Mission Statement
The mission of Kirtland Financial Management, Inc. is to provide clients with integrated long-term solutions for their
financial and related personal needs by providing objective advice on the complex financial options available in today’s
global economic environment. This is accomplished by assisting clients manage time horizons, volatility, and risk through
the implementation of investment strategies and designed financial planning disciplines exclusive to each client.
Business Focus
Kirtland Financial Management, Inc., (hereinafter referred to as “KFM”, “we”, “us” and “our”) is a registered investment
advisor1 engaged in the business of assisting clients to implement fiscally responsible practices that are tailored to
address their monetary needs for today, tomorrow, and in the future. Our financial planning and investment counsel are
directed to the needs of high-net-worth individuals and their families, charitable organizations, pension and profit-
sharing plans, affluent business owners, and entrepreneurs that have come to expect professional and quality service.
KFM has operated as a Registered Investment Advisor since 1999. Brett C. Hixon is the primary owner of KFM.
A client’s economic health and well-being is impacted by four primary sectors in their financial life. Each sector is
sensitively linked; if the balance of these sectors is weighted too heavily in one direction, then the impending results
might adversely affect the client. Therefore, what we seek to do is examine a client’s total financial situation to
determine how any financial advice might impact the stability of these sectors, and then advise the client based on the
scenario most likely to prevent such imbalances from occurring. Consequently, the complex investment alternatives
available to the client are then reduced to those investment options best suited to maintain the desired balance.
These four sectors are:
• Income – Employment, investment income, windfall/inheritance, social security, and pension income.
• Household Expenses – Housing, utilities, transportation, insurance, education, debt repayment, and other
expenses including entertainment.
• Assets – Real estate, investments, other tangible property, and intangible property.
• Liabilities – Mortgage, credit card, automobile, and unsecured debt.
Therefore, KFM looks at a client’s financial goals and lifestyle needs as an interaction between their income and
household expenses, their collection and management of assets, and their use and management of liabilities and
net worth.
Financial Planning Services
Successful financial planning can be achieved by starting with a clear picture of a client’s financial needs and objectives.
The financial plans we develop for clients are designed to help us eliminate much of the guesswork in achieving the
financial freedom and independence the client desires by simplifying these financial alternatives. For the client, such
quality time invested by KFM on the front-end can solve problems and eliminate future concerns.
Financial planning is an evaluation of the investment and financial options available to a client based upon their defined
economic criteria. Planning includes: (i) attempting to make optimal decisions; (ii) projecting the consequences of these
decisions for the client in the form of a financial plan – a working blueprint; (iii) implementing the protocol to achieve
the objectives of the plan; and then, (iv) comparing future performance against the working blueprint.
A financial plan can be integrated – a mutually defined review of the client’s personal financial needs; or, targeted –
1 The term “Registered Investment Advisor” is not intended to imply Kirtland Financial Management, Inc. has attained a certain level of skill or training. It is used
strictly to reference the fact that we are “Registered” as an “Investment Advisor” with the United States Securities and Exchange Commission – and with such other
regulatory agencies that may have limited regulatory jurisdiction over our business practices.
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review, analysis and evaluation of a core area of financial need. In general, financial planning encompasses one or more
of the following areas of concern:
• Personal – Family records, budgeting, personal liability, estate information and financial goals.
• Education – Education IRAs, financial aid, and state savings plans including 529 plans, grants and general
assistance in preparing to meet dependents continuing educational needs through development of an education
plan.
• Taxes & Cash Flow – Understanding the impact of various investments on a client’s current income tax and
future tax liability.
• Death & Disability – Cash needs at death, income needs of surviving dependents, estate planning and income
analysis.
• Estate – Reviewing estate planning documents, including wills and trusts, to determine if a client should seek
the assistance of an estate planning attorney. Reviewing powers of attorney, nursing home and assisted living
agreements, living trusts, and Medicare/Medicaid benefits.
• Retirement – Analysis of current strategies and investment plans designed to help you achieve your retirement
goals.
• Investments – Analysis of investment alternatives and their effect on a client’s investment portfolio(s),
including a risk and return analysis. Assessment of a client’s risk tolerance profile.
• Real Estate – Analysis of real estate investment opportunities.
• Insurance – Review of existing policies to ensure proper coverage for life, health, disability, long-term care,
liability, home and automobile.
Methodology
Our financial planning methodology follows the six (6) steps specified in the Financial Planning Practice Standards
established by the Certified Financial Planning Board.
1. Establishing and defining the client-planner relationship.
2. Gathering client data identifying both financial and personal goals and objectives.
3. Analyzing and evaluating the client’s financial status.
4. Developing and presenting financial planning recommendations and/or alternatives.
5. Implementing the financial planning recommendations.
6. Monitoring the financial planning recommendations.
These standards build on serving the complete financial need of the client by implementing specific measures to solve
problems and establish financial objectives that are in the best interest of the client.
Preparing the Financial Plan
KFM prepares the financial plan in four (4) phases. These phases are defined as follows:
Phase I – Evaluate
Through the detailed assessment process, KFM learns about the client and what the client wants to achieve. This is
accomplished through personal interviews and profile questionnaires2, which are designed to address all of the financial
planning disciplines discussed above. The client has the opportunity to prioritize their objectives and to remove from the
process any areas that are not applicable to their circumstances.
The time we invest in the detailed assessment process to listen and cater to the client’s desires is critical for developing
a strong financial planning foundation. Such time helps to: (1) define and narrow the client’s objectives and investment
options; (2) stimulate creative thinking; (3) identify areas of greatest concern; (4) create a unique picture of the client’s
2 The profile questionnaires used by KFM are important tools in gathering information about the client’s investment methodology, risk tolerance, income/tax bracket,
liquidity, time horizons, etc.… If the client elects not to answer the questionnaires or chooses to respond with limited input, it is possible that we could operate in a
handicapped capacity. Therefore, if the client desires the most effective and accurate recommendations, they will make every effort to provide us with detailed
personal needs and objectives, along with detailed financial and tax information.
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overall financial personality; and (5) Provide an effective and efficient way for us to address each client’s unique financial
needs and objectives.
After the interview process, we will prepare an agenda and conduct a meeting with the client to begin formally
documenting their goals and objectives. From this meeting, we may draft a report documenting the financial planning
process disciplines, which the client wishes to address, and detailing the specific objectives under each discipline.
Redrafting and meetings can be repeated until the client is completely satisfied with the report. Depending upon the
engagement, different levels of financial reporting will be undertaken. At a minimum, a statement of financial position,
designed for financial planning use only, will be prepared.
Phase II – Integrate
We define the financial plan as a series of blueprints designed to take the client from where they currently are
financially, to where they want to be financially. This is the creative portion of the process. There are usually many
different ways to accomplish a given goal. The objective, however, is to formulate a plan that the client will be
comfortable executing. In some cases, the drafting of the plan reveals the need for us to help the client reconcile the gap
between their expectations and their financial realities. Once a viable plan has been drafted, it is presented to and
reviewed with the client. The draft and review process may be repeated until the client is satisfied with the financial
plan.
Phase III – Formulate
A financial plan is of limited value if it is not put into action. Accordingly, we place a premium on implementing3 and
monitoring the plan. The implementation schedule provides the client with a list of tasks and deadlines designed to
ensure that the plan is put into action. The following are some examples of implementation: (i) drafting of appropriate
estate documents (performed by an estate attorney); (ii) purchase of various insurance policies; (iii) discretionary
investment advisory services, including preparation of an Investment Policy Statement and Client Profile and asset
allocation strategy (performed by KFM, or another investment adviser/broker-dealer of the client’s choice); (iv) adoption
of a personal budget; and, (v) income tax planning (prepared by a CPA).
Phase IV – Delegate
Once the plan has been built and the recommendations have been implemented it is critical that these
recommendations
be monitored on a continuing basis to assure that they remain consistent with the Investment Policy
Statement, if the assets are advised on a discretionary basis. This process requires periodic rebalancing of the portfolio
to assure that our client’s original objectives are maintained. Continued monitoring of established personal budgets and
the continued effects of taxation on the plan are assessed regularly and continually for clients who have taken
advantage of our Annual Retainer Agreement.
Investment Advisory Services
Our managed accounts are designed to build long-term wealth while maintaining risk tolerance levels acceptable to the
client. With every managed account, we incorporate investment strategies that have been pre-determined from the
investment parameters outlined in the Investment Policy Statement, if the assets are advised on a discretionary basis.
Such investment strategies are made up of one or more of the following investment styles:
• Capital Appreciation – Strategies designed to take advantage of the current economic environment and to offer
enhanced equity growth and income performance.
• Capital Preservation – Strategies designed to produce consistent, stable investment returns that do not
fluctuate so aggressively with daily changes in the financial markets.
• Retirement Living/Tax Implications – Long-term strategies designed to capitalize on investment returns that
yield either low taxes or are tax exempt.
3 Implementing the recommendations made in a financial plan often requires consultation or coordination with one or more outside professionals (e.g.: attorneys,
CPAs, insurance and securities representatives). All information provided by and received from the client will be kept entirely confidential, not only by KFM, but by
the outside professionals as well. Such information will be disclosed to third parties only with mutual consent or as may be permitted or required by law.
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In accomplishing these objectives, we will: (i) create tailored investment solutions; (ii) implement the designed
investment strategies or match the investment needs of the client with a group of third-party money managers
(“Portfolio Managers”) and/or mutual funds for investment advisory services, asset allocation and timing services; and
(iii) monitor the investment performance of such management strategies and/or Portfolio Managers.
Portfolio Composition
Investment advisory services of KFM primarily utilize equities, fixed income (bond) vehicles, and investment company
products to make up the composition mix within each client’s portfolio.
The investment mix for each client is uniquely designed to achieve the desired investment return for the client.
However, the selected equities and fixed income vehicles in a client’s portfolio are typically diversified into many stocks
and bonds that are common to all client accounts. This is the only common denominator; from that point the
composition mix and quantity of stocks and bonds in any given client account is completely subjective.
Such classifications are a hypothetical representation of a typical account composition but should not be construed as
absolute. Ultimately, the exact composition makeup and allocation of securities are determined by the client’s
investment parameters, which can compose a more detailed and/or complex structure.
We use additional investment vehicles to achieve the client’s desired investment objective: derivatives, index funds,
leveraged index funds, closed-end funds, mutual funds, equipment leasing, private placements and other publicly traded
securities.
Methodology
Our investment methodology is based on five (5) premises, each of which is devised from modern portfolio theory.
1. Clients are inherently risk averse.
2. The markets are basically efficient.
3. The focus of attention is shifted away from individual securities analysis to consideration of portfolios as a
whole, predicated on explicit risk-reward parameters.
4. For any level of risk that the client is willing to accept, there is a rate of return that should be achieved.
5. Portfolio diversification is not so much a function of how many issues are involved, but more a function of the
relationships and proportions of each asset to its correlating asset.
It is our practice to develop an Investment Policy Statement for each client if the assets are managed on a discretionary
basis. The Investment Policy Statement is a report which has recommendations and is intended to provide guidance in
the client’s decision regarding the allocation of capital in the client’s portfolio. The approach used in making portfolio
recommendations is based on these perspectives and assumptions: (i) an evaluation of your risk preference and rate of
return objectives; (ii) asset selections, liquidity, and cost constraints required in the development of a long-term
portfolio strategy; and (iii) an attempt to match established policies and objectives with the client’s risk and return
preferences. This method of formalizing policies and objectives, establishing risk/reward parameters, selecting asset
classes, defining allocation constraints, and setting guidelines for performance evaluation is of paramount importance in
maintaining long-term investment strategies and portfolio growth. The report is prepared using historical performance
data for the investments included therewith. The data is obtained from outside source and is believed to be reliable, but
there can be no guarantees as to its accuracy or reliability.
Portfolio Monitoring Services
For those clients who believe they will benefit from a separately managed account, we may match the client’s particular
needs, as outlined in the Investment Policy Statement (designed for those clients whose assets are managed on a
discretionary basis), with an independent third-party money manager (“Portfolio Managers”) for investment advisory
services, asset allocation and timing services through a wrap fee program. A “wrap-fee” program is one that provides
the client with advisory and brokerage execution services for an all-inclusive fee. The client is not charged separate fees
for the respective components of the total service. More detail may be found on each Portfolio Manager’s Wrap Fee
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Program in their respective Form ADV Part 2A Appendix 1.
Selecting Portfolio Managers
KFM may make available to the client a selected group of Portfolio Managers that fit the client’s investment criteria.
Such Portfolio Managers, under our direction, may then implement the investment advisory services allocation and
timing services.
The Portfolio Managers may have little or no direct client contact, relying instead on our pre-qualification as directed
through the Investment Policy Statement. We may perform such qualifying analysis together with performing certain
professional, administrative and clerical duties prior to selecting and opening accounts with a particular Portfolio
Manager.
Monitoring Services
Once the Portfolio Manager has been selected and the account established, we may monitor the performance of the
Portfolio Manager and the client’s investments continuously based on the procedures and timing intervals delineated in
the Investment Policy Statement. Although KFM is not involved in any way in the purchase or sale of these investments,
KFM will supervise the client’s portfolio and may make recommendations to the client as market factors and the client’s
needs dictate.
Tailored Relationships
KFM tailors investment advisory services to the individual needs of the client. KFM clients are allowed to impose
restrictions on the investments in their account. All limitations and restrictions placed on accounts must be presented to
KFM in writing. Clients will retain individual ownership of all securities.
Fiduciary Statement
We are fiduciaries under the Investment Advisers Act of 1940 and when we provide investment advice to you regarding
your retirement plan account or individual retirement account, we are also fiduciaries within the meaning of Title I of the
Employee Retirement Income Security Act, (“ERISA”) and/or the Internal Revenue Code, (“IRC”), as applicable, which are
laws governing retirement accounts.
We have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money
creates some conflicts with your interests. We must take into consideration each client’s objectives and act in the best
interests of the client. We are prohibited from engaging in any activity that is in conflict with the interests of the client.
We have the following responsibilities when working with a client:
• To render impartial advice;
• To make appropriate recommendations based on the client’s needs, financial circumstances, and investment
objectives;
• To exercise a high degree of care and diligence to ensure that information is presented in an accurate manner
and not in a way to mislead;
• To have a reasonable basis, information, and understanding of the facts in order to provide appropriate
recommendations and representations;
• Disclose any material conflict of interest in writing; and
• Treat clients fairly and equitably.
Regulations prohibit us from:
• Employing any device, scheme, or artifice to defraud a client;
• Making any untrue statement of a material fact to a client or omitting to state a material fact when
communicating with a client;
• Engaging in any act, practice, or course of business which operates or would operate as fraud or deceit upon a
client; or
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• Engaging in any manipulative act or practice with a client.
We will act with competence, dignity, integrity, and in an ethical manner, when working with clients. We will use
reasonable care and exercise independent professional judgement when conducting investment analysis, making
investment recommendations, trading, promoting our services, and engaging in other professional activities.
Wrap Fee Programs
As described above, KFM may recommend Wrap Fee Programs to clients through independent managers.
Client Assets
As of December 31, 2022, KFM managed $276,446,741 in client assets; $252,950,893 was managed on a discretionary
basis and $23,495,848 was managed on a non-discretionary basis.
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