A. The Welch Group is a limited liability company formed on September 4, 1998 in
State of Alabama. The Welch Group became registered as an Investment Adviser
in February 1999. The Welch Group is principally owned by Stewart H. Welch, III,
who is The Welch Group's Founder.
On January l, 2018, pursuant to an internal merger between two affiliated entities,
both under common control ownership by Stewart H. Welch (the Founder), Welch
Investments, LLC (SEC File Number: 801-56718) merged into The Welch Group,
LLC. As a result of the merger, all future services are provided by The Welch
Group. As discussed below, depending upon the terms of the engagement, The
Welch Group can provide its clients (i.e. individuals, pension and profit sharing
plans, trusts, and business entities) with investment management services, financial
analysis services, and, to the extent engaged to do so and specifically requested by
a client, financial planning and related consulting services.
PORTFOLIO DESIGN/MANAGEMENT
In the event the client desires, the client can engage The Welch Group to design an
investment portfolio and provide ongoing corresponding investment management
services on a fee-only basis. To the extent provided in the written agreement
between the Welch Group and the client, The Welch Group's annual investment
advisory fee shall include, to the extent specifically requested by the client,
financial planning and consulting services (generally subject to a $3 million assets
under management minimum-see Item 5 below). The Welch Group's annual
investment advisory fee is based upon a percentage (%) of the market value of the
assets placed under The Welch Group's management, generally between 0.30%
and 1.20%. To commence the investment advisory process, The Welch Group will
ascertain each client's investment objective(s) and then allocate the client's assets
consistent with the client's designated investment objective(s). Once allocated, The
Welch Group provides ongoing supervision of the account(s). Before engaging The
Welch Group to provide investment advisory services, clients are required to enter
into an Investment Advisory Agreement setting forth the terms and conditions of the
engagement (including termination), describing the scope of the services to be
provided, and the fee that is due from the client.
Please Note: The Welch Group believes that it is important for the client to address
financial planning issues on an ongoing basis. Registrant's advisory fee, as set forth
at Item 5 below, will remain the same regardless of whether or not the client
determines to address financial planning issues with Registrant.
FINANCIAL PLANNING AND CONSULTING SERVICES (STAND-ALONE)
To the extent it is specifically requested to do so, The Welch Group may provide
its clients with a broad range of financial analysis and consulting services
(including non-investment-related matters) on a stand-alone separate fee basis. The
Welch Group's planning and consulting fees are negotiable, but generally range up
to $3,500 on a fixed fee basis, depending upon the level and scope of the service(s)
required and the professional(s) rendering the service(s).Prior to engaging The
Welch Group to provide financial analysis and/or consulting services, the client
will generally be required to enter into a Financial/ Advisory Agreement with The
Welch Group setting forth the terms and conditions of the engagement, describing
the scope of the services to be provided, and the portion of the fee that is due from
the client prior to The Welch Group commencing services. Please Note: The
Welch Group does not serve as an attorney, accountant, or insurance agent, and no
portion of our services should be construed as legal, accounting or insurance
services. Accordingly, The Welch Group does not prepare estate planning or any
other legal documents, tax returns, or sell insurance products. To the extent
requested by a client, we may recommend the services of other professionals for
non-investment implementation purposes (i.e. attorneys, accountants, insurance,
etc.). No client is under any obligation to utilize the services of any such
recommended professional. Please Also Note: If the client engages any
professional (i.e. attorney, accountant, insurance agent, etc.), recommended or
otherwise, and a dispute arises thereafter relative to such engagement, the client
agrees to seek recourse exclusively from the engaged professional. If, and when
The Welch Group is involved in a specific matter (i.e. estate planning, insurance,
accounting-related engagement, etc.), it is the engaged licensed professionals (i.e.
attorney, accountant, insurance agent, etc.), and not The Welch Group, that is
responsible for the quality and competency of the services provided.
It remains the client’s responsibility to promptly notify The Welch Group if there
is ever any change in their financial situation or investment objectives for the
purpose of reviewing, evaluating or revising The Welch Group’s previous
recommendations and/or services.
REPORTING SERVICES AND AGGREGATE DATA STORAGE
The Welch Group offers investment data storage and periodic comprehensive
reporting services which can incorporate all of the client's investment assets,
including those investment assets that are not part of the assets managed by The
Welch Group (the "Excluded Assets "). Should the client desire reporting services,
the client acknowledges and understands that with respect to the Excluded Assets,
The Welch Group's service is limited to reporting and data storage services only
and does not include investment management, review, or monitoring services, nor
investment recommendations or advice. As such, the client, and not The Welch
Group, shall be exclusively responsible for the investment performance of the
Excluded Assets. In the event the client desires that The Welch Group provide
investment management services with respect to the Excluded Assets, the client
may engage The Welch Group to do so for a separate and additional fee in
accordance with the fee schedule set forth above.
MISCELLANEOUS
Variable Annuity Sub-divisions. The Welch Group may also render discretionary
investment management services to clients relative to variable annuity products
that they may own. In so doing, The Welch Group directs the allocation of client
assets among the various mutual fund sub-divisions which comprise the variable
annuity product based upon the investment objectives of the client.
Limitations of Financial Planning and Non-Investment Consulting/Implementation
Services: As indicated above, to the extent requested by a client, we may provide
financial planning and related consulting services regarding non-investment-
related matters, such as estate planning, tax planning, insurance, etc. Please Note:
The Welch Group does not serve as an attorney, accountant, or insurance agent,
and no portion of our services should be construed as legal, accounting, or
insurance services. Accordingly, The Welch Group does not prepare estate
planning or any other legal documents, tax returns, or sell
insurance products. To the extent requested by a client, we may recommend the
services of other professionals for non-investment implementation purposes (i.e.
attorneys, accountants, insurance, etc.). No client is under any obligation to utilize
the services of any such recommended professional. Please Also Note: If the client
engages any professional (i.e. attorney, accountant, insurance agent, etc.),
recommended or otherwise, and a dispute arises thereafter relative to such
engagement, the client agrees to seek recourse exclusively from the engaged
professional. If, and when The Welch Group is involved in a specific matter (i.e.
estate planning, insurance, accounting-related engagement, etc.), it is the engaged
licensed professionals (i.e. attorney, accountant, insurance agent, etc.), and not The
Welch Group, that is responsible for the quality and competency of the services
provided. Neither The Welch Group, nor its investment adviser representatives,
assist clients with the implementation of any financial plan, unless they have
agreed to do so in writing. In addition, The Welch Group does not monitor a client's
financial plan, and it is the client's responsibility to revisit the financial plan with
us, if desired.
Retirement Plan Rollovers: Potential for Conflict of Interest: A client or
prospective client leaving an employer typically has four options regarding an
existing retirement plan (and may engage in a combination of these options): (i)
leave the money in the former employer's plan, if permitted, (ii) roll over the assets
to the new employer's plan, if one is available and rollovers are permitted, (iii)
rollover to an Individual Retirement Account ("IRA"), or (iv) cash out the account
value (which could, depending upon the client's age, result in adverse tax
consequences). If Welch Group recommends that a client roll over their retirement
plan assets into an account to be managed by Welch Group, such a recommendation
creates a conflict of interest if The Welch Group will earn new (or increase its
current) compensation as a result of the rollover. If The Welch Group provides a
recommendation as to whether a client should engage
in a rollover or not (whether
it is from an employer’s plan or an existing IRA), The Welch Group is acting as a
fiduciary within the meaning of Title I of the Employee Retirement Income
Security Act and/or the Internal Revenue Code, as applicable, which are laws
governing retirement accounts. No client is under any obligation to roll over
retirement plan assets to an account managed by The Welch Group, whether it is
from an employer’s plan or an existing IRA. ANY QUESTIONS: The Welch
Group's Compliance Officer, Brent Gillis, remains available to address any
questions that a client or prospective client may have regarding the potential for
conflict of interest presented by such rollover recommendation.
Margin Accounts: Risks/Conflict of Interest. The Welch Group does not
recommend the use of margin for investment purposes. A margin account is a
brokerage account that allows investors to borrow money to buy securities and/or
for other non-investment borrowing purposes. The broker/custodian charges the
investor interest for the right to borrow money and uses the securities as collateral.
By using borrowed funds, the customer is employing leverage that will magnify
both account gains and losses. Should a client determine to use margin, The Welch
Group will include the entire market value of the margined assets when computing
its advisory fee. Accordingly, The Welch Group’s fee shall be based upon a higher
margined account value, resulting in The Welch Group earning a correspondingly
higher advisory fee. As a result, the potential of conflict of interest arises since The
Welch Group may have an economic disincentive to recommend that the client
terminate the use of margin. Please Note: The use of margin can cause significant
adverse financial consequences in the event of a market correction. ANY
QUESTIONS: Our Chief Compliance Officer, Brent Gillis, remains available
to address any questions that a client or prospective client may have regarding
the use of margin. .
Use of Mutual Funds and Exchange Traded Funds. While The Welch Group may
recommend allocating investment assets to mutual funds and exchange traded
funds that are not available directly to the public, The Welch Group may also
recommend that clients allocate investment assets to publicly-available mutual
funds or exchange traded funds that the client could obtain without engaging The
Welch Group as an investment advisor. However, if a client or prospective client
determines to allocate investment assets to publicly available mutual funds or
exchange traded funds without engaging The Welch Group as an investment
advisor, the client or prospective client would not receive the benefit of The Welch
Group's initial and ongoing investment advisory services. Please Note: In addition
to The Welch Group's investment advisory fee described below, and transaction
and/or custodial fees discussed below, clients will also incur, relative to all mutual
fund and exchange traded fund purchases, charges imposed at the fund level (e.g.
management fees and other fund expenses).
Cash Sweep Accounts. Account custodians generally require that cash proceeds
from account transactions or cash deposits be swept into and/or initially maintained
in the custodian’s sweep account. The yield on the sweep account is generally
lower than those available in money market accounts. To help mitigate this issue,
The Welch Group shall generally purchase a higher yielding money market fund
available on the custodian’s platform with cash proceeds or deposits, unless The
Welch Group reasonably anticipates that it will utilize the cash proceeds during the
subsequent 30-day period to purchase additional investments for the client’s
account. Exceptions and/or modifications can and will occur with respect to all or
a portion of the cash balances for various reasons, including, but not limited to, the
amount of dispersion between the sweep account and a money market fund, an
indication from the client of an imminent need for such cash, or the client has a
demonstrated history of writing checks from the account.
Cybersecurity Risk. The information technology systems and networks that The
Welch Group and its third-party service providers use to provide services to
Registrant’s clients employ various controls, which are designed to prevent
cybersecurity incidents stemming from intentional or unintentional actions that
could cause significant interruptions in Registrant’s operations and result in the
unauthorized acquisition or use of clients’ confidential or non-public personal
information. Clients and The Welch Group are nonetheless subject to the risk of
cybersecurity incidents that could ultimately cause them to incur losses, including
for example: financial losses, cost and reputational damage to respond to regulatory
obligations, other costs associated with corrective measures, and loss from damage
or interruption to systems. Although The Welch Group has established its systems
to reduce the risk of cybersecurity incidents from coming to fruition, there is no
guarantee that these efforts will always be successful, especially considering that
The Welch Group does not directly control the cybersecurity measures and policies
employed by third-party service providers. Clients could incur similar adverse
consequences resulting from cybersecurity incidents that more directly affect
issuers of securities in which those clients invest, broker-dealers, qualified
custodians, governmental and other regulatory authorities, exchange and other
financial market operators, or other financial institutions.
Custodian Charges-Additional Fees: As discussed at Item 12 below, when
requested to recommend a broker-dealer/custodian for client accounts, The Welch
Group generally recommends that Schwab serve as the broker-dealer/custodian for
client investment management assets. Broker-dealers such as Schwab charge
brokerage commissions, transaction, and/or other type fees for effecting certain
types of securities transactions (i.e., including transaction fees for certain mutual
funds, and mark-ups and mark-downs charged for fixed income transactions, etc.).
The types of securities for which transaction fees, commissions, and/or other type
fees (as well as the amount of those fees) shall differ depending upon the broker-
dealer/custodian (while certain custodians, including Schwab, do not currently
charge fees on individual equity transactions, others do). Please Note: there can be
no assurance that Schwab will not change its transaction fee pricing in the future).
These fees/charges are in addition to The Welch Group’s investment advisory fee
at Item 5 below. The Welch Group does not receive any portion of these
fees/charges. ANY QUESTIONS: The Welch Group's Chief Compliance Officer,
Brent Gillis, remains available to address any questions that a client or prospective
client may have regarding the above.
ERISA PLAN and 401(k) INDIVIDUAL ENGAGEMENTS:
• Trustee Directed Plans. The Welch Group may be engaged to provide
discretionary investment advisory services to ERISA retirement plans,
whereby the Firm shall manage Plan assets consistent with the investment
objective designated by the Plan trustees. In such engagements, The Welch
Group will serve as an investment fiduciary as that term is defined under The
Employee Retirement Income Security Act of 1974 ("ERISA"). The Welch
Group will generally provide services on an "assets under management" fee
basis per the terms and conditions of an Investment Advisory Agreement
between the Plan and the Firm.
• Client Retirement Plan Assets. If requested to do so, The Welch Group shall
provide investment advisory services relative to the client's 401(k) plan assets.
In such event, The Welch Group shall recommend that the client allocate the
retirement account assets among the investment options available on the
401(k) platform. The Welch Group shall be limited to making
recommendations regarding the allocation of the assets among the investment
alternatives available through the plan. The Welch Group will not receive any
communications from the plan sponsor or custodian, and it shall remain the
client's exclusive obligation to notify The Welch Group of any changes in
investment alternatives, restrictions, etc. pertaining to the retirement account.
Portfolio Activity. The Welch Group has a fiduciary duty to provide services
consistent with the client's best interest. As part of its investment advisory services,
The Welch Group will review client portfolios on an ongoing basis to determine if
any changes are necessary based upon various factors, including, but not limited
to, investment performance, market conditions, fund manager tenure, style drift,
account additions/withdrawals, and/or a change in the client's investment objective.
Based upon these factors, there may be extended periods of time when The Welch
Group determines that changes to a client's portfolio are neither necessary nor
prudent. Of course, as indicated below, there can be no assurance that investment
decisions made by The Welch Group will be profitable or equal any specific
performance level(s). Clients nonetheless remain subject to the fees described in