Pasadena Financial Planner -- Pasadena, California | Independent Investment Advisor Form ADV

Independent Investment Advisor Form ADV


 

Lawrence Russell and Company

Adviser Brochure:  Form ADV Part 2

January 19, 2016

 

Lawrence J. (Larry) Russell

President and Managing Director

 

Lawrence Russell and Company

1077 Prospect Blvd.

Pasadena, CA 91103

A CALIFORNIA REGISTERED INVESTMENT ADVISER

CERTIFICATE #133101

 

This brochure provides information about the qualifications and business practices of Lawrence Russell and Company. If you have any questions about the contents of this brochure, please contact us. 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. “Registered investment adviser” refers to registration with regulatory authorities and does not imply a certain level of skill or training. Additional information about Lawrence Russell and Company is available on the SEC’s website at www.adviserinfo.sec.gov.

2:  Material Change to Annual Update

Since Lawrence Russell and Company’s previous annual Form ADV update, we do not believe that there are material changes to the substance of this Form ADV Part 2 brochure.

This brochure is intended to provide clients with a document in narrative format that is written in plain English and that provides a full and truthful disclosure. This document provides a description of our services and a statement of our obligations to be a fiduciary to our clients.

Disclosure Obligations as a Fiduciary: Under federal and state law, Lawrence Russell and Company is a fiduciary and must make full disclosure to clients of all material facts relating to the advisory relationship. As a fiduciary, Lawrence Russell and Company also must seek to avoid conflicts of interest with our clients, and, at a minimum, make full disclosure of all material conflicts of interest between us and you, which could affect the advisory relationship. This obligation requires us to provide you with sufficiently specific facts so that you can understand any conflicts of interest we may have and business practices in which we engage, so that you can give informed consent to our practices or reject them.

Lawrence Russell and Company’s position regarding its fiduciary obligations toward clients is simple:

Lawrence Russell and Company will have no conflicts of interest of any kind with respect to the fiduciary interests of our clients. We will always put the interests of our clients first, and we will not engage in any practice that would involve a conflict of interest with respect to our clients.

 

3:  Table of Contents

1:  Cover Page.

2:  Material Change to Annual Update.

3:  Table of Contents.

4:  Our Advisory Business.

4A:  Our Comprehensive Lifetime Financial Planning Process.

4B:  Our Typical Investment Recommendations.

5:  Our Fees and Compensation.

6:  No Performance-Based Fees.

7:  The Types of Clients We Serve.

8:  Our Methods of Analysis and Investment Strategies and the Risk of Loss.

9:  Disciplinary Information.

10:  Other Financial Industry Activities and Affiliations.

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

12:  Brokerage Practices.

13:  Review of Client Accounts.

14:  No Client Referral Fees and Other Compensation.

15:  Clients Retain Full Account Custody.

16:  No Investment Discretion.

17:  Clients Vote Their Own Securities.

18:  Financial Information.

19:  Additional Information Required for State-Registered Advisers.

 

4:  Our Advisory Business

Lawrence Russell and Company provides fee-only financial and investment planning services that are tailored to the particular needs of our clients. Our firm is a California Registered Investment Adviser.

Lawrence Russell and Company helps individuals and families to improve their personal financial planning knowledge, practices, and self-reliance. We specialize in analyzing particular personal financial situations and in developing comprehensive, durable, and client-managed lifetime financial and investment plans that our clients can implement themselves cost-effectively. We help our clients with the knowledge, strategies, and tactics that they can use over the long-term to improve their financial practices and financial position.

Lawrence Russell and Company provides personalized financial analysis and advisory services ranging from answering specific questions through developing comprehensive lifetime financial plans. Our goal is to provide completely objective advice on any personal financial planning and investment topic of interest to our clients. We are particularly focused on helping our clients to understand what to do and why they should do it. Financial education is a significant part of our services, and one of our goals is to help all clients to become more knowledgeable and more self-sufficient.

Larry Russell is the Managing Director who prepares all financial plans for our clients. Larry holds a BS from MIT, an MA from Brandeis University, and an MBA from Stanford University. He also has 20+ years of financial, business development, and corporate development experience working in managerial and executive roles with major corporations, including HP and Sun Microsystems, and with start-ups. The number of clients who can be served by our firm is limited by the hours required by our clients and by Larry Russell’s available time.

As a separate business venture, which takes about one-third to one-half of Larry Russell’s time, Lawrence Russell and Company also develops lifetime financial planning and retirement software that is licensed to individuals who wish to do their own personal financial planning without an adviser. This lifetime cash flow and asset projection modeling software is licensed under the trade name VeriPlan through the website: http://www.myfinancialfreedomplan.com/ Lawrence Russell and Company also publishes financial articles on our web sites for a general Internet audience.

Larry and his wife, Karen F. Deacy-Russell, who is an administrative Managing Director and is not a financial adviser, established Lawrence Russell and Company in 2001 to provide consulting services under contract. In 2004, Lawrence Russell and Company began to offer investment advisory services and to develop automated lifetime financial planning software. In 2007, we began to develop comprehensive lifetime financial plans for clients.

 

4A:  Our Comprehensive Lifetime Financial Planning Process

For clients interested in comprehensive lifetime financial planning, this outlines the typical process:

  • Several in-person meetings are held — usually for 8 to 12 hours in total over a two-month to four-month period.
  • Family financial planning objectives and special requirements are clarified and modeled and alternative decisions are evaluated.
  • Throughout the process, any and all personal finance and investment topics of interest are discussed and information is provided to help clients increase their knowledge of what works and what does not.
  • The front-end of the process focuses on development of a customized, comprehensive, integrated, and automated lifetime cash flow projection and investment asset appreciation model to be used in subsequent planning, analysis and decision-making. At the end of the planning process, clients are provided with their own copy of this financial planning software loaded with their personal data and assumptions. Our clients can use this computerized financial planning model to update and analyze their finances in the future.
  • After a client’s personal financial objectives have been clarified and their baseline lifetime financial plan has been developed and agreed upon, the advisor will write a detailed personal finance and investment planning document covering the various topics that are of importance to the client, including the “how-to and why.” These written plans typically exceed 100 pages.

As appropriate, a comprehensive written financial plan can address:

a) earned income and other income,

b) living expenses and expense tracking methods,

c) savings rates,

d) retirement timing,

e) pensions, social security, and retirement income,

f) debt management,

g) real estate assets,

h) investment diversification,

i) investment risk preferences,

j) investment asset allocation,

k) investment cost control,

l) low-cost index investment fund alternatives (mutual funds for every client, plus exchange-traded funds (ETFs) for experienced clients who understand how to trade),

m) investment tax optimization,

n) emergency cash management,

o) tax-advantaged retirement investment strategies,

p) risk exposures,

q) identity theft,

r) projected estate sizes, and any other special topics that are pertinent to the client.

This comprehensive written plan is delivered to our clients for their careful reading and evaluation. After a client has had time to read and understand their written plan, a final meeting is held to discuss the plan, to clarify any remaining topics, and to answer any questions about implementation.

 

4B:  Our Typical Investment Recommendations

In the great majority of cases, Lawrence Russell and Company will recommend the direct purchase of low-cost, broadly-diversified, passively-managed mutual funds direct from mutual fund families that deal directly with the public. We recommend to our clients that they invest in such mutual funds in accordance with their chosen asset allocation plan and policies developed in consultation with us. In general, we recommend that clients buy and hold broadly diversified cash, bond, and stock mutual funds that they purchase directly from low-cost mutual fund companies.

We help our clients to find cost-effective financial products in the marketplace. Excessive financial fees and expenses are rampant in the financial industry. There is almost always a superior, low-cost alternative that individuals can buy directly. A broad and general reading of research literature indicates the lack of any consistent and reliable ways for investors to identify investments before the fact that deliver superior net risk-adjusted returns over the long-term — except by reducing dramatically costs and fees related to asset management, trading, sales, and custody and by minimizing associated taxes.

Only for those clients who have experience in trading through a broker do we suggest that they continue to do so, if they have a preference for using low-cost, broadly-diversified, passively-managed exchange-traded funds, instead of similar mutual funds. We encourage all of our clients to invest through investment funds and to avoid more costly and less diversified portfolios composed of individual securities, unless there is a good reason to do so. When experienced brokerage clients with trading experience only have a relationship with a full service broker and do not already have a brokerage relationship with one of the major discount brokers, we encourage them to open such an account to reduce their trading costs.

Unless there is a reason to do so, in general, we discourage the use of investment strategies involving frequent trading, futures, options, derivatives, borrowing, and other “zero-sum” strategies and asset classes.

 

5:  Our Fees and Compensation

Lawrence Russell and Company is paid solely and directly by our clients either on a fixed fee for project basis or on an hourly basis. We never accept any compensation, commission, or fee in any form from any third party related to the advisory work that we do on behalf of our clients.

Prior to the delivery of any service we will discuss with our clients the scope, milestones, and deliverables of any particular project. Then, the adviser will quote a fixed fee for that service. Project quotes are written into a formal planning contracts signed by Larry Russell and our clients. Advisory services are also provided at an hourly rate or fraction thereof. The current hourly rate is $150.

Fees depend on the scope of the work wanted and the complexity of the financial issues involved. Limiting the scope of a project and the estimated number of adviser hours that will be applied is the extent to which advisory fees for financial and investment planning projects are negotiable.

Lawrence Russell and Company offers investment planning services which range from $1,250 to $2,500. An investment plan covers the investment portions of a comprehensive financial and investment plan.

Regarding the more comprehensive financial and investment planning service for an individual or family, our rates range from $1,350 to $2,950.

Price variation for any fixed rate service is related to the degree of planning complexity involved and the expected time needed to complete the assignment. Typically, the hourly work commitment on a comprehensive financial and/or investment plan will significantly exceed the number of hours that would be implied by dividing the total fee by the standard hourly rate. A modest fee may be added for travel time and expenses for the adviser to travel to the client’s home or other location for meetings. For remote clients, communications are conducted over the telephone and through email and other electronic means.

During a typical planning engagement, about one-third of the adviser’s time commitment consists of meeting with a client in their home. The remainder of the time is focused on researching special issues related to the client’s financial affairs, building the client’s lifetime cash flow and asset appreciation projection model, and/or writing the comprehensive financial plan or investment plan.

Hourly projects usually focus on one to several of the dozen or so subjects that are involved in a typical comprehensive financial plan. After speaking with the client about their needs, the adviser can also specify the number of hours needed to complete any hourly assignment. If the client wants a fixed quote for an hourly billing project, the adviser will provide one. When a fee for a fixed number of hours is quoted, then billing will not exceed those hours, even if the engagement takes longer than anticipated.

Negotiated retainer arrangements are also available. Calendar quarter retainer arrangements are available for the client to engage us based upon our current hourly services rate. If an activity conducted for the client is clerical or administrative, then an hourly fee of up to $100 will be charged.

Full payment for a particular service is due and payable upon delivery of that service. For larger projects with interim deliverables that the client and advisor have agreed to, the client may be billed for work that has been performed to date. With written notice the advisory contract is cancelable by either party at any time without cause. If the client cancels the contract, the client will pay for any completed or partially completed work prior to notice of cancellation. No prepayments of more than $500 and 6 months or more in advance are required in any financial arrangement with any client.

 

6:  No Performance-Based Fees

Lawrence Russell and Company and its management and employees do not participate in any performance-based fee or any side-by-side investment management arrangement of any kind with any third party. No incentives would cause us to favor one investment product over another in our recommendations.

 

7:  The Types of Clients We Serve

Lawrence Russell and Company focuses on providing financial planning and investment advice to individuals and families. We do not charge asset fees, and we have no requirements about assets or wealth related to our clients.

 

8:  Our Methods of Analysis and Investment Strategies and the Risk of Loss

Recommendations developed by Lawrence Russell and Company are based upon Larry Russell’s professional judgment. Lawrence Russell and Company bases its financial and investment planning services on the scientific finance literature. Academics and analysts who focus on financial economics have published an extensive body of scientific finance research papers. These papers report developments in financial theory and practice, and they provide statistical results that test these theories and practices. We believe that sound financial and investment planning advisory services should be guided by a broad, collective reading of these objective, scientifically constructed, and peer-reviewed studies.

The future is fundamentally unpredictable, and any person’s financial success or failure depends upon numerous personal factors over which he or she has greater or lesser control. Furthermore, neither the client nor the adviser has any control over a wide variety of market, currency, economic, political, business, natural, and other risks. As much as clients would like to have inexpensive guarantees against risks, there can be no guarantees with respect to any recommendation that we provide.

No person and no tool can predict or assess probabilities about what will happen in the future. Clients should never develop any false comfort that anyone can predict the future for them, nor should they expect that any financial plan can predict the future. Furthermore, clients should understand that financial products that purport to provide some form of guarantee usually do so at some cost that is often quite high.

Given the fundamental uncertainty of the future, Lawrence Russell and Company generally favors proactively increasing income and moderating consumption when necessary to insure substantial rates of savings and rates of debt reduction during working years. Our clients are more likely to build long-term financial security, when their substantial ongoing savings are invested according to an asset allocation strategy that is appropriate to their risk tolerance. Furthermore, when our client’s increasing assets are held continuously in securities that have been demonstrated a potential to pay risk premiums and appreciate in value, they can further improve their financial circumstances. By building up assets, clients can provide protection and choice in an uncertain future and can fund future expenses when income sources decline.

By investing in low-cost, broadly-diversified, passively-managed investments, clients are more likely to keep a greater portion of whatever returns the securities markets may produce over time. By holding very broadly-diversified fund investments, investors can significantly reduce the non-systematic risks associated with holding less diversified assets. Systematic securities risk caused market, currency, economic, political, business, natural, and other systemic risks will still persist. Nevertheless, from an investment standpoint, Lawrence Russell and Company believes that the general investment approach outlined above in this section is more likely to deliver optimal risk-adjusted investment returns and thus more likely to support our clients’ lifetime financial planning goals.

 

9:  Disciplinary Information

Lawrence Russell and Company and its managers and employees have not been involved in any federal, state, or local criminal, civil, or disciplinary event or proceeding of any kind that would have anything to do with our advisory business or our integrity.

 

10:  Other Financial Industry Activities and Affiliations

Lawrence Russell and Company is completely independent. Lawrence Russell and Company and its managers and employees have no affiliation with any other firm.

 

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

When Lawrence Russell and Company makes any recommendation for any financial product or service, that recommendation is based solely upon what we believe would be in the best interests of our clients. Lawrence Russell and Company receives no compensation of any kind related to the recommendations that we make to our clients. We pay no compensation to anyone related to our clients.

Lawrence Russell and Company’s ethical conduct standards are determined by Lawrence J. Russell, Managing Director. This Form ADV Part 2 serves as our written code of conduct. Lawrence J. Russell is the only manager or employee of Lawrence Russell and Company who is permitted to make specific recommendations to clients regarding securities and other financial products.

We maintain complete financial independence from other financial firms. Beyond providing advice and recommendations and related assistance, we are not directly involved in the financial and investment affairs of our clients. Our only involvement in clients’ transactional affairs is to make recommendations regarding financial products and to assist clients concerning how to effect any such transaction, should they need and ask for assistance.

We never act as a custodian and never commingle finances. We never act as any kind of financial intermediary between our clients and the financial firms with which they transact and that act as custodians of our clients’ assets.

As a firm, Lawrence Russell and Company owns no securities or investments of any kind, except cash or cash equivalents for working capital. Its managers and employees may and do hold investments in some of the same low-cost, broadly-diversified, passively-managed funds that we recommend to our clients.

 

12:  Brokerage Practices

Lawrence Russell and Company has no relationships with any broker that involves any kind of direct or indirect compensation, commission, benefit, or soft-dollar arrangement for suggesting that a client use any particular broker. We always encourage clients to minimize their trading expenses though buy-and-hold investments in low-cost accounts using low-cost, passively-managed investment funds with low turnover.

 

13:  Review of Client Accounts

After a client’s initial plan is complete, Lawrence Russell and Company may perform annual reviews for clients, upon their request. This process would involve updating client-specific data and reevaluating their financial situations and preferences at that time. More frequent services on special topics would be provided upon client request.

Because we do not manage client’s accounts, clients will instead receive reports directly from their fiduciaries at whatever frequency those firms are required to report to their clients.

 

14:  No Client Referral Fees and Other Compensation

Lawrence Russell and Company does not pay and does not receive any compensation in any form for either client referrals to us or for our referrals to any other firm or professional.

 

15:  Clients Retain Full Account Custody

Lawrence Russell and Company does not manage our clients’ investment asset accounts. Instead, we make investment recommendations and instruct clients how to implement those recommendations in their own accounts. We do not charge fees related to our client’s assets, and we have no involvement in the custodial relationships that our clients have with any financial firms.

Our clients retain full custody of their own accounts and receive investment reports directly from their financial asset fiduciaries, which of course, they should always read carefully and check for correctness.

 

16:  No Investment Discretion

Our clients are in no way obligated to make any purchases of securities or any other investments through Lawrence Russell and Company. At all times, our clients may unilaterally decide to follow or ignore completely or in part, any information, recommendation, or counsel given by us.

Lawrence Russell and Company never seeks to have investment selection discretion in any client account. Our clients retain absolute discretion over all investment and implementation decisions at all times.

 

17:  Clients Vote Their Own Securities

Lawrence Russell and Company has no involvement in the voting of client securities related to proxies or other solicitations. Clients will receive their proxies or other solicitations directly from their custodian or a transfer agent. They can make their own decisions about these matters and vote directly.

Should any of these votes seem significant to any client, we can evaluate the matter and offer a recommendation to that client. We are unlikely to be involved in these matters, simply because we encourage clients to hold broadly-diversified, low-cost, passively-managed investment funds that track market indexes rather than to hold a self-managed portfolio of individual securities that may not be adequately diversified.

 

18:  Financial Information

No prepayments of more than $500 and 6 months or more in advance are required. Full payment for a particular service is due and payable upon delivery of that service. As such, Lawrence Russell and Company is not required to publish its balance sheet. The firm holds no investment assets beyond cash working capital. Lawrence Russell and Company has never been the subject of a bankruptcy petition.

 

19:  Additional Information Required for State-Registered Advisers

Lawrence Russell and Company believes that clients with sophisticated financial and investment planning needs should be served by an advisor who has extensive executive-level business experience and a college and graduate level education in economics, finance, investments, accounting, probability, statistics, survey research, and computer modeling. Larry Russell has this business and educational background.

Larry Russell (born 1952) is a Managing Director of Lawrence Russell and Company. He provides all advisory services to clients that require financial and investment planning knowledge and judgment. Larry holds degrees from MIT (BS – 1975), Brandeis University (MA – 1979), and Stanford University (MBA – 1982). Prior to Lawrence Russell and Company, Larry Russell was a business and corporate development executive with technology firms and start-ups.

For most of his career, he contributed to the Hewlett-Packard Company (1982-1989), IntelliCorp (1989-1991) and to Sun Microsystems, Inc. (1991-1999). During his corporate career, Larry specialized in business and corporate development and acquired externally developed products via negotiated licenses and companies through mergers and acquisitions. As Director of Corporate Development at Sun Microsystems from 1995 to 1999, Larry was responsible for leading the evaluation of all investment proposals submitted to Sun’s Executive Committee members. He provided mergers and acquisitions support to business units, oversaw the corporation’s equity investment portfolio, worked with venture investment partners, and managed strategic partners.

In 1999, Larry left Sun to co-found Codexa Corporation in Altadena, and later Pasadena, California. At Codexa, he was EVP and CFO, recruited the management team, and led the firm’s finance, accounting, human resources, legal affairs, product marketing, and business development efforts. This venture funded firm provided advanced information filtering services for securities market professionals. As a consultant under contract following Codexa, Larry served as Interim CEO and President while forming VRVS Global Corporation, a Caltech startup.

Karen Deacy-Russell (born 1955) is Managing Director of Lawrence Russell and Company, and she provides administrative services. Karen has been Managing Director of Lawrence Russell and Company since 2001. For the period 1995 to 2000 she was a homemaker. During the prior two decades she held administrative and/or marketing communications positions in Silicon Valley at the San Jose Police Department, Syntex Corporation, Software Publishing Corporation, and Adobe Systems, Inc. Currently, Karen also works part-time reporting to the CFO of the wonderful Flintridge Sacred Heart Academy in La Canada Flintridge, California, from which our daughter recently graduated. Karen holds a Bachelor of Arts degree from San Jose State University (1980).

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