Registered Investment Advisor

Freestone Capital Management Review 2022

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Freestone Capital Management is a registered investment advisory firm headquartered in Seattle. The firm provides both investment advisory and wealth management services to its client base of largely individual investors. In addition to traditional investment strategies, Freestone believes in diversifying client portfolios even further, and employs a number of private funds covering investments such as manufactured homes.

The bottom line: Freestone Capital Management is a Seattle-based wealth management firm with a unique investment strategy that includes a wide offering of alternative assets.

  • Works mostly with individuals, including those who are high net worth
  • Charges some performance-based fees
  • Also sells insurance products

All information included in this profile is accurate as of March 24, 2022. For more information, please consult Freestone Capital Management’s website.

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Overview of Freestone Capital Management

Freestone Capital Management was founded in Seattle in 1999, at the height of the tech boom. The firm offers portfolio management and financial planning services. Freestone has over 70 employees, close to 30 of whom serve in investment advisory and research roles.

A look at the founder of Freestone Capital Management

Freestone was founded by Gary Furukawa, a former broker at E.F. Hutton and Smith Barney. Furukawa also worked as a CPA at Deloitte & Touche. The firm is named after a freestone river, considered a favorable spot for fly fishing, a hobby of Furukawa’s.

Furukawa started the firm because he wanted to provide holistic financial planning to his clients and go outside traditional asset management. The timing of the firm’s founding coincided with Seattle’s tech boom, and many of the firm’s clients were drawn from that industry.

Today, Furukawa and his wife, Della, own between 25% and 50% of the firm through Freestone Capital Holdings. Employees of the firm own the remaining amount.

Freestone Capital Management’s pros

  • Unique investment style: With its emphasis on alternative investments, Freestone Capital Management veers into nontraditional areas in order to create highly diversified portfolios with investments in assets including directly owned real estate. Freestone has carved out a name for itself by investing in mobile homes and affordable housing.
  • Attention to downside risk: Freestone pays a lot of attention to downside risk, not just capturing upside returns. While that may hamper portfolios during market upswings, it might protect them from suffering the same severe losses as the market in general.
  • Awards and accolades: The Freestone Capital Management team regularly lands on lists of top advisors. In 2021, eight of Freestone’s advisors were recognized by Five Star Professional as Five Star Wealth Managers. Barron’s ranked senior partner Erik Morgan No. 16 out of the 100 best advisors in the United States overall in 2021; it was his 12th year on the list. In 2021, Financial Advisor Magazine ranked the firm overall at No. 54 in its rankings of the top RIAs.

Freestone Capital Management’s cons

  • Fee schedule not transparent: Freestone doesn’t publish a clear fee schedule, so you will not know exactly what your fees will be until you have a meeting with an advisor. This could make it harder to easily compare the firm’s fees against those of other firms.
  • Charges performance-based fees: Freestone charges performance-based fees to clients who participate in the firm’s private funds. Though these fees can sometimes be charged in lieu of asset-based fees, performance-based fees can still create an incentive for advisors to take investment risks in an attempt to achieve outsized returns. Additionally, this fee arrangement could pose a conflict of interest, as advisors may be incentivized to recommend private funds over other types of investments due to the higher potential returns.
  • Sells insurance: Freestone can earn a one-time commission for recommending the purchase of life and disability insurance products to its non-discretionary clients, and this financial incentive could pose a potential conflict of interest. To mitigate this issue, the firm discloses this conflict in writing prior to the sale and maintains that clients are free to take the recommendation and make their insurance purchase elsewhere.
  • Potential conflicts related to brokerage selection: Clients of Freestone typically must maintain a brokerage account at Charles Schwab. Because Freestone participates in a client referral program at Schwab, the firm has a financial incentive to use Schwab in order to get these referrals. In addition, Freestone uses soft dollar arrangements, which are credits or rebates from a brokerage firm on commissions that a client pays for trades executed in a firm’s client accounts. This might lead a firm to favor the brokerages that participate in soft dollar arrangements instead of the brokerage that offers the best trade execution. However, Freestone states that it uses its rebates to purchase research that benefits all client accounts, even those that aren’t subject to soft dollar arrangements.

What types of clients does Freestone Capital Management serve?

Most of Freestone’s clients are individual investors, with slightly more who are high net worth than not. For reference, the Securities and Exchange Commission (SEC) defines high net worth individuals as those with at least $750,000 under management or a net worth of at least $1.5 million.

While Freestone doesn’t have a firm minimum account requirement, it does believe that, given its investment strategy of alternative asset classes, it’s best suited for those who are able to invest at least $1 million (or $500,000 for clients who are referred through Schwab Advisor Network, a client referral program that Freestone participates in). The firm prefers to work with clients on a discretionary basis, meaning Freestone is allowed to make trades in their portfolio without getting prior approval each time, but it can work on a non-discretionary basis in some circumstances.

Services offered by Freestone Capital Management

Freestone Capital Management’s offerings center around investment advisory and wealth management services. Through its asset management services, the firm combines its expertise in traditional and alternative asset classes with third-party expertise in domestic and global equity, domestic and global fixed income and alternative investments. Based on an understanding of a client’s financial goals and objectives, risk tolerance, time horizon and liquidity needs, Freestone develops a personalized investment plan.

In addition, Freestone offers wealth management and financial planning services to its advisory clients, usually at no additional cost. The level of service offered may depend on the amount of assets the firm manages for the client as well as how complex the client’s situation is, but may extend to areas such as tax planning, estate and trust planning and philanthropy. The firm also may recommend outside professionals to provide additional services.

Here is a complete list of services that Freestone Capital Management offers:

  • Asset management
  • Wealth management and financial planning
    • Retirement and benefit plan solutions
    • Credit and risk analysis
    • Insurance planning
    • College planning
    • Corporate benefits, including advice on stock options
    • Tax planning
    • Estate and trust planning
    • Philanthropic planning

How Freestone Capital Management invests your money

To invest its clients’ assets, Freestone Capital Management uses a combination of internally managed model portfolios; model portfolios developed by outside firms and managed either by Freestone or outside firms; and alternative investments, including private and third-party funds.

In addition to upside performance, Freestone also focuses on downside risk based on what the firm calls a “Stay Wealthy” approach. Freestone touts a belief in broad diversification, well beyond the traditional asset classes of equities, fixed income and cash. To achieve that level of diversification, the firm has a series of private funds investing in alternative asset classes through its affiliates.

Among the alternative investment strategies Freestone uses are:

  • Distressed investing or arbitrage strategies
  • Private placements and other restricted securities
  • Interests of a single private fund issuer sold in the secondary market
  • A multi-manager and fund-of-funds investment approach
  • Real estate investments
  • Private equity investments
  • Real assets, such as oil and gas working interests
  • Privately originated corporate loans
  • Cleared and over-the-counter financial instruments

Freestone largely manages client assets on a discretionary basis, meaning that it does not run investing decisions by clients prior to executing them. The firm allows clients to place “reasonable restrictions” on the types of investments purchased, using the example of prohibiting tobacco stocks. However, Freestone reserves the sole discretion to determine what constitutes a “reasonable restriction” and might refuse to carry out these requests if they interfere too much with an investment strategy.

Fees Freestone Capital Management charges for its services

Freestone Capital Management may charge in the following ways for the services it provides:

Investment advisory and wealth management fees: Typically, Freestone charges clients based on a percentage of assets under management. This fee covers both investment advisory services and wealth management and financial planning services. While rates vary, they will not exceed 1.50% of the value of a client’s assets that the firm manages or advises on.

Minimum annual fee amounts vary depending on whether the client was referred through the Schwab Advisor Network. New advisory clients who are referred by the program must pay a minimum of $4,000 per year, while new clients who are not referred through Schwab will owe a minimum annual fee of $6,000.

However, these minimums may be waived at Freestone’s discretion. Additionally, these fees might be lower depending on client type, account size, anticipated increase in the client’s account and preexisting relationships. Sometimes, household account amounts are combined for the purposes of receiving a lower rate.

Freestone also charges performance-based fees in some cases, in lieu of an asset-based fee for advisory clients. Performance-based fees are only charged to “qualified clients,” who are defined by the SEC as having a net worth of at least $2.1 million or at least $1 million in assets under management. Freestone negotiates the terms of these fees on a case-by-case basis and includes the terms of the fees in the investment management agreement.

In addition to Freestone’s asset-based management fee, clients may also pay an investment advisory fee charged by third-party subadvisors that Freestone might engage; those fees are disclosed in the investment management agreement. Additionally, clients will be responsible for any custodial fees, brokerage commissions, fund fees or trading costs incurred.

Private fund fees: Freestone manages a number of private funds to carry out its alternative investment mandate. These funds typically have a 1% annual management fee and a performance-based fee. In many cases, an asset-based fee of 0.10% also applies. Clients are not charged operating expenses and other costs on top of the fees charged by Freestone’s private funds. However, when clients’ assets are invested in private funds managed by a third party, they may be charged two levels of fees.

Advice on investments or financial/wealth planning fees: Freestone sometimes charges advisory clients hourly fees or flat fees for advice on investments or related financial or wealth planning matters. The firm negotiates such fees on a client-by-client basis.

Freestone Capital Management disciplinary disclosures

Freestone Capital Management does not have any disciplinary disclosures listed in its Form ADV. SEC-registered firms are required to provide prompt disclosures of any legal or disciplinary actions in their Form ADV to help current and prospective clients evaluate the firm. The type of legal and disciplinary events that must be disclosed include criminal and civil actions, administrative proceedings before a federal regulatory agency and proceedings before a self-regulatory organization.

For more information, you can go to Freestone Capital Management’s Investment Adviser Public Disclosure (IAPD) page.

Freestone Capital Management onboarding process

  1. Contact the firm: To find out more about working with Freestone Capital Management, you can reach out in the following ways:
    • Call 800-990-3001
    • Reach out to one of the offices directly using the contact information listed on the firm’s website
    • Schedule a meeting by filling out the form on Freestone’s website
  2. Get assigned a team: When clients sign on with Freestone, they are assigned a team consisting of a client advisor and one or more client service associates to oversee the day-to-day responsibilities. When appropriate, Freestone advisors will work with a client’s other financial professionals to create a holistic money management strategy.
  3. Receive regular reports: Account custodians send brokerage statements to clients no less than quarterly. Advisory clients also receive quarterly written reports on investment holdings and portfolio performance.

Where Freestone Capital Management is located

Freestone Capital Management has offices in the following locations:

  • Seattle
  • Santa Barbara, Calif.
  • San Francisco

Is Freestone Capital Management right for you?

Freestone Capital Management brings a unique investment style that’s aimed at helping clients withstand economic downturns with its cadre of private funds. The firm works to unify investment advisory services with wealth management for a holistic client experience.

Though the firm doesn’t have a hard minimum, it generally prefers to work with those who can invest at least $1 million (or $500,000 for those who come through the Schwab referral program). Its roster of clients includes individuals who do and do not have a high net worth. With three West Coast offices, Freestone will likely be most accessible to investors in that region.

However, Freestone Wealth Management’s myriad financial arrangements with outside entities might give investors pause. The firm has a number of potential conflicts of interest that could call into question whether recommendations are made in the client’s best interest or due to financial incentives. As is the case with vetting any financial service or product, you’ll want to make sure you ask questions and understand all costs involved beforehand to ensure you find the right advisor for you.

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