Arlington Capital Management | FAQs 2018-06-22T12:05:26-06:00


Who is Arlington Capital Management?

Arlington Capital Management (ACM) is a privately held, SEC Registered (www.sec.gov) Investment Advisory (RIA) firm specializing in providing portfolio management services to individuals, families and small businesses.  Founded in 2000, ACM employs a proprietary proactive investment methodology that seeks to achieve attractive risk-adjusted returns during a variety of market cycles over a long-term investment horizon.  Our Proactive Asset Allocation Strategy (PAAS), Proactive Income Strategy and Proactive 401(k) Strategy have all been developed in-house, and all portfolio decisions are made internally by our Investment Policy Committee, chaired by Joseph LoPresti.

As a fee-only RIA, our revenue is solely derived from the fees assessed on assets under our management.  We do not earn commissions of any kind.  As advisors held to the highest fiduciary standards in today’s financial services industry, we are obligated to act in the best interests of our clients.

Who are your clients?

The ACM clients are active, educated professionals who have worked, and saved diligently.  They care about the community, as well as a fulfilled lifestyle.  They are now at the point in life where they’re thinking about protecting their lifestyle throughout a long and well deserved retirement.  Our clients are at a point in life where they expect world class service and positive outcomes in all things.

In as much as they want to protect what they’ve saved, they are discerning investors and expect to have the insight to participate in market growth when the market allows it rather than “sit on the sidelines with a passive plan”.  The team at Arlington Capital is dedicated to offering boutique investment platforms that until now had been reserved for the ultra-high-net-worth to a generation that can appreciate the difference.

Who is your staff?

The firm is led by Joseph LoPresti as President and Chief Investment Officer, John Hollahan as Chief Compliance Officer and Ivan Botnari as Chief Technical Officer. Additionally, we employ lead advisors, technology, marketing and operational and client service professionals who bring strong industry backgrounds to ACM. All share in the firm’s core values and commitment to providing our clients with the best possible investment advice and exceptional client service.

Professional Biographies

What is your investment philosophy?

We believe in providing you with a dynamic and proactive investment strategy designed to adapt to prevailing market conditions.  Further we emphasize the need for appropriate asset allocation for each client, based on individual risk tolerance and unique financial situations.  We manage portfolios in one of five (5) risk-based models ranging from conservative to aggressive.  Each model is proactively managed in an effort to build wealth during bull market conditions while attempting to reduce risk during bear market conditions.  Utilizing our proprietary research and portfolio construction processes, we strive to both build and preserve client wealth in each of our models.

How does your philosophy differ?

Arlington Capital Management rejects the use of passive portfolio management approaches or so called “buy and hold” strategies, in which a percentage of portfolios are invested across a wide variety of asset classes and held despite changes in market conditions.  We view this approach as uneducated and archaic.  Our Proactive Asset Allocation Strategy (PAAS) approach utilizes dynamic, proactive strategies that influence our buy, sell and reallocation decisions.

What type of investments do you use?

While we have access to the entire universe of investment options available in the global marketplace, we currently employ the use of the following instruments (including but not limited to):

  • Exchange-Traded Funds and Exchange-Traded Notes (ETFs and ETNs)
  • Individual equities (stocks)
  • Variety of income producing assets, including but not limited to, bonds, preferred stocks, energy trusts, REITs Institutional no-load mutual funds.

As fee-only advisors held to the highest fiduciary standards, we seek to build portfolios in the most cost efficient manner for our clients.  The actual composition of an individual’s portfolio can differ depending on their appropriate asset allocation model and their unique financial situation.

Is my account commingled or separately managed?

Your account is always separately managed in consideration of your individual situation.  Please note that all client accounts are held in individual name at the selected custodian.  Your assets will never be commingled with another client’s assets, as in a mutual fund.

When you invest in a mutual fund or other commingled vehicles, your funds are pooled with those of many other investors.  Money managers who run mutual funds do not take into account clients’ individual objectives, investment time horizons, tax considerations, etc.  The pools of money are simply invested at the discretion of the manager without concern for your unique situation. Additionally, investment in pooled vehicles sometimes inhibits one’s ability to see what they ultimately own through their share of the pool.

How often do you trade my account?

Once we have initially invested your portfolio in the appropriate Proactive Asset Allocation Strategy (PAAS), we will only trade when we deem it necessary to reallocate in accordance with prevailing market conditions.  We do not participate in any commissions and do not get paid to transact your account.

How often do you review my investments?

We review all of our Model Portfolios on a daily basis.  Our Investment Policy Committee meets regularly to review overall market conditions as well as industry, sector and asset class exposure.  If we deem it appropriate to make a tactical change to any Model, we will implement the necessary trades in all related portfolios promptly.  Additionally, we monitor all securities held at the firm as well as potential candidates for inclusion in our Models.  Every security purchased at ACM is assigned specific trading parameters.  Should a specific security be deemed to materially stray from these parameters, a sell decision or other risk management strategy may be employed.

We make every effort to keep our clients informed as to our thoughts about the markets and our Model portfolio construction so that they are never surprised when changes are implemented.

As an Arlington Capital Management client, you will receive a weekly PAAS performance video updates. These updates provide transparency and details into our proactive investment strategies.

Will you consult me prior to making trades?

As you grant us Limited Power of Attorney to manage your accounts, we generally do not consult you when making trades.  We exercise discretionary authority over portfolios, enabling us to react quickly when market conditions dictate.

Your custodian will generate trade confirmations immediately following our transactions and you may view these electronically or receive hard copy.  If Arlington Capital Management implements major changes to our allocations, we will send you our proprietary Flash Report via your preferred means of communication that will provides a brief rationale for our decisions.

You will also receive monthly statements from your custodian, as well as our weekly PAAS updates and periodic market commentaries.

Please note that when we first begin working together, we will likely have much more personal interaction than later in the relationship when a greater comfort level exists.  We will make every effort to ensure you understand our philosophy and processes, and in turn, that we thoroughly comprehend your investment objectives and tolerance for risk.

Who holds my funds and are they insured?

As a registered investment advisor, we do not take possession of any client funds.  All clients must select a custodian for custody and safekeeping of their securities under the appropriate legal name.  The custodian is responsible for the sanctity of your assets and provides safekeeping for securities and monies.

You simply grant us Limited Power of Attorney to buy and sell securities on your behalf in accordance with mutually determined investment guidelines.

We currently recommend Charles Schwab as custodian for our clients and they maintain some of the highest levels of insurance per client account in the industry.

What is Limited Power of Attorney?

Limited Power of Attorney grants our firm the ability to buy and sell securities on your behalf in the designated custodial account, in accordance with mutually determined investment guidelines.  We are granted discretionary management over the portfolio, but have no right to put money in your account or take money out of your account (with the exception of our approved quarterly management fees).

As a discretionary manager we can utilize block trading at preferred custodians allowing you to participate in average price execution when we trade a large number of shares for our clients.

May I trade in the account(s) you manage?

We generally recommend that you do not trade in our managed portfolios, as it can disturb the desired asset allocations, etc.  Additionally, it makes it difficult to discern performance metrics when clients make decisions in portfolios over which we have discretionary authority.  We will, however, be happy to assist you in opening a separate account at your custodian in which you can execute personal trades.

May I review my account online?

Provided that your custodian provides that capability, you will be able to view all accounts that we manage.  Please note that our preferred custodian is Charles Schwab and they provide 24/7 web access to all accounts held at their institution.

How often will you meet with me?

While we typically meet most frequently in the early stages of our working relationship, we recommend that we meet no less than annually.  However, many of our clients meet with their portfolio manager semi-annually or even quarterly depending on the complexity of their situation, or when major life changes such as marriage, job change or retirement occur.

Initially, we will have a series of consultations over the phone and/or in person to mutually determine your asset allocation, complete the necessary documents and ensure our relationship begins smoothly.

Of course, we welcome your inquiry at anytime and invite you to call or email should you have a questions or concerns.

How often will I receive reports from ACM?

Clients receive comprehensive quarterly reports, including quarterly and year-to-date summaries, portfolio valuations and detailed position reports, performance net of expenses over previous 5 years and an invoice of the fees for payment to ACM. You will also receive monthly or quarterly account statements from your custodian, and may request reports be generated on demand from either ACM or your custodian at any time.

Who will work directly with me?

You will work directly with your lead advisor.  Additionally, you will be supported by a member of our Operations staff who can assist with most client service requests.

Please note that unlike large banks or brokerage firms, we do not reassign existing portfolios to junior staff members or frequently change portfolio managers.  We recognize the importance of the trusted advisor relationship and believe continuity is critical to a successful partnership.

Will you coordinate with my accountant or lawyer?

With your express written permission, we will share your portfolio information with your tax or legal advisors to ensure coordinated efforts on your behalf.  We can provide duplicate copies of quarterly statements or specific annual reports to assist your accountant with tax preparation.

Please note that we do not render legal or accounting advice, but can refer you to a reputable professional upon request.

What information do you provide for tax purposes?

Your custodian (i.e., Charles Schwab) is the official record keeper and will provide you with monthly statements and annual reports critical to filing taxes.  However, we have sophisticated portfolio management software that enables us to continually monitor your transactions, tax basis, realized and unrealized gains and losses, etc. We will gladly provide you a professional report upon request.

How is ACM compensated?

As a fee-only Registered Investment Advisor, we are solely compensated by advisory fees assessed on the money we manage.  We charge an annual percentage fee (billed quarterly), based on the value of clients’ portfolios.  We do not participate in any commission generation or sale of investment product at Arlington Capital Management.

What is your fee schedule?

Assets under Management                    Annual Fee

Less than $500,000                                 $7,500

$500,000-$1,000,000                               1.50%

$1,000,000-$2,500,000                            1.25%

$2,500,000-$5,000,000                            1.00%

Over $5MM                                               0.80%

How and when am I billed for advisory fees?

Arlington Capital Management bills our clients quarterly, on the calendar quarter.  We mark your portfolio to market and value the portfolio as of the close of the last business day of the prior quarter, and bill in advance for the following quarter according to our standard fee schedule.

Our clients typically authorize direct payment to us from their custodian, and a copy of the management fee is provided from ACM with your quarterly reports.

It is worth noting that advisory fees are a tax-deductible expense for many clients.

Are there any other costs involved in working with ACM?

You will pay transaction fees to your custodian for any trade executed in your account. All trade confirmations will contain the transaction cost information.

Should there be any mutual fund trades in your portfolio, you will incur the expense associated with the operational costs of the fund.  We do not routinely utilize mutual funds and strive to select those with the lowest expenses ratios when necessary.

All performance reporting is provided net of any fees or expenses incurred.

What are your policies regarding privacy and confidentiality?

Arlington Capital Management takes the issue of client confidentiality very seriously and has implemented internal controls to protect our clients.  All employees of our firm must abide by stringent confidentiality policies.  You may view our official firm Privacy Policy here.

We have implemented a best practices methodology of multi-layered security systems for our office, including firewalls, intrusion detection and prevention systems, anti-virus and anti-spy ware programs.


Important Disclosures

Arlington Capital Management, Inc. (“ACM”) utilizes a proactive asset allocation strategy (“PAAS”) in advising its clients. PAAS combines quantitative-based buy, sell and reallocation indicators, with qualitative research, selecting from US and global securities, in seeking to achieve attractive risk-adjusted returns over a long-term investment horizon. As with any investment strategy, ACM has in the past, and may in the future, modify the investment approach and portfolio parameters of PAAS in any manner which it believes is consistent with the strategy’s overall investment objective.  In that light, the following material modifications were made to PAAS: in February 2009 (creation of Universe Trend and Cash Comparison Indicators for trend analysis), June 2009 (creation of Long-Term Momentum Indicator for trend analysis), September 2009 (expanded Asset Class Ranking System and started PAAS computerized testing), December 2009 (creation of Global Indicator Set for buy and sell signals), April 2010 (inception of PAAS Computer Model), October 2010 (implementation of Tactical Indicators and Signals for short term risk management), January 2011 (modify Global Sell Signal with additional criteria including pattern determination), June 2011 (close Global Signals with stop loss criteria), September 2011 (inception of PAAS Long Only Model), May 2012 (modify Global Buy Signal wait period to enhance signal timing), October 2012 (first use of PAAS Stock Model), November 2012 (implement ETF replacement criteria), December 2012 (additional historical data for Cash Comparison Indicators), November 2015 (modify Global Buy Signal with additional criteria), June 2016 (modify Tactical Sell signal criteria), May 2018 (expanded Asset Class Ranking System, Tactical Asset Class Selling, Mini-Buy signal implementation); however, none of these changes modified the objectives or overall investment strategy of PAAS. Rather, as noted previously, ACM made these changes to seek to enhance the manner by which it runs PAAS, and thus each change, individually or in the aggregate, might have impacted the performance of PAAS (either positively or negatively, depending upon the efficacy of the changes(s)) after their implementation.  For more information regarding any of these material modifications, please contact ACM at 855-471-5796.

While PAAS currently is ACM’s primary growth focused investment strategy, ACM also offers a proactive income strategy.  Client portfolios are managed with different weights on PAAS and the proactive income strategy based on each client’s desired risk level (e.g., aggressive, moderate, conservative).

The performance returns and investment portfolios shown on this website are those of model portfolios, which are used to illustrate the hypothetical performance of an account managed using PAAS, and do not represent the results of actual trading using client assets. The performance of the model portfolios has been independently examined by Ashland Partners & Company LLP (“Ashland”), a certified public accounting firm, for the following periods:  PAAS Managed Model for the periods from August 1, 2010, to December 31, 2016; PAAS Managed ETF Model for the periods from October 1, 2012, to December 31, 2016; PAAS Managed Stock Model for the periods from October 1, 2012, to December 31, 2016; PAAS Managed Long Only Model for the periods from September 1, 2011, to December 31, 2016.  A copy of Ashland’s opinion letter is available on request.

The performance of the model portfolios shown reflects the assumptions, views and analytical methods utilized by ACM. Hypothetical or model performance results have certain inherent limitations. Unlike actual performance results, model performance results do not represent actual trading and the results may have under- or over-compensated for the impact, if any, of certain market factors, such as market disruptions, lack of liquidity and the effect of interest rates. There can be no assurance that ACM will take positions for client accounts similar to those taken in the model portfolios.  No representation is being made that any client account will or is likely to achieve profits or losses similar to those of the model portfolios shown. There frequently are sharp differences between the hypothetical or model performance results and the results subsequently achieved by any particular trading or investment program. ACM clients have had investment results that have been better or worse than the performance results of the model portfolios shown. The performance results of the model portfolios assume a starting value of $500,000 at model inception, and are shown net of fees and expenses (i.e., an assumed annual investment management fee of 1.50% and brokerage commission applied as follows: Prior to January 1, 2013, transaction prices used are net of commissions; after January 1, 2013 gross transaction prices are used and a $10 commission is assessed per portfolio transaction), and reflect the reinvestment of dividends and other earnings. The model fee of 1.5% is ACM’s highest published asset-based fee, and it is charged to clients with a minimum portfolio size of $500,000.  ACM does provide management services to clients with portfolios ranging from $250,000 to $500,000.  These clients are charged a fixed annual fee of $7,500, which ranges between 1.5% and 3% of their managed assets.  Clients with less than $500,000 to invest should be aware that the fees they pay will be greater than those deducted from the model portfolio, and that the performance shown would be less if the fixed fee were to be deducted.  ACM’s standard fee rates are available: (i) upon request; (ii) on ACM’s website; and (iii) in Part 2 of its Form ADV. The model performance results shown reflect the purchase and sale of securities using the price of block trade execution at ACM’s primary custodian. Past performance is not a guarantee of future results.

Any index information presented was included for comparative purposes, to show general market trends during the periods indicated, and is not intended to imply that any model portfolio is similar to the index (or indices) shown either in composition or element of risk.  The MSCI All Country World Total Return Index is a broad index composed of stocks from the US, Developed International and Emerging International markets.  It is shown for comparative purposes because it represents the areas that PAAS considers for inclusion in the model, however, it should be noted that at any given time, the PAAS model will include securities from a narrow subset of these areas.

The information presented should not be considered a recommendation to purchase or sell any particular security. There can be no assurance that any securities discussed will remain in model or client portfolios or if sold will not be repurchased.  The securities listed for each model represent all portfolio holdings in that model as of the date shown.  No list itself includes all securities recommended by ACM as of the date indicated or in the preceding 12 months.  Some accounts managed in accordance with a particular ACM strategy may hold different securities than those listed.  This is generally due to client imposed account restrictions, mandates, substitutions, liquidity requirements and/or legacy holdings, among other things.  The listed securities were not selected for inclusion in this report on the basis of performance.  It should not be assumed that any of the securities discussed have been or will be profitable, or that recommendations made in the future will be profitable or will equal the performance of the securities discussed.  The examples of specific investments are included merely to illustrate the PAAS investment process and investment strategy.  Client portfolios may contain a different number of positions than the examples set forth and accordingly the examples are not intended to indicate overall portfolio performance that has been, or may be expected to be, achieved.

No graph, chart, formula or other device can be used to determine which securities to buy or sell, or when to buy or sell them. ACM makes no representation that any graph, chart, formula or other device shown can assist any person in making their own decisions as to which securities to buy or sell or when to buy or sell them.

An investor should consider risk and volatility in addition to performance when making any investment decision. The risk and volatility associated with PAAS may be significantly higher or lower than the risk and volatility of other investment strategies and/or products.

As with any investment strategy, there is potential for profit as well as of loss. All investments involve some level of risk, and PAAS may not be suitable for all investors. This material does not constitute a complete description of ACM’s investment services and is intended solely for informational purposes. This material is in no way a solicitation or an offer to buy or sell any securities. This material and any model portfolios contained herein do not consider specific investment objectives, financial situations or the particular needs of any individual investor who may view this report. Investors should seek advice from their advisors regarding the appropriateness of investing in any securities or in accordance with any investment strategy.

All information regarding market or other financial information is obtained from sources that ACM believes to be reliable. ACM makes no representation as to the accuracy or completeness of information or data provided. Individuals that work for ACM and its affiliates may have long or short positions in the securities referenced, or in related investments.

Any projections, market outlooks or estimates presented are forward-looking statements and are based on certain assumptions.  Other events which were not taken into account may occur and may significantly affect the returns or performance of the model portfolios shown.  Any projections, outlooks or estimates should not be construed to be indicative of actual events which will occur.

For additional information, please contact us via phone at (847) 670-4030, or via email at inquiries@arlington-capital.com.