Mesirow SMART Portfolios® Program Details

Mesirow Financial SMART Portfolios® (the “Program”) is a digital, low cost investment management solution designed by Mesirow Financial Investment Management, Inc. (“Mesirow”) to offer Mesirow’s eligible advisory clients a product that combines Mesirow’s asset management expertise, as a global investment management firm, with a state-of-the-art technology platform developed by one of the world’s most recognized asset custodians, Charles Schwab & Co., Inc. (“CS&Co”). This hybrid approach to investment management leverages a technology platform called Institutional Intelligent Portfolios® (the “Platform”) developed by an affiliate of CS&Co, Schwab Performance Technologies (“SPT”). The Platform is available exclusively through independent investment advisory firms (“Advisors”) for their clients who open or maintain a brokerage account at CS&Co. Advisors, including Mesirow, are independent of and not owned by, affiliated with, or sponsored or supervised by SPT, CS&Co or their affiliates.  

The Platform offers eligible clients an efficient way to gain access to low-cost professional money management and is currently compatible with the following account types: Individual, Custodial, Community Property, Joint Tenants, Tenants in Common, Contributory IRA, Roth Contributory IRA, Rollover IRA, SEP IRA, SIMPLE IRA and Revocable Living Trust (with identical grantor and trustee). 

The Platform includes a client portal (the “Client Portal”) that allows enrolled clients to access the Program, answer the Investor Investment Profile Questionnaire (described below), receive Portfolio recommendations, receive/sign advisor’s documents (ADV2A, client agreement, privacy policy), open, fund, and view their applicable account(s) at CS&Co (such applicable accounts using the Program and the Platform, the “Program Accounts”) on an ongoing basis.

Additional features and benefits of the Platform and the Program include: 

A. Low Minimum Account Sizes and Fees 

  • Account Minimum for Program Accounts: $5,000 for initial investment
  • Fees: Mesirow charges clients a 3 basis point or 0.03% monthly investment advisory fee for assets in Program Accounts. At this time, there are no fees from SPT. However, SPT may charge Mesirow a 10 basis point or 0.10% annual fee to utilize the Platform. This 0.10% annual fee is currently waived provided Mesirow maintains a certain threshold of assets under the custody of CS&Co. Please see a copy of Mesirow’s Form ADV Part 2A for more information. 

B. Asset Allocation and Investor Investment Profile Questionnaire 

Proper asset allocation can improve the likelihood of a client achieving their investment goals. Through the Platform, Mesirow is able to offer a wide range of portfolios (the “Portfolios”) to address clients’ various goals, financial situations, constraints, and preferences. SPT has developed an Investment Profile Questionnaire (the “IPQ”) to help Mesirow determine whether the recommended Portfolio is consistent with the applicable client’s stated goals, time horizons, and risk profile.  

The IPQ and related questions for the account opening process for Program Accounts were developed based on rigorous research, considering both objective (factual) and subjective (behavioral) information to measure risk willingness and are scored accordingly.  The IPQ also includes questions that are designed to capture a preference for Total Return or Income focused portfolios and the tax status of the Program Account. The IPQ may be modified from time to time by SPT. For more information on the IPQ please refer to the details on the Platform.

C. Tax-Loss Harvesting 

The Platform includes a tax loss harvesting option whichMesirow has elected to make available to qualifying clients. Qualifying clients must have a minimum balance of $50,000 in their applicable Program Account at enrollment in tax-loss harvesting and $40,000 at time of the applicable trade. When a tax-loss harvesting trade event occurs, the primary ETF is sold and the secondary ETF is purchased, per the ETF pairing chosen by Mesirow.

D. Investment Committee

Clients who enroll in Mesirow’ s SMART Portfolios® benefit by gaining access the asset management expertise of Mesirow’s dedicated Investment Committee (“IC”). Our IC leverages over 150 years of collective industry experience to bring portfolio solutions to our clients. We believe by combining this industry experience with state-of-the-art technology, clients will benefit from low-cost professional investment management and make SMART decisions when formulating an investment strategy. 

Our IC meets on a quarterly basis and follows a disciplined process as it relates to the construction, asset allocation and monitoring of client portfolios. Thirty different Portfolios ranging from conservative to aggressive have been developed to meet the investment needs of our clients and will be available via the Platform. The Portfolio construction process itself involves detailed screening and due diligence of ETFs that includes:

Selection and evaluation of ETF’s:  

SPT has selected over 900 ETF’s for use on the Platform, corresponding to 1 of 28 asset classes (stocks, fixed income, commodities), and available to the IC for constructing Portfolios.  A complete guide to the asset classes can be found by clicking here. The IC reviews the performance, exposure and performance attribution of each asset class that is included in Portfolios on a regular basis. 

In order for an ETF to be eligible for inclusion in a Portfolio, the ETF must:

i. Correspond to one of the available asset classes for investment strategies available on the Platform;
ii. have been in operation for a minimum period of time;
iii. have a certain minimum level of assets; and
iv. have a relative small difference in between the “bid” and the “ask”.

SPT will consider making changes to the ETF’s that are available on the Platform on a quarterly basis.

Automatic Rebalancing and Trading

Based on the asset allocation for the investment strategy chosen by Mesirow for an applicable Program Account, SPT will rebalance the Portfolios in applicable Program Accounts periodically by generating instructions to CS&Co to buy and sell shares of ETF’s and depositing or withdrawing funds through the Sweep Program (as described below). This rebalancing function is an algorithm that is designed to maintain each client’s target allocation by asset class. The algorithm has no impact on the underlying investments or the overall Portfolio recommended to the client as a part of the Program Account opening process. Rebalancing trade instructions may be generated by the SPT when (among other times): 

  • The percentage allocation of an ETF varies by a set parameter agreed to by SPT and Mesirow; 
  • Mesirow decides to change the ETFs or their percentage allocations for a particular investment strategy; and/or
  • Mesirow decides to change a client’s investment strategy, which could occur, for example, when a client makes a change to their investment profile or imposes or modifies restrictions on the management of their applicable Program Account. 

Additional Information

No Advisor or Client Trading Authority

  • Neither Mesirow nor client may give trade orders on Program Accounts. Trading instructions will be generated automatically by SPT.

Proxy and Corporate Actions Administration Process

  • Mesirow will handle all proxy voting and administration of corporate actions related to securities held in Program Accounts, unless the Client indicates, via the applicable form, that they would like to receive proxies and corporate action documents directly from issuers.

Trade Order Management Process

  • Trades related to Program Accounts are executed by CS&Co.
  • All trades for a client’s Program Account(s) may be aggregated with trades for all other Program Accounts using the Platform.
  • Orders are routed and handled according to a rules-based process.
  • Program Accounts receive the average price for the aggregated trades.

Ability to Suspend Trading

  • The Platform provides Mesirow with the ability to suspend trading in the event of extreme market volatility. 

Enrollment in the Sweep Program

  • Each investment strategy involves cash allocation (the “Cash Allocation”), which will be will be accomplished through enrollment in the Sweep Program, a program sponsored by CS&Co (the “Sweep Program”).
  • By enrolling in the Program, clients consent to having the free credit balances in their brokerage accounts at CS&Co swept into deposit accounts at Charles Schwab Bank (“Schwab Bank”) through the Sweep Program.  Schwab Bank is an FDIC-insured depository institution and an affiliate of CS&Co.
  • The Cash Allocation will be a minimum of 4% of an account’s value to be held in cash, and may be higher, depending on which investment strategy is being utilized and the amount of the Cash Allocation Mesirow has set for the investment strategy.