Background
SEC Form ADV
The SEC’s FORM ADV, Part 2A (brochure) and Part 2B (supplement) —
shown below as a webpage — is also available as a PDF: ADV-Part2A and ADV-Part2B
The SEC’s FORM ADV, Part 3 (Client Relationship Summary) —
included below — is also available as a PDF: ADV-Part3 (Client Relationship Summary)
Link to Form ADV Part 2B, Supplement (below ▼)
Link to Form ADV Part 3, Client Relationship Summary (below ▼)
Item 1 ·
Stratigraphic Asset Management, Inc.
Brochure, Part 2A – Form ADV
This brochure was prepared by Stratigraphic Asset Management, Inc. for its clients and provides information about the firm’s qualifications and business practices. If you have any questions about the contents, please contact us at (305) 447-0300. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission (SEC) or by any state securities authority.
Additional information about Stratigraphic Asset Management, Inc. is available elsewhere on this website and on the SEC’s website at www.adviserinfo.sec.gov.
Alan S. Bernstein
7307 Los Pinos Boulevard
Coral Gables, FL 33143
Telephone (305) 447-0300
abernstein@stratigraphic.com
January 20, 2024
Item 2 · Material Changes
The last filing of Form ADV Part 2A and 2B was dated February 1, 2023, and filed with FINRA.
There have been no material changes since the aforementioned filing.
Item 3 · Table of Contents
| Item 1 | Cover Page |
| Item 2 | Material Changes |
| Item 3 | Table of Contents |
| Item 4 | Advisory Business |
| Item 5 | Fees and Compensation |
| Item 6 | Performance-Based Fees and Side-By-Side Management |
| Item 7 | Types of Clients |
| Item 8 | Methods of Analysis, Investment Strategies, and Risk of Loss |
| Item 9 | Disciplinary Action |
| Item 10 | Other Financial Industry Activities and Affiliations |
| Item 11 | Code of Ethics |
| Item 12 | Brokerage Practices |
| Item 13 | Review of Accounts |
| Item 14 | Client Referrals and Other Compensation |
| Item 15 | Custody |
| Item 16 | Investment Discretion |
| Item 17 | Voting Client Securities |
| Item 18 | Financial Information |
| Item 19 | Requirements for State-Registered Advisers |
Item 4 · Advisory Business
Stratigraphic Asset Management, Inc. offers an independent, flexible, and comprehensive approach to help clients manage their liquid assets and generate an attractive risk-adjusted return. Stratigraphic’s principals invest their own money alongside their clients and always put the interests of their clients first.
Stratigraphic has been engaged in the investment advisory business since April, 1993. The firm is private and wholly owned by Alan S. Bernstein.
Stratigraphic’s business is providing investment supervisory services through the management of client portfolios. Such portfolios are always held at a major financial institution that serves as custodian. Stratigraphic manages substantially all of its client portfolios on a discretionary basis. At December 31, 2023 the firm had two non-discretionary account under management with total assets valued at $38.6 million and 62 discretionary accounts valued at around $121.5 million. Managed accounts consist mainly of publicly traded securities: U.S. and foreign common stocks; U.S. Government, corporate debt securities, municipal securities; and exchange traded fund shares. For certain clients, Stratigraphic has utilized covered options writing as a supplemental investment strategy. Stratigraphic principals and clients have invested in real estate private placements in which a family member was a general partner/principal at the time of the offering.
We do structure portfolios and tailor asset class weightings to take into account risk preferences, account cash withdrawal requirements, age, and other related personal factors that have a bearing on the management of the account.
Alan Bernstein is not engaged in any other business outside of Stratigraphic.
Stratigraphic’s Principal
Alan S. Bernstein • Mr. Bernstein was engaged in the domestic petroleum industry until 1998, when Stratigraphic Asset Management, Inc. was founded. From 1968 to 1972, Mr. Bernstein was a senior energy analyst with Loeb, Rhoades & Co. in New York. Mr. Bernstein is a trustee emeritus of Amherst College, where he was a member of the budget and finance committee that advised the administration on all aspects of the financial affairs of the institution. He served on the Visiting Committee on Romance Languages at Harvard University, the Head of School Advisory Board of Sidwell Friends School, Washington, D.C., and the Board of Trustees of Ransom Everglades School in Miami. He was a trustee and treasurer of the Musical Arts Association of Miami, which supported the annual Miami residency of The Cleveland Orchestra. Currently he is a trustee of the Georges Lurcy Charitable and Educational Trust, a New York-based private foundation; and is a trustee of the Miami Music Project, which provides instruction to young musicians learning to perform classical music along the lines of the Venezuelan “Sistema” program. Mr. Bernstein holds a BA degree cum laude from Amherst College and an MBA degree from Harvard Business School.
Item 5 · Fees and Compensation
Billing Period
Fees are paid in arrears by Client on a semi-annual basis.
Account Valuations
Accounts are valued based on the average end of month market value during the billing period, including unrealized gains and losses, dividends receivable and accrued interest.
Fees
All Equity & Balanced Accounts
| Less than or equal to $2.5 million | 1.25% Per Annum |
| Over $2.5 million | 1.00% Per Annum |
| Minimum Fee | $10,000 Per Annum |
Where special circumstances warrant, the foregoing conditions may be negotiable. Clients provide authorization to have the fees deducted from their accounts.
Other expenses that are assessed against the managed accounts such as trading commissions are charged at cost. Stratigraphic does not charge any fees other than its advisory fees and does not have any interest in charges that may be assessed by the custodian or funds such as ETFs held by the clients. We are fee-only advisers, meaning we accept no compensation related to any security or any “product” purchased by a client through Stratigraphic.
Stratigraphic clients can cancel investment advisory services at any time by written notice. Fees are calculated on a pro rata basis through the date that notice is given. Any refunds of fees due to clients will be promptly remitted.
Item 6 · Performance-Based Fees and Side-By-Side Management
Stratigraphic does not charge performance-based fees.
Item 7 · Types of Clients
Our clients are principally high net worth individuals who require portfolio management services for their individual investments, retirement accounts, trusts, foundations, corporations and other related entities. Our minimum portfolio is $1 million, although we make exceptions, chiefly for family members of larger clients.
Item 8 · Methods of Analysis, Investment Strategies, and Risk of Loss
In recognition that there is always the risk of loss from investments, Stratigraphic adheres to the following four principles governing the investment process:
- We attempt to structure portfolios among different asset classes to reflect the risk tolerances of clients, taking into account that the risks associated with common stocks generally, but not always, are higher than the risks associated with fixed-income securities. We review asset allocations on at least a semi-annual basis with our clients.
- We also seek to mitigate risk by broadly diversifying the portfolios we manage.
- We attempt to reduce risk and enhance the potential returns of our investments by taking a rigorous fundamental analytical approach.
- As a rule, we do not use leverage to enhance portfolio returns.
Investment Process
Idea Generation – how we find potential ideas for inclusion in the portfolios
- Extensive reading – periodicals, sell-side research, Internet.
- Attending via the Internet company and sell-side sponsored events such as analyst days/investment conferences.
Idea Diligence – conducting a detailed financial and fundamental company analysis
- Read all recent SEC filings and quarterly financial reports.
- Understand how the executive team is compensated. Are they truly shareholder fiduciaries?
- Review available research (Internet, investment, et al).
- Analyze the company’s competitive market and financial position.
- Translate our analysis into forecasts of future earnings and cash flow.
Investment Decision – how a decision is made
- Compose a comprehensive investment memo that details our analysis and recommendation.
- Each idea is discussed thoroughly by the principals – action requires unanimity.
- Sizing of the initial position is determined by our shared conviction levels and current portfolio exposures.
| Investment Process — Asset Allocation | |||
|---|---|---|---|
| Compose Macroeconomic View | Determine Asset Class Exposure | Identify Tactical Opportunities | Optimize Structure |
What currently drives the global markets?
|
Which asset classes offer the best risk‐adjusted rates of return given our market view? Where are we in the credit cycle? Do we want to trade market exposure for interest rate risk? What will protect portfolios from deflation or inflation? What will protect us against a weakening dollar or how can we profit from a strengthening currency? |
What short duration opportunities exist? Is this appropriate for the client? What is the expected risk/return? Is the risk/return better elsewhere? Why does the opportunity exist? |
Sizing the investment What are the expected net returns (i.e. after‐tax, after fees)? Should we sacrifice liquidity? |
| Is the consensus correct? | |||
Managing the Positions – how we reevaluate the portfolios
- We review the portfolios on a frequent basis.
- Positions and their relative weights and expected returns are continuously reexamined.
Item 9 · Disciplinary Action
Neither Stratigraphic nor its officers and directors have ever been involved in any disciplinary action in the securities or investment advisory business.
Item 10 · Other Financial Industry Activities and Affiliations
No officer of Stratigraphic is involved with any other entity in the financial industry.
Item 11 · Code of Ethics
Stratigraphic Core Values
- We are fiduciaries.
We are a small independent firm whose principals have their entire liquid net worth invested alongside our clients. We always put our clients’ interests before our own. - We are client centered.
Our entire approach is focused on delivering the best financial advice to our clients, tailored to understanding and listening to our clients’ unique needs and goals and proposing the appropriate solution. - We are performance oriented.
We assess ourselves on our performance and helping our clients attain their goals. - We are professional.
Every interaction or communication with us reflects the highest ethical and professional standards. We strive for excellence in everything we do.
Other Important Principles That Govern Our Conduct
We expect every employee of Stratigraphic to meet a high standard of ethical conduct and to adhere rigorously to applicable federal and state securities laws, and to promptly report all violations. Certain conduct that may result in a violation of federal securities laws such as front-running, insider trading, and the misuse of material nonpublic information are expressly prohibited.
We value and protect the privacy of our clients in accordance to a Privacy Statement that is provided to clients at least once each year.
We will never recommend or purchase a publicly traded security of a corporation in client portfolios in which we have or related family member has a material interest nor will we recommend or purchase a publicly traded security that we would not purchase for our own accounts, subject to investment objectives, risk preferences, and similar considerations. Transactions in publicly traded securities for Stratigraphic and related persons will be at the same prices and subject to the same commissions as our clients. When securities for more than one account are purchased or sold, the securities or the net proceeds are allocated on an average price basis.
Stratigraphic principals and clients have invested in real estate private placements in which a family member was a general partner/principal. Stratigraphic principals and clients will always subscribe to such investments on the same terms. Although Stratigraphic receives no compensation such as a finder’s fee or commission in connection with private placement offerings, the fair value of such investments may be included in the computation of Stratigraphic's investment advisory fee.
No Stratigraphic principal will have a brokerage account except with a designated custodian of Stratigraphic or unless the account is not considered material to Stratigraphic’s business. All security transactions and holdings of Stratigraphic’s principal are reviewed on a quarterly basis to ensure that there is full compliance with our Code of Ethics. A principal of Stratigraphic who desires to participate in an IPO or limited offering will obtain written approval beforehand.
Each year Stratigraphic employees are asked to affirm in writing that they have read and will abide by the firm’s code of ethics.
Item 12 · Brokerage Practices
Stratigraphic does not maintain physical custody of its client assets, although it may be deemed to have custody of client assets when clients give Stratigraphic authority to withdraw client advisory fees from their accounts (see Item 15 – Custody, below). All client assets are maintained in an account at a “qualified custodian,” generally a broker-dealer or bank approved by Stratigraphic. All client accounts are currently held at Charles Schwab & Co., Inc., a qualified custodian.
Stratigraphic is independently owned and operated and not affiliated with its custodians. Schwab holds client assets in a brokerage account and buy and sell securities pursuant to instructions from Stratigraphic. Stratigraphic clients enter into agreements directly with custodians / brokers.
Stratigraphic selected the custodian/brokers that hold client assets and execute transactions on terms that compare favorably with the services of other providers. A wide range of factors are considered, including:
- Combination of transaction execution services and asset custody services (generally without a separate fee for custody)
- Capability to execute, clear, and settle trades
- Capability to facilitate transfers and payments to and from accounts (wire transfers, check requests, bill payment, etc.)
- Availability of investment research and tools that assist us in making investment decisions
- Quality of services
- Competitiveness of the price of those services (commission rates, margin interest rates, other fees, etc.) and willingness to negotiate the prices
- Reputation, financial strength, security and stability
- Availability of other products and services that benefit us, as discussed below (see “Products and services available to us from Schwab”)
The custodian utilized by Stratigraphic does not charge separately for custody services, but it may be compensated through commissions, fees on trades that they execute or that settle into client accounts, and net interest earned on client cash balances. Substantially all transactions for clients are executed through a custodian at agreed upon rates, which are believed to be competitive in the industry. At the time of this writing, Schwab does not charge commissions on equity trades. However, this policy is subject to change, in which case Stratigraphic will make certain that the new level of charges are competitive with the charges assessed by alternative custodian/brokers.
Stratigraphic has a fiduciary responsibility to seek the best execution of securities transactions on behalf of clients. Schwab has systems and procedures in place to ensure purchases and sales are made at prices that reflect the most favorable market offers. In regard to fixed income securities, Stratigraphic also has procedures for testing the reasonableness of prices offered. Periodically we prepare a memorandum on "best execution" issues that is available to clients upon request.
Stratigraphic receives from custodian/brokers access to TRACE (fixed income historical trading data), research and data from Schwab and other service providers. Stratigraphic may receive other services from its custodian/brokers such as participation in educational conferences and events; consulting on technology, compliance, legal, and business needs; publications and conferences on practice management and related topics; marketing consulting and support.
Item 13 · Review of Accounts
The senior staff of Stratigraphic reviews the accounts at least monthly and more frequently depending upon the condition of capital markets, changes in asset allocations being made, bond and stock purchases and sales, among other factors.
We review the accounts with clients at least semi-annually through personal meetings or conference calls. Semi-annually we send to the clients an appraisal of the holdings in their accounts that we reconcile beforehand with the custodian statements as well as a computation of the return on the portfolio computed on an internal rate of return basis for the reporting period.
Item 14 · Client Referrals and Other Compensation
Stratigraphic has never paid a third party for client referrals.
As previously noted in Item 12 of this brochure, Stratigraphic receives an economic benefit from its custodians in the form of support products and services.
In the transition of Stratigraphic accounts to Schwab during the third and fourth quarters of 2019, Schwab reimbursed Stratigraphic accounts directly for exit fees charged by each client’s current custodian. Schwab also reimbursed Stratigraphic with limits certain third party expenses that Stratigraphic incurred during the period when accounts were transferred to Schwab.
Item 15 · Custody
In the case of two trust clients, Mr. Bernstein serves as a trustee and therefore is deemed to have custody of the accounts' assets. Pursuant to SEC regulations, Stratigraphic has arranged at its expense for a qualified independent accountant to examine annually the clients' cash and securities.
The custodian reports directly to the clients regarding any transaction that affects the account such as deposits and withdrawals, dividend and interest payments received, and purchases and sales transactions at least monthly. In addition, custodians report monthly (quarterly if there was no activity) to providing an appraisal of the accounts and a summary of all activity affecting their accounts during the period. Finally custodians provide year-end tax information to account holders necessary for filing U.S. income tax returns.
All Stratigraphic clients have the option to review their accounts on-line through special arrangements made with the custodians and to receive e-mail alerts concerning transactions in their accounts.
Item 16 · Investment Discretion
In all but two accounts, Stratigraphic has the authority to determine, without obtaining specific client consent, the securities to be bought and sold, the amount of the securities to be bought and sold, the broker or dealer to be used, and the commission rates to be paid. Such authority is conveyed by the client to Stratigraphic through a limited power of attorney contained in the investment advisory agreement that is executed when the account is established.
Item 17 · Voting Client Securities
Stratigraphic never votes client securities.
Item 18 · Financial Information
Stratigraphic is an S corporation organized under the state of New York in 1983. Our financial condition is sound. Our resources are more than adequate to fund our current operations. Our financial statements are available upon request.
Item 19 · Requirements for State-Registered Advisers
Stratigraphic is only registered with the Securities and Exchange Commission and is not a state-registered adviser.