trading and investing activities through the EF Hutton website which can be accessed online or through any web-enabled mobile device. 

All trade execution is through Tradier Brokerage Inc. and details are provided at trading.efhutton.com.  This service is for clients that want to establish a self-directed account, not managed or using the strategies offered by EF Hutton as described in Item 4 and Item 5 of this brochure.  With this service, EF Hutton also provides a list of high-risk stocks that investors should take extra care to evaluate before investing.  Clients may open one or more trading accounts with Tradier Brokerage Inc. to manage on their own.   Clients utilizing this service will be solely responsible for all investment decisions made in the account and solely responsible for implementing all securities transactions in the account.  EF Hutton will not have access to or authority over, the client’s trading accounts. 

 

Although we do not receive a referral fee or other form of payment from Tradier Brokerage Inc., clients pay a monthly fee to EF Hutton for this service.  The fee covers all applicable trading, transaction and other brokerage related costs and expenses assessed by Tradier Brokerage Inc., excluding exchange fees and certain clearing fees that are charged separately – see trading.efhutton.com for details.  EF Hutton splits a portion of the monthly fee with Tradier Brokerage Inc.  Monthly fees are available on the website at efhutton.com.

 

Clients are not obligated or required to utilize the brokerage services of Tradier Brokerage Inc. and can select the broker/dealer or other custodian of their choosing.  EF Hutton has a right to acquire a minority ownership stake in the parent company of Tradier Brokerage Inc.  Therefore, EF Hutton’s recommendation that clients utilize the self-directed brokerage services of Tradier Brokerage Inc. is based partially on EF Hutton’s consideration of a partial ownership stake.  To mitigate this conflict of interest, Tradier Brokerage Inc. offers unlimited trading with no commission so that EF Hutton has no interest in promoting a volume of trading activity.    

Clients electing to open a trading account must execute all required brokerage new account paperwork and an agreement with Tradier Brokerage Inc. as detailed at trading.efhutton.comClients must also execute an agreement with EF Hutton and agree to pay EF Hutton a monthly charge for electronic trading using Tradier Brokerage Inc.

Code of Ethics, Participation or Interest in Client Transactions and Personal Trading

As part of EF Hutton’s broader compliance policies and procedures, EF Hutton has established a Code of Ethics that will apply to all of its supervised persons. As a fiduciary, it is an investment adviser’s responsibility to provide fair and full disclosure of all material facts and to act solely in the best interest of each of my clients at all times. EF Hutton has a fiduciary duty to all clients. This fiduciary duty is considered the core underlying principle for EF Hutton’s Code of Ethics which also covers its Insider Trading and Personal Securities Transactions Policies and Procedures.  EF Hutton has the responsibility to make sure that the interests of all clients are placed ahead of EF Hutton’s or its supervised person’s own investment interest. Full disclosure of all material facts and potential conflicts of interest will be provided to clients prior to any services being conducted. EF Hutton strives to conduct business in an honest, ethical and fair manner and avoid all circumstances that might negatively affect or appear to affect my duty of complete loyalty to all clients. This disclosure is provided to give all clients a summary of EF Hutton’s Code of Ethics.

This section is intended to provide a summary description of the Code of Ethics of EF Hutton.  You may receive the EF Hutton Code of Ethics by requesting it from support@efhutton.com.

EF Hutton or its supervised persons may buy or sell for their personal accounts, investment products identical to those recommended to clients.  This creates a potential conflict of interest. To help control for this conflict of interest, it is the express policy of EF Hutton that all persons associated in any manner with the firm must place the interests of our clients ahead of their own when implementing personal investments.  EF Hutton and its supervised persons shall not buy or sell securities for their personal account(s) where their decision is derived, in whole or in part, by information obtained as a result of his/her employment unless the information is also available to the investing public upon reasonable inquiry.  In addition, securities recommended by EF Hutton are widely held and publicly traded.  Finally, the firm has develop policies and procedures under our Code of Ethics requiring all access persons to report their personal securities holdings and positions to the firm for review and approval.

EF Hutton and its supervised persons do not recommend to clients securities in which EF Hutton or a related person has a material financial interest.  We do not act as principal to our clients; we do not act as general partner in a partnership in which we solicit client investments; and we do not act as an investment adviser to an investment company that we recommend to clients.

Review of Accounts

EF Hutton’s software based investment advisor service assumes that a portfolio will not stay optimized over time and must be periodically rebalanced back to its original targets to maintain the intended risk level and asset allocations. EF Hutton reviews each client’s account when it is opened, and continuously monitors and periodically rebalances each client’s portfolio to seek to maintain a client’s targeted risk tolerance and optimal return for the client’s risk level. EF Hutton also conducts reviews when material changes may have occurred to a client’s portfolio or investment objectives.

On a quarterly basis, EF Hutton contacts each client to remind them to review and update the profile information they previously provided. EF Hutton also requests that clients reconfirm the same information on an annual basis. These notifications and confirmations include a link to the client’s current information and contact information.

Currently Hugh Rhodes, EF Hutton’s Director of Individual Investments and  Investment Adviser Representative, is responsible for developing investment models, determining appropriate rebalancing procedures and leading all reviews.

EF Hutton sends periodic account summary emails to clients, which periodic reports include information regarding your portfolio, including performance, top movers (up and down) and performance versus a relevant index. The reports also include top news stories. EF Hutton also sends other periodic or event inspired reports based upon market or portfolio activity. In addition, when clients login to the EF Hutton service, they can view their portfolio performance, asset allocation, dividends, key statistics and portfolio ratios and geographic allocation data, among other information.

Additionally, clients will receive monthly or quarterly brokerage account statements and confirmations from TD Ameritrade.

Client Referrals and Other Compensation

EF Hutton does not directly or indirectly compensate anybody for client referrals.

Other than the receipt of investment advisory fees detailed in Item 5 of this brochure, EF Hutton receives no other compensation in connection with our web-based, investment management services.

Financial Information

EF Hutton does not require or solicit prepayment of more than $1,200 in fees per client, six months or more in advance.  Therefore, we are not required to include a balance sheet for the most recent fiscal year.  We are not subject to a financial condition that is reasonably likely to impair our ability to meet contractual commitments to clients.  Finally, EF Hutton has not been the subject of a bankruptcy petition at any time.

CUSTOMER PRIVACY POLICY NOTICE

Regulation S-P, Privacy of Consumer Financial Information, requires financial institutions, including EF Hutton to provide notice to current clients and prospective clients about their policies and practices concerning the collection and use of customer, non-public information.  This privacy policy notice is given to all prospective clients of EF Hutton upon entering into a contract with EF Hutton and annually thereafter.

Privacy Disclosure Statement.  A primary goal of EF Hutton is to protect the privacy of its clients.  EF Hutton does not sell the personal information of clients to anyone. To conduct regular business, EF Hutton may collect non-public personal information from clients.  This information is provided by clients to EF Hutton on applications and other forms provided by clients to EF Hutton as well as transactions with the firm, our affiliates, or others.

Information Safeguarding.  EF Hutton has implemented strict policies and procedures aimed at protecting the sensitive nature of client information.  EF Hutton restricts access to client information to only those members of EF Hutton that must provide products and services to clients in order to service client accounts.  EF Hutton has implemented physical, electronic, and procedural safeguards aimed at meeting EF Hutton’ duty to protect non-public client information.

Use and Disclosure of Customer Information to Provide Customer Service for Client Accounts To administer, manage and service customer accounts, process transactions and provide related services for client accounts, it is necessary for EF Hutton to provide access to Customer Information within the Firm and its affiliated companies and to non-affiliated companies such as other investment advisers, broker-dealers, trust companies, custodians and insurance companies.  EF Hutton may also provide Customer Information outside of the Firm as permitted by law, such as to government entities, consumer reporting agencies or other third parties in response to subpoenas.

Since EF Hutton shares nonpublic information solely to service client accounts, our firm does not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.  However, we may also provide customer information outside of the firm as required by law, such as to government entities, consumer reporting agencies or other third parties in response to subpoenas.  In the event that our firm has a change to its customer privacy policy that would allow it to disclose non-public information not covered under applicable law, we will allow our clients the opportunity to opt out of such disclosure.

If you have any questions concerning EF Hutton’s customer privacy policy or concerns about your personal information please feel free to contact us at the phone number listed on the cover page of this brochure.