Comprehensive Financial Management LLC (“CFM”) is a California limited liability company. CFM
operates a multi-family office and investment advisory firm with headquarters located in Los Gatos, CA.
CFM was started in August, 1986 and began offering its current services in 1996. The firm is managed
by three partners - Michael G. Mohr, who founded CFM; Gregory R. Hardester, who joined the firm in
1996; and Jeffrey R. Alvord, who joined the firm in 2007. CFM is wholly owned by its executives. CFM
views every client relationship as a long-term relationship and partnership. We seek the client’s input and
we welcome feedback on how to serve our clients better. We tailor investment strategies to fit the short-
term and long-term goals and needs of our clients.
CFM customizes and personalizes our broad range of services to provide each client with the best service
possible. In addition to investment advisory services, CFM also provides the following services to our
clients:
• Tax management, analysis, and consulting
• Estate planning and generational wealth transfer strategies
• Lifestyle asset acquisition and management
• Governance consulting
• Financial audit assistance
• Accounting, bill pay, and audit management
• Philanthropic management and consulting
• Risk management consulting
CFM Investment Advisory and Investment Management
CFM’s investment advisory and planning services are designed to be part of a collaborative process that
results in an integrated approach to meeting each client’s short-term and long-term goals and targets.
Each client’s engagement manager and CFM staff members design and implement, with client
participation, investment strategies that will deliver the financial means to achieve the client’s goals,
targets, and aspirations.
CFM generally utilizes the following process to design a custom set of investments and services for each
client:
• Identify and prioritize client goals and objectives: CFM tailors each client’s investment portfolio
based on a detailed understanding of the client’s goals, targets, and preferences. Goals include
financial security, support of family members, wealth transfer across generations, business
responsibilities, and charitable and philanthropic goals.
• Gather and analyze relevant information: CFM uses data provided by the client on its existing
investment portfolio and financial obligations to construct customized return requirements, risk
tolerance, and liquidity needs. CFM may work with third-party service providers (legal,
accounting, and other advisers) to obtain relevant information and coordinate strategies and
actions.
• Propose recommendations: CFM prepares a plan for the client, or in some cases, the giftor, to
review. Strategies and plans are revised until the plan satisfies the client/giftor or the engagement
manager.
• Plan Implementation: After the client/giftor approves the plan, CFM begins the implementation
process, drawing on existing investments and external manager relationships as appropriate.
• Monitoring progress: CFM reviews goals and targets at least annually to ensure progress and
continued alignment with client objectives. Clients can review their goals with CFM at any time.
In some cases in which a trust or other entity type is created for a client by another family member, the
investment plan is driven by the terms of the gift and the nature of the entity.
As of December 31, 2019, CFM managed $17.1 billion in total assets on a solely discretionary basis.
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Hourly work-based fees
CFM bills its investment clients on an hours-worked basis. The firm has specific arrangements in place
with each client, the fees are determined by the client and the engagement manager, and are documented.
Employees’ time is billed to clients monthly based on the number of hours each employee dedicated to
each client’s investments. Employees’ hourly rates vary based on salary level, seniority, and
responsibility. Engagement managers review draft billings for clients monthly or quarterly before bills
are sent out. In addition to fees paid directly to CFM, clients also pay, indirectly, investment management
fees and incentive fees to any third party managers that manage a portion of their accounts, and to
managers of the hedge funds, private equity/venture capital funds and other investment vehicles in which
their accounts are invested. CFM believes that its fees are competitive with fees charged by other
investment advisers for comparable services. Comparable services may be available, however, from other
sources for lower fees.
Performance-based fees
In addition to hourly fees, some clients are also charged for investment services based on the performance
of their investments. The client and CFM agree on the performance fee, if any, to be paid, the assets to be
included in the fee structure, and other relevant terms such as high water marks and hurdle rates by which
performance fees are calculated and paid. CFM may charge performance fees on client assets invested in
accounts and funds managed by outside managers that also charge fees. CFM complies with Rule 205-3
under the Investment Advisers Act of 1940, to the extent required by applicable law. Performance fees
may create an incentive for CFM to make more risky and speculative investments than it would otherwise
make.
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Some clients, but not all, are charged performance-based fees in addition to hourly fees. A performance-
based fee is a way of compensating an investment adviser with a share of the gains or appreciation of the
assets under management. CFM does not have a fixed performance fee schedule and the terms and
conditions are customized for each relationship. The structure is negotiated with each client separately;
not all clients are charged a performance fee. Performance-based fees are charged by CFM; employees
of CFM do not have separate compensation agreements with CFM clients.
In the allocation of investment opportunities, performance-based fee arrangements may also create (i) an
incentive for CFM to favor clients with performance fee arrangements over clients that are not charged, or
from which CFM will not receive a performance fee (e.g., because CFM has not met the relevant
performance threshold, if one exists), and (ii) an incentive to favor accounts from which it will receive a
greater performance fee over accounts from which it will receive a lesser performance fee. CFM has
adopted an investment allocation policy and procedures (which are part of CFM’s Compliance Manual)
designed to ensure that all clients are treated fairly and equally and to prevent this form of conflict from
influencing the allocation of investment opportunities among clients. In accordance with the allocation
procedures, CFM and its personnel will endeavor to treat clients in a fair and equitable manner.
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CFM manages investments for high-net-worth individuals and families. Within some client relationships
CFM manages assets for a variety of entities, including
• Personal accounts in the client’s name
• Living trusts, income trusts, charitable remainder trusts, and other trusts
• Limited liability companies and other partnership and corporate structures
• Foundations and other nonprofit organizations
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Investments, and Risk of Loss Methods of financial analysis
CFM constructs custom investment programs specifically designed for each client. The firm considers
the type of client (individual, nonprofit, etc.), the client’s return requirements and risk tolerances, the
timing and size of liquidity needs, the tax status, and the overall life situation of the client. CFM uses a
combination of computer programs, internal models, scenario-based analyses, and qualitative discussions
and analyses to create a portfolio management structure for each client.
Investment strategies and types of investments
The investment strategies that result from the analysis of client and market data generally fall into capital
preservation, capital growth, current income generation, or a balance among the three. Asset allocations
can include domestic and international assets and include equity, bond and fixed income, real estate, and
alternative investment holdings while maintaining appropriate levels of liquidity to meet expected
spending needs. Vehicles include (but are not limited to) individual stocks and bonds, mutual funds and
ETFs, real estate investment trusts (REITs), master limited partnerships (MLPs), hedge funds, and private
equity and private credit funds. CFM employs external managers and also manages securities portfolios
in-house. CFM builds highly customized portfolios that match a client’s return requirements, risk profile,
and liquidity needs. CFM will also recommend strategies that tie into estate planning and
intergenerational transfer of assets.
Sources of information
Clients provide some of the information used to construct the financial plan:
• Financial goals, both short-term and long-term
• Existing assets and liabilities
• Current and expected sources of income
• Risk tolerance
• Future projects and other possible uses of capital
CFM also uses market, economic, and investment data such as
• Past and expected future asset class returns for stocks, bonds, and other assets
• Current and expected interest rates
• Current and expected inflation rates
• Current and expected tax regulations and tax rates
• Analysis and commentary from internal and external sources
Investment Risk Factors
Investing in securities and other assets involves a potential risk of loss due to various market, economic,
political, regulatory, business, currency, counterparty and other risks that clients should be prepared to
bear. CFM does not guarantee the future performance of any client account, investment decision or
strategy. Future results may vary substantially from past performance and no investment strategy can
guarantee profit or protection from loss. Returns on investments can be volatile and a client may lose all
or a portion of their investment.
Equity and equity-related investments are volatile and will increase or decrease in value based upon
issuer, economic, market and other factors. Small capitalization stocks generally involve higher risks in
some respects than do investments in stocks of larger companies and may be more volatile. The securities
of non-U.S. issuers also involve a high degree of risk because of, among other factors, the relative lack of
public information with respect to such issuers, less governmental regulation of stock exchanges and
issuers of securities traded on such exchanges, and the absence of uniform accounting, auditing and
financial reporting standards. The non-U.S. domicile of such issuers and currency fluctuations may also
be factors in the assessment of financial risk to a client. Foreign securities markets are often less liquid
than U.S. securities markets, which may make the disposition of non-U.S. securities more difficult.
Emerging markets can be subject to greater social, economic, regulatory and political uncertainties and
can be extremely volatile.
Investments in fixed income and credit securities are subject to credit, liquidity, prepayment and interest
rate risks, any of which may adversely impact the price of the security and result in a loss. The municipal
market is volatile and can be significantly affected by adverse tax, legislative or political changes and the
financial condition of the issuers of municipal securities.
Alternative investments, such as hedge funds and private equity/venture capital funds, are generally less
liquid than other asset classes and can involve a high degree of risk. Alternative investments generally
have high fees (including both management and performance based fees) and expenses that partially
offset returns. Alternative investments are generally subject to less regulation than publicly traded
investments. Secondary markets for alternative investments are limited and there may be significant
restrictions or limitations on withdrawing from or transferring these types of investments. An account
may invest in restricted securities that are subject to long holding periods, or that are not traded in public
markets. These securities are difficult or impossible to sell at prices comparable to the market prices of
similar publicly-traded securities and may never become publicly traded. Private equity and venture
capital funds generally require an investor to make and fund a commitment over several years. Some
private funds reinvest substantially all income and gain rather than distribute income and gains when
realized. Therefore, an investor may have taxable income from a fund without a cash distribution to pay
the related taxes.
The use of third party managers in investment programs involves additional risks. The success of the
third party manager depends on the capabilities of its investment management personnel and
infrastructure, all of which may be adversely impacted by the departure of key employees and other
events. The future results of the third party manager may differ significantly from the third party
manager’s past performance. CFM or a third party manager may not be able to obtain complete or
accurate information about an investment and may misinterpret the information that it does receive. While
CFM employs reasonable diligence in evaluating and monitoring third party managers, no amount of
diligence can eliminate the possibility that a third party manager may provide misleading, incomplete or
false information or representations, or engage in improper or fraudulent conduct, including unauthorized
changes in investment strategy, insider trading, misappropriation of assets and unsupportable valuations
of portfolio securities. CFM or a third party manager also may receive material, non-public information
about an issuer that prevents it from trading securities of that issuer for a client when the client could
make a profit or avoid losses. CFM may charge performance fees on client assets invested in accounts
and funds managed by outside managers that also charge fees.
Third party managers and funds may use leverage by borrowing on margin, selling securities short and
trading futures, other commodity interests and derivatives, which increases volatility and risk of loss.
These instruments can be difficult to value. An incorrect valuation could result in losses. Such managers
and funds may also sell covered and uncovered options on securities. The sale of uncovered options
could result in unlimited losses.
CFM and third party managers may engage in hedging, which may reduce profits, increase expenses and
cause losses. Price movement in a hedging instrument and the security hedged do not always correlate,
resulting in losses on both the hedged security and the hedging instrument. CFM and third party
managers are not obligated to hedge a client’s or a fund’s portfolio positions, and frequently may not do
so. Also, third party managers and funds may sell securities short, resulting in a theoretically unlimited
risk of loss if the prices of the securities sold short increase.
CFM’s internally managed investment strategies (and some third party manager strategies) might hold a
relatively concentrated portfolio of securities in comparison to their respective benchmarks and broader
market indices. In addition, these strategies may be impacted (positively or negatively) by the
performance of one or more positions in the portfolio or the sectors in which the strategies focus their
investments.
Changes in economic conditions can adversely affect investment performance. At times, economic
conditions in the U.S. and elsewhere have deteriorated significantly, resulting in volatile securities
markets and large investment losses. Government actions responding to these conditions could lead to
inflation and other negative consequences to investors.
Counterparties such as brokers, dealers, futures commission merchants, custodians and administrators
with which managers and funds do business may default on their obligations. For example, a client or a
fund may lose its assets on deposit with a broker if the broker, its clearing broker or an exchange clearing
house becomes bankrupt.
Clients should carefully evaluate all applicable risks with any investment or investment strategy, and
realize that investing in securities involves risk of loss that clients should be prepared to bear. CFM and
third party managers are generally not responsible to any client for losses incurred in an account unless
the conduct resulting in such loss breached the manager’s fiduciary duty to the client. Investment
activities of CFM and third party managers could have adverse tax consequences for clients, including
liability for interest and penalties.
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CFM does not have any subsidiaries, affiliates, or related company relationships. The firm is wholly-
owned by its executives. CFM does not have any arrangements with broker-dealers, distributors,
placement agents, or other advisors.
CFM selects third party managers to manage client capital. Neither CFM nor any of its employees
receive compensation from third party managers in exchange for the firm’s recommendations.
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and Personal Trading CFM has adopted policies and procedures that put restrictions in place for employees when they trade for
their own accounts. These policies and the resulting restrictions are designed to minimize conflicts of
interest with respect to a client. The policies are available to clients upon request.
Participation or interest in client transactions
CFM may buy or sell securities for its own account acting as principal when a client is the counterparty to
the transaction. CFM generally does not execute cross transactions between client accounts. If it enters
into any principal transaction with a client account, or if it engages in cross transactions between the
accounts of clients, the firm will obtain the consent of the client and/or the client’s engagement manager,
and the Chief Compliance Officer.
Personal trading rules and procedures
CFM prohibits employees from owning or trading in shares of companies that our clients founded and
represent significant holdings, and companies in which clients or employees have inside information. All
employees are bound by this policy and new employees are presented with the policies and procedures
when they join the firm. The list of restricted securities includes those issued by companies in which,
during the course of their normal business affairs (including board of director positions), clients and
employees might acquire inside information. The list is reviewed periodically by senior management and
revised by CFM’s Chief Compliance Officer as the clients’ activities change.
Excluding stocks on the prohibited list, CFM allows employees to own stocks and other investments that
are held in client portfolios. Permissible employee holdings include stocks, bonds, mutual funds, ETFs,
and other securities that CFM clients hold directly as well as issues that third party managers purchase for
client accounts.
Insider trading policy
CFM employees may come into possession of material nonpublic information during the normal course
of business. CFM employees are bound by United States laws and legal restrictions on communicating
and acting on inside information that might be of benefit to themselves or CFM clients.
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CFM does not act as a broker or agent by effecting public securities transactions directly. The firm
determines the broker or dealer to be used to trade securities for our clients based on cost and on trading
skill and execution. CFM does not receive client referrals, compensation, research, or other products or
services other than execution in return for directing client securities transactions. We do not request
clients to direct their execution to specific third parties.
CFM typically does not manage assets through aggregated or multi-client-owned entities but will create
entities for multiple clients within the same family. CFM directs transactions for each client or client
entity individually.
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All accounts are reviewed periodically to verify that
• asset allocations are within stated policy limits or reasonable ranges and any exceptions are
understood and justified
• manager performance is consistent with stated strategy, market performance, and acceptable risk
levels
• cash levels are adequate to meet near-term spending needs
All accounts are reviewed annually to determine whether the goals and objectives have changed, and to
verify that the portfolio is well-designed to achieve the goals and objectives going forward.
Clients receive portfolio reporting as frequently as they desire. Some clients choose to receive monthly
reporting, while others receive reports less frequently. CFM customizes the frequency and the level of
detail in client reports to the client’s needs and desires. Reports are typically delivered electronically.
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CFM is paid according to the description above under “Fees and Compensation”. CFM does not
compensate its employees for referrals. There are no other arrangements under which employees are
compensated for the services they, or the firm, provide to clients.
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Rule 206(4)-2 promulgated under the Advisers Act (the “Custody Rule”) (and certain related rules and
regulations under the Advisers Act) imposes certain obligations on registered investment advisers that
have custody or possession of any funds or securities if the adviser directly or indirectly holds client funds
or securities or has the authority to obtain possession of them.
CFM is required to maintain the funds and securities (except for securities that meet the privately offered
securities exemption in the Custody Rule) over which they have custody with a “qualified custodian”.
Qualified custodians include banks, brokers, futures commission merchants and certain foreign financial
institutions.
Rule 206(4)-2 imposes on advisers with custody of clients’ funds or securities certain requirements
concerning reports to such clients and surprise examinations relating to such clients’ funds or securities.
CFM maintains custody of client assets in accordance with the Custody Rule.
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CFM designs investment plans with varying levels of input from clients. In most cases, a client (or giftor)
participates in the initial design of their plan and approves their plan prior to the investment of capital. In
other cases, CFM creates an investment plan that fits a client’s life situation and risk tolerance based on
inputs from the client and/or the giftor of assets to the client. After the investment plan is finalized, the
client (in some cases, the giftor) determines how much investment discretion CFM exercises. In some
cases, CFM has complete discretion to operate within agreed-upon policies. In other cases, clients
participate in the approval process for individual investments.
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Clients can vote the proxies for the shares that they hold, or CFM may vote the proxies on behalf of
clients. When CFM votes proxies, it does so pursuant to CFM’s proxy voting policy in accordance with
Rule 206(4)-6 under the Investment Advisers Act of 1940, which takes client policies, preferences, and
wishes into account in determining how to vote each such proxy. CFM votes proxies for founders’ stock
and other large, direct client holdings after seeking client guidance and direction. In other cases CFM
relies on its understanding of the client to determine if and how the shares should be voted. CFM
generally assigns authority over proxy voting to separate account managers in the management contract or
investment policy statement. CFM generally does not vote proxies for mutual funds or ETFs. CFM will
provide information to clients about how securities have been voted, and a copy of the Proxy Voting
Policies and Procedures, upon request.
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CFM does not require the prepayment of fees by our clients.
CFM is not aware of any financial condition that is reasonably likely to impair its ability to meet
contractual commitments to its clients.
CFM has not been the subject of a bankruptcy petition at any time during the past ten years.
CFM does have custody of client assets. Please review carefully your account statements from qualified
custodians and compare them with the statements that you receive from CFM.
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