Form CRS
Conversation starters

About Form CRS

Form CRS (which stands for client relationship summary) is a uniform disclosure document prepared by broker-dealers and investment advisers registered with the Securities and Exchange Commission (“SEC”). alphaAI Capital Management LLC (“alphaAI”) is registered with the SEC as an investment adviser. Investment advisers and broker-dealers are required to deliver to retail investors a brief relationship summary written in plain English that provides information about the firm’s relationships and services, fees, costs, conflicts of interest, standard of conduct, disciplinary history, and where to find additional information. The relationship summary also includes key questions (“conversation starters”) for investors that alphaAI has answered below. The relationship summary is in addition to the Form ADV Part 2 narrative brochure that investment advisers provide to their clients. You can contact our Customer Support Team if you have any further questions or clarifications about how alphaAI works, but be aware that our Customer Support Team members are not licensed to give financial advice.

Learn more: Investor.gov/CRS

Conversation Starters

Given my financial situation, should I choose an investment advisory service? Why or why not?

Two types of financial firms that you might be considering are investment advisers and broker-dealers. alphaAI is an investment adviser.

As an investment adviser, we are held to a fiduciary standard that covers our investment advisory relationship with you. A fiduciary has both a duty of care and a duty of loyalty to its clients.

• The duty of care requires us to place your best interests ahead of our own at all times. We are also required to monitor your portfolio, investment strategy, and investments throughout the duration of our advisory relationship with you.
• Under the duty of loyalty, we must avoid conflicts of interest or tell you about them in a way that you can understand, so that you can decide whether to agree to them.

Broker-dealers must act in your best interest and not place their interest ahead of yours when they recommend you an investment or investment strategy involving securities. Broker-dealers are not fiduciaries and are not required to monitor your portfolio or investments on an ongoing basis.

While not inclusive of all business models, below are some general differences between broker-dealers and investment advisers to help you decide whether an investment adviser or broker-dealer might be right for you. Please review our Form CRS and Form ADV Part 2 for more details about alphaAI.

Types of Relationships and Services

Broker-Dealers

• Broker-dealers typically give point-in-time recommendations and have no ongoing duty to monitor your account.

Investment Advisers

• Investment advisers typically provide ongoing advice and regular monitoring of your account.

• At alphaAI, our software monitors your account on an ongoing basis.

Authority to Make Trading Decisions On Your Behalf (Discretion)

Broker-Dealers

• Typically, a brokerage account with a broker-dealer is a non-discretionary account. You may select investments or the broker-dealer may recommend investments for your account, but the ultimate decision for your investment strategy and when to buy and sell investments will be yours.

• Some broker-dealers offer discretionary accounts, where the broker can make trades in a customer’s account without first consulting the customer.

Investment Advisers

• Some investment advisers offer discretionary accounts that allow them to buy and sell investments on your behalf when they determine it is appropriate to do so.

• Other investment advisers offer non-discretionary accounts where they may give you regular advice but allow you to decide what investments to buy and sell.
• alphaAI offers managed investing portfolios composed of exchange-traded funds (“ETFs”) and, in certain limited cases, mutual funds (together “traditional securities”).

Fees and Costs

Broker-Dealers

• Transaction-based fees. As a customer, generally you pay a fee every time you buy or sell an investment or take a certain type of action. Commonly referred to as a commission, this type of fee is typically a flat fee per transaction. Many broker-dealers now provide commission-free trading on certain types of securities, but charge interest on money borrowed for margin trading, earn net interest on idle cash in your brokerage account, or charge fees on transfers or for additional services.

• Broker-dealers may also charge additional fees, such as custodian fees, account maintenance fees and account inactivity fees.

• Third-party fees from certain types of investments (like mutual funds and ETFs) are embedded in investments that are purchased for your account.

Investment Advisers

• Asset-based fees. As a client of an investment adviser, generally you pay an ongoing fee based on the value of the investments and/or cash in your advisory account. Some investment advisers may have other fee structures, such as subscription-based fees, fixed fees or hourly fees.
• alphaAI’s wrap-fee program includes transaction costs and custody services in your fee. You will pay an annualized 0.25% fee of your account balance. You do not pay fees on a per-transaction basis.
   

• Third-party fees from certain types of investments (like mutual funds and ETFs) are embedded in the investments that are purchased for your account.
• ETFs or other funds in your portfolio with alphaAI include embedded fund fees, but alphaAI does not receive any portion of such fees. Fund fees are in addition to alphaAI’s asset-based fee.
  

Conflicts of Interest

Broker-Dealers

• A broker-dealer who receives a fee per trade (commission) has an incentive to recommend you trade more often. The more transactions in your account, the more fees you could be charged.

• Some brokers may also receive compensation from third parties for directing orders to different parties for trade execution (known as payment for order flow).

Investment Advisers

• An adviser who charges an asset-based fee has an incentive to recommend you increase the assets in your account. The more assets you have in your account, the more fees you could be charged.

• For information about alphaAI’s conflicts of interest, please review the conversation starter “How might your conflicts of interest affect me, and how will you address them?” below.

Standard of Care

Broker-Dealers

• Best interests standard at the point in time of the investment recommendation.

Investment Advisers

• Fiduciary standard involving the duty of care and loyalty at all times in the relationship.

• alphaAI is a fiduciary.

Additional Information

Broker-Dealers

• For additional information about broker-dealers, visit Investor.gov/CRS or Brokercheck.finra.org

Investment Advisers¹

• For additional information about investment advisers (including us), visit Investor.gov/CRS or review our Form ADV Part 2 brochure.

1. Information specific to alphaAI as an investment adviser is presented in bold italics.

Our mission at alphaAI is to help you make the most of your money so you can live better. We do that by offering guided investing portfolios, retirement planning tools, and cash management solutions. Because our advice is automated, we are sometimes called a robo-advisor, but we prefer an “automated investment platform.”

We offer a managed account, which means you give us discretionary authority over the account, which means we can buy and sell investments on your behalf when we determine it is appropriate to do so. We trade in response to your actions (such as asset allocation changes, deposits, or withdrawals), to rebalance your accounts, or to otherwise further your investment goals. Managed accounts are convenient—you don’t have to research investments, follow the market, or worry about any of the other actions listed above (although it always makes sense to review your account periodically to make sure the information you’ve provided us is accurate and up-to-date so that we’re providing relevant advice, to protect against fraud, as well as to ensure that the account continues to be appropriate for your needs). As a fiduciary, alphaAI will act in your best interests at all times. You may benefit from our services if you want ongoing investment advice, a fiduciary to manage your investments, and/or someone to make investment decisions for you.

The tradeoff for this ongoing advice and convenience is that you give up day-to-day control over the investments in the account. This includes the timing of each trade. If you are the type of investor who follows the market closely and wants to dictate the precise moment at which your assets are bought and sold, as well as which specific investments are traded, a managed account may not be the right option for you, and you may prefer to open a self-directed account at a broker-dealer.

Whether you choose to use alphaAI or another investing service, there are a few things we recommend looking before you sign up to make sure your choice is the right fit for you.

How will you choose investments to recommend to me?

When you sign up for an alphaAI account, we ask you a series of questions about yourself, including information about your financial goals. For example, what are your investment goals? What is your risk tolerance? Based on your answers, we recommend to you one of our expert-built and automatically managed investment strategies, Moderate Builder, Conservative Climber, and Aggressive Achiever. You are always free to pick a different strategy than the one recommended, and you may change strategies at any time. Your recommended strategy has a risk level designed for your goal’s investment horizon. This risk level is determined by weighing the trade-offs between potential gains from higher-risk investments and the potential for falling short of your goal by playing it too safe. You can also modify our recommended allocation, depending on your risk appetite. 

We receive no financial benefit from recommending particular securities or strategies, which helps align our incentives with yours.

What is your relevant experience, including your licenses, education and other qualifications? What do these qualifications mean?

All of our financial advice is automated, and our AI technology is developed and overseen by investment advisory personnel that include investment professionals, engineers, behavioral scientists, and traders.

Members of our Customer Support Team are available to assist with questions about how alphaAI works or to help with your account, but please be aware that they are not licensed to give financial advice.

Help me understand how fees and costs might affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?

The fees you pay significantly impact the value of your account over time. Whether an asset-based fee (like our wrap fee program) or a transaction-based fee (offered by broker-dealers) is right for you depends on the level of fees and your personal circumstances, including the frequency of trades you wish to make.

If you gave us $10,000 dollars to invest in our wrap fee program, we would invest the full $10,000 for you. We charge our annual wrap fee of 0.25% per year. If the value of your account didn’t change during the year, we would charge a total of $25 per year, or roughly $2.08 per month. We construct our strategies with ETFs, a type of security that generally tracks a broad-market stock or bond index but trades like a stock on a listed exchange, which have embedded fund fees. alphaAI does not receive any portion of the fund fees and these fees are in addition to our annual wrap fee. We construct our portfolios using cost-efficient ETFs that exhibit competitive fund fees. 

How might your conflicts of interest affect me, and how will you address them?

We work hard to minimize any conflicts of interest. First and foremost, it’s important to know that we are a fiduciary, which means we are legally required to act in your best interest at all times in our client relationship with you.

With that in mind, our business model has incentives that can create conflicts of interest. We are paid based on assets under management and have a financial incentive to recommend you increase the value of your accounts. 

Do you have any disciplinary history? For what type of conduct?

No.

Who is my primary contact person? Are they a representative of an investment adviser or a broker-dealer? Who can I talk to if I have concerns about how this person is treating me?

alphaAI is set up a little differently from other investment advisers. Because we provide investment advice primarily over the internet, your primary way of interacting with us as your investment adviser will be through our website or app. If you have questions about how alphaAI works or are concerned about your account, you should contact our Customer Support Team. Members of our Customer Support Team are not investment adviser representatives and are not licensed to give financial advice.