Advisor Resource Council, (the “Firm,” “we,” “us” or “our,”) is an investment advisor registered
with the Securities and Exchange Commission under the Investment Advisers Act of 1940.
This Wrap Fee Program Brochure, or Brochure, provides more information about our wrap fee
program. More detailed information about the other types of investment advisory and
consulting services we provide may be found in our Form ADV Part 2A Brochure, which may be
requested at any time, without charge, by contacting Sarah Pais, Chief Officer of Compliance
and Operations at (972) 421- 1360 or
RIACompliance@thearcfirm.com.
Portfolio Management Services
Our wrap fee program is an investment advisory program that “wraps” or “bundles” services
together. Participation in a wrap fee program may be appropriate for clients who desire the
benefit of an ongoing advisory relationship, are interested in discretionary asset management,
intend to actively engage in buy and sell investment strategies (whether discretionary or
nondiscretionary) or who do not intend to maintain substantial positions in cash or cash
equivalents. This section of the Brochure describes the general structure and operation of our
program.
Wrap Accounts and Portfolio Managers
As part of our wrap fee program, we create individual accounts, called “wrap accounts,” which
are individually managed investment portfolios that may consist of individual stocks or bonds,
mutual funds, exchange traded funds (“ETFs”), options, unit investment trusts, alternative
investments and other public or private securities or investments.
Usually, wrap accounts are managed by our individual investment advisor representatives, or
“IARs,” who act as discretionary portfolio managers. Alternatively, clients may elect to manage
the assets held in their wrap account or impose reasonable limits on the discretion exercised by
their advisor.
More information about the services provided by IARs under our wrap fee program may be
found below in Item 6. Specific information about each IAR who is providing advisory services
through our wrap fee program may be obtained in the Brochure Supplement for the IAR, Form
ADV Part 2B, which will be provided before or at the time of engagement. Each IAR has
different licenses and training and has attained different educational levels. Clients should
carefully review the applicable Brochure Supplement before an IAR is engaged.
Custody
We do not hold or custody client securities and other funds. When we establish a wrap account,
we ordinarily designate a qualified custodian to custody the securities and other property held
in the account, or our clients may instead designate another custodian that is acceptable to us.
Program Services
At the onset of each relationship, the client and the client’s IAR agree upon the services that we
will provide, which may include some or all of the following:
• Access to a designated IAR, who will oversee the wrap account;
• Determining the client’s particular investment strategy and investment goals, based on
a client profile and other information we obtain when the wrap account is first
established;
• Determining any restrictions or limits that will be placed on the management of the
wrap account; while we attempt to accommodate each client, the restrictions and
limits must be reasonable and not unduly burdensome;
• Access to discretionary portfolio management, including portfolio monitoring and
rebalancing, provided at the frequency we agree upon with each client;
• Periodic performance reviews, annually or at more frequent intervals, as requested by
our client;
• Custody of assets;
• Execution of transactions; and
• Delivery of required documents, such as mutual fund prospectuses.
Fees
Clients who participate in our wrap fee program may elect one of two fee arrangements, either:
• An asset-based conventional wrap or “bundled” fee, which includes fees for
investment advice, discretionary management, as applicable, transaction expenses and
other wrap fee program services; or
• An asset-based management fee, which includes fees for investment advice and
discretionary management, as applicable, and other wrap fee program services, but
excludes the cost of certain transaction-based charges, which are separately billed:
Asset-Based Fees
Regardless of the fee arrangement selected, each client will pay an asset-based fee, calculated
as either a percentage of assets or a flat fee based on the size of assets under management.
Our maximum asset-based fees are negotiable under appropriate circumstances. When we
negotiate fees, we may consider factors such as the fees that our client has paid to a
competitor for similar services, the totality of our relationship with the client, the potential for
future business, the complexity of the client’s investment strategy, the degree to which we
provide discretionary asset management, and whether the client will be responsible for
transaction-based charges.
Our maximum asset-based fees are below; more information about our billing procedures and
practices may be found in our Form ADV Part 2A Brochure, Item 5, “Fees and Compensation,” in
the Section titled “Calculation and Payment of Fees.”
PERCENTAGE OF ASSETS UNDER MANAGEMENT*
Assets Under Management
Maximum Annual Fee
$0 to $499,999 2.75%
$500,000 to $999,999 2.50%
$1,000,000 to $1,999,999 2.25%
$2,000,000 to $4,999,999 2.00%
Over $5,000,000 1.75%
*Fees are prorated and billed quarterly in advance, based on the value of each client’s account
on the last day of the previous quarter.
FLAT ANNUAL FEE*
Assets Under Management
Maximum Annual Fee
$0 to $499,999 $13,750
$500,000 to $999,999 $25,000
$1,000,000 to $1,999,999 $45,000
$2,000,000 to $4,999,999 $100,000
Over $5,000,000 Maximum of $100,000 for each
$5,000,000 increment
*Fees are billed in arrears, quarterly, semi-annually or annually.
Asset-based fees are deducted from each client’s wrap account and directly remitted to us.
When a wrap account is established, each client determines the method for calculating the
wrap fee, authorizes the deduction of fees from the account, and directs the custodian to
deduct and remit fees to us. Each client receives a quarterly statement from the custodian that
reflects all amounts disbursed from the account, including the amount of our fee.
Additional Transaction-Based Charges
Clients electing the transaction-based management accounts agree to pay transaction-based
charges, in addition to our asset-based fee. Transaction-based charges vary based upon the
type of security that is purchased, sold or exchanged. Charges are currently between $0 and
$26.50 for mutual fund transactions, $9.00 for ETF transactions
and up to $75.00 for certain foreign
transactions. Actual charges may depend upon the fees that the qualified custodian receives from
the mutual fund or ETF that is purchased, sold or exchanged and whether the sponsor of the fund
participates in the qualified custodian’s transaction fee network, which generally reduces the
transaction fees that are charged. If a fund participating in the network is purchased, the fund’s
sponsor directs a payment to the qualified custodian, which is used to defray transaction charges
that are incurred. When a fund participating in the network is sold, the qualified custodian waives
the transaction charge. Clients with asset-based management accounts authorize the qualified
custodian to deduct these transaction-based charges directly from their accounts and will receive
quarterly custodial statements that reflect these charges.
Comparing Fee Arrangements
Before deciding to participate in our wrap fee program, clients should evaluate our fees and
expenses. The same or similar services may be available from other advisors for a lower fee.
Fees associated with our wrap fee program may be more or less costly than the fees charged
separately for each service provided through our wrap fee program, such as fees for investment
advice and costs associated with trading activity. Clients should consider the need for ongoing
investment advice, the number of transactions that are likely to be executed, whether buy and
hold investment strategies will be used, the need to hold cash balances and similar factors
before deciding to participate in our wrap fee program.
When deciding between our fee arrangements, clients should consider the following:
• Clients who elect an asset-based conventional wrap and pay a conventional wrap fee,
with no transaction- based charges, should understand that the wrap account’s
transaction charges will be allocated to the client’s IAR. While these charges may be
less than conventional brokerage costs, they may be a factor when an advisor decides
which securities or mutual funds to purchase or sell and whether to place transactions
for the account. Clients should also consider that these conflicts may have an impact
on the investment performance of their account.
• Clients who elect an asset-based management account and pay a wrap fee and
transaction-based charges should consider the number of transactions that are
anticipated. More information about the Firm’s relationship with the approved
custodian may be found below in Item 9.
Additional Costs and Expenses
All clients who participate in our wrap fee program, regardless of the fee arrangement selected,
should expect to pay additional expenses charged by third parties, including the following:
Clients remain responsible for custodial and similar fees and costs customarily associated with
the maintenance of a brokerage account.
• Clients will be charged internal expenses associated with investment products such as
mutual funds and ETFs, including investment management and 12b-1 fees. These
internal expenses are typically calculated as a percentage of the fund’s assets under
management. Some of these fees are retained by the product issuers, and some are
paid to third parties for services such as the maintenance of shareholder accounts and
the distribution of prospectuses and similar items. More information about specific
expenses charged by a fund or ETF may be found in the applicable prospectus. Because
these expenses are directly deducted from a fund’s assets, they have the effect of
reducing the performance of the investment.
• Products, primarily mutual funds, may have multiple share classes, each class with a
different fee and compensation structure, which may include deferred sales charges.
Charges for internal expenses may also differ among share classes, including
investment management fees and 12b-1 fees. Mutual fund shares acquired in a wrap
account may be subject to these fees and expenses, and we may acquire shares in a
class other than those designated specifically for advisory or institutional accounts.
Clients should not assume that the share class with the lowest fees and costs will be
acquired.
• Other types of charges and expenses may be incurred under our wrap fee program,
including mark-ups and mark-downs, odd-lot differentials, spreads paid to market
makers from whom securities were are obtained, transfer taxes, wire transfer and
electronic fund fees, and other fees and taxes on brokerage and securities
transactions.
Schwab Transaction Charges
The Firm pays Schwab transaction costs for each executed trade in Wrap Fee accounts. As a
result, we have a financial incentive to limit orders for Wrap Fee accounts because trades
increase our transaction costs. Thus, an incentive exists to trade less frequently in a Wrap Fee
program.
Mutual Fund Share Classes
As explained above, mutual funds generally offer multiple share classes, with each class subject
to certain eligibility or purchase requirements (such as minimum investments or participation in
an investment advisory program) and different expense ratios and costs. In some
circumstances, our advisors may receive additional compensation from a mutual fund based on
the share class that is acquired. When designating a share class for purchase, our advisors
typically evaluate factors such as the amount of any asset-based advisory fee that is paid by a
client or account, whether the purchase or sale of the fund is subject to transaction charges,
operational considerations related to a fund or share class (such as access to a particular class
through a custodian), and the availability of revenue sharing, distribution fees, shareholder
servicing fees and similar items.
The Firm and our IARs may have a financial incentive to recommend or select a share class that
results in the payment of additional compensation. The Firm has taken steps to minimize this
conflict by providing IARs with guidance and by conducting periodic reviews of client accounts
to ensure the appropriateness of share class holdings. Regardless of these actions, our clients
should not assume that the share class with the lowest expense ratio or charges will be
acquired.
Compensation Paid to our Investment Advisor Representatives
Our IARs receive a portion of the wrap fee that is paid to the Firm, either directly as a
percentage of the fee or indirectly in the form of salary paid by the Firm. If an IAR is directly
paid a percentage of the wrap fee, the advisor may earn more compensation through the wrap
fee program than would be paid in another type of advisory arrangement, and clients may pay
more under our wrap fee program than would be charged separately for advice and
transactions. Clients should be aware that the potential for increased compensation may create
an incentive to recommend the wrap fee program over other types of transaction-based
accounts.