DIRECTIONAL ASSET MANAGEMENT, LLC

Directional Asset Management, LLC Firm Brochure This brochure provides information about the qualifications and business practices of Directional Asset Management, LLC. If you have any questions about the contents of this brochure, please do not hesitate to contact us at (847) 749-2312 or by email at: scott@directionalasset.com. Additional information about Directional Asset Management, LLC is also available on the SEC’s website at www.adviserinfo.sec.gov. Directional Asset Management, LLC’s CRD number is: 152859 171 W Wing St., #206 Arlington Heights, IL 60005 (847) 749-2312 scott@directionalasset.com Registration does not imply a certain level of skill or training. Version Date: 03/10/2025  Item 2: Material Changes The material changes in this brochure from the last annual updating amendment of Directional Asset Management, LLC on 03/08/2024 are described below. Material changes relate to Directional Asset Management, LLC’s policies, practices or conflicts of interests. • Directional Asset Management, LLC added information regarding Custody. (Item 15) • Directional Asset Management, LLC has transitioned to registration with the United States Securities and Exchange Commission from its prior registration at the state level. i  Item 3: Table of Contents Item 2: Material Changes ................................................................................................................................................... i Item 3: Table of Contents .................................................................................................................................................. ii Item 4: Advisory Business ................................................................................................................................................ 1 A. Description of the Advisory Firm ................................................................................................................................... 1 B. Types of Advisory Services ........................................................................................................................................... 1 Investment Supervisory Services ....................................................................................................................................... 1 Financial Planning .......................................................................................................................................................... 1 Services Limited to Specific Types of Investments ................................................................................................................. 1 Selection of Other Advisers ............................................................................................................................................... 2 C. Client Tailored Services and Client Imposed Restrictions ................................................................................................... 2 D. Wrap Fee Programs ..................................................................................................................................................... 2 E. Amounts Under Management........................................................................................................................................ 2 Item 5: Fees and Compensation ......................................................................................................................................... 2 A. Fee Schedule .............................................................................................................................................................. 2 Investment Supervisory Services Fees ................................................................................................................................. 2 Financial Planning Fees .................................................................................................................................................... 3 Hourly Fees ................................................................................................................................................................... 3 Selection of Other Advisers Fees ........................................................................................................................................ 3 B. Payment of Fees .......................................................................................................................................................... 4 Payment of Investment Supervisory Fees ............................................................................................................................ 4 Payment of Financial Planning Fees ................................................................................................................................... 4 Payment of Selection of Other Advisers Fees........................................................................................................................ 4 C. Clients Are Responsible For Third Party Fees ................................................................................................................... 4 D. Prepayment of Fees ..................................................................................................................................................... 4 E. Outside Compensation For the Sale of Securities to Clients ................................................................................................. 4 Item 6: Performance-Based Fees and Side-By-Side Management .............................................................................................. 5 Item 7: Types of Clients .................................................................................................................................................... 5 Minimum Account Size .................................................................................................................................................... 5 Item 8: Methods of Analysis, Investment Strategies, and Risk of Investment Loss ....................................................................... 5 A. Methods of Analysis and Investment Strategies ............................................................................................................... 5 Methods of Analysis ........................................................................................................................................................ 5 Charting analysis ............................................................................................................................................................ 5 Fundamental analysis ...................................................................................................................................................... 5 Technical analysis ........................................................................................................................................................... 5 Cyclical analysis ............................................................................................................................................................. 6 ii  Investment Strategies ....................................................................................................................................................... 5 B. Material Risks Involved ................................................................................................................................................ 6 Methods of Analysis ........................................................................................................................................................ 6 Fundamental analysis ...................................................................................................................................................... 6 Technical analysis ........................................................................................................................................................... 6 Cyclical analysis ............................................................................................................................................................. 6 Investment Strategies ....................................................................................................................................................... 6 C. Risks of Specific Securities Utilized ................................................................................................................................. 7 Item 9: Disciplinary Information ........................................................................................................................................ 8 Item 10: Other Financial Industry Activities and Affiliations ................................................................................................... 8 A. Registration as a Broker/Dealer or Broker/Dealer Representative ....................................................................................... 8 B. Registration as a Futures Commission Merchant, Commodity Pool Operator, or a Commodity Trading Advisor ......................... 8 C. Registration Relationships Material to this Advisory Business and Possible Conflicts of Interests .............................................. 8 D. Selection of Other Advisors or Managers and How This Adviser is Compensated for Those Selections ...................................... 8 Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading ...................................................... 9 A. Code of Ethics ............................................................................................................................................................ 9 B. Recommendations Involving Material Financial Interests ................................................................................................... 9 C. Investing Personal Money in the Same Securities as Clients ................................................................................................ 9 D. Trading Securities At/Around the Same Time as Clients’ Securities ..................................................................................... 9 Item 12: Brokerage Practices ............................................................................................................................................ 10 A. Factors Used to Select Custodians and/or Broker/Dealers ............................................................................................... 10 1. Research and Other Soft-Dollar Benefits ......................................................................................................................... 10 2. Brokerage for Client Referrals ...................................................................................................................................... 10 3. Clients Directing Which Broker/Dealer/Custodian to Use ................................................................................................ 10 B. Aggregating (Block) Trading for Multiple Client Accounts................................................................................................ 10 Item 13: Reviews of Accounts .......................................................................................................................................... 10 A. Frequency and Nature of Periodic Reviews and Who Makes Those Reviews ....................................................................... 10 B. Factors That Will Trigger a Non-Periodic Review of Client Accounts .................................................................................. 11 C. Content and Frequency of Regular Reports Provided to Clients ......................................................................................... 11 Item 14: Client Referrals and Other Compensation .............................................................................................................. 11 A. Economic Benefits Provided by Third Parties for Advice Rendered to Clients (Includes Sales Awards or Other Prizes) ............... 11 B. Compensation to Non –Advisory Personnel for Client Referrals ........................................................................................ 11 Item 15: Custody ........................................................................................................................................................... 11 Item 16: Investment Discretion ........................................................................................................................................ 12 Item 17: Voting Client Securities (Proxy Voting) ................................................................................................................. 12 Item 18: Financial Information ......................................................................................................................................... 12 A. Balance Sheet ........................................................................................................................................................... 12 B. Financial Conditions Reasonably Likely to Impair Ability to Meet Contractual Commitments to Clients ................................... 12 iii  C. Bankruptcy Petitions in Previous Ten Years ................................................................................................................... 12 iv  Item 4: Advisory Business A. Description of the Advisory Firm This firm has been in business since February 16, 2010, and the principal owner is Daniel Scott Short. B. Types of Advisory Services Directional Asset Management, LLC (hereinafter “DAM”) offers the following services to advisory clients: Investment Supervisory Services DAM offers ongoing portfolio management services based on the individual goals, objectives, time horizon, and risk tolerance of each client. DAM creates an Investment Policy Statement for each client, which outlines the client’s current situation (income, tax levels, and risk tolerance levels) and then constructs a plan (the Investment Policy Statement) to aid in the selection of a portfolio that matches each client’s specific situation. Investment Supervisory Services include, but are not limited to, the following: • • • Investment strategy • • Asset allocation • Risk tolerance Personal investment policy Asset selection Regular portfolio monitoring DAM evaluates the current investments of each client with respect to their risk tolerance levels and time horizon. Risk tolerance levels are documented in the Investment Policy Statement, which is given to each client. Financial Planning Financial plans and financial planning may include, but are not limited to: investment planning, life insurance; tax concerns; retirement planning; college planning; and debt/credit planning. These services are based on hourly fees and the final fee structure is documented in Exhibit II of the Financial Planning Agreement. Services Limited to Specific Types of Investments DAM limits its investment advice and/or money management to mutual funds, equities, bonds, fixed income, debt securities, ETFs, real estate, hedge funds, third party money managers, REITs, private placements, and government securities. DAM may use other securities as well to help diversify a portfolio when applicable. 1  Selection of Other Advisers DAM may direct clients to third-party investment advisers. Before selecting other advisers for clients, DAM will always ensure those other advisers are properly licensed or registered as investment adviser. C. Client Tailored Services and Client Imposed Restrictions DAM offers the same suite of services to all of its clients. However, specific client financial plans and their implementation are dependent upon the client Investment Policy Statement which outlines each client’s current situation (income, tax levels, and risk tolerance levels) and is used to construct a client specific plan to aid in the selection of a portfolio that matches restrictions, needs, and targets. Clients may impose restrictions in investing in certain securities or types of securities in accordance with their values or beliefs. However, if the restrictions prevent DAM from properly servicing the client account, or if the restrictions would require DAM to deviate from its standard suite of services, DAM reserves the right to end the relationship. D. Wrap Fee Programs DAM does not participate in any wrap fee programs. E. Amounts Under Management DAM has the following assets under management: Discretionary Amounts: Non-discretionary Amounts: Date Calculated: $112,700,000.00 $5,200,000.00 December 2024 Item 5: Fees and Compensation A. Fee Schedule Investment Supervisory Services Fees Total Assets Under Management Annual Fee First $1,000,000 1.00% Next $2,000,000 0.90% 2  Total Assets Under Management Annual Fee Next $2,000,000 0.80% Next $5,000,000 0.70% Above $10,000,000 0.65% Fees will be calculated on a blended tier schedule. For example, a $5,000,000 account fee would be calculated quarterly as follows: ($1,000,000 x 1.00%) + ($2,000,000 x 0.90%) + (2,000,000 x 0.80%) = ($10,000 + $18,000 + $16,000) / 4 = $11,000 per quarter. The use of a blended fee schedule represents a conflict of interest for the Advisor in that the blended fee schedule results in higher fees for the Advisor than are collected by advisors who use a breakpoint schedule for the same or similar services. Fees that are charged through a blended fee schedule result in additional revenue for the adviser as the value of the account increases. Although new money or increases in the account’s values may be managed at lower rates, the total values of assets in the earlier tiers continue to be managed at their initial higher rates. Higher asset under management fees have an adverse effect on client returns and client portfolios over time. These fees are negotiable and the final fee schedule is attached as Exhibit II of the Investment Advisory Contract. Fees are paid in arrears, and clients may terminate their contracts with one day written notice. Because fees are charged in arrears, no refund policy is necessary. Clients may terminate their accounts without penalty within 5 business days of signing the advisory contract. Advisory fees are withdrawn directly from the client’s accounts with client written authorization. Financial Planning Fees Hourly Fees The hourly fee for these services is $175. The fees are negotiable and the final fee schedule will be attached as Exhibit II of the Financial Planning Agreement. Fees are paid in arrears upon completion. Because fees are charged in arrears, no refund is necessary. Clients may terminate their contracts without penalty within five business days of signing the advisory contract. Selection of Other Advisers Fees DAM may direct clients to third-party investment advisers. DAM will be compensated via a fee share from the advisers to which it directs those clients. This relationship will be memorialized in each contract between DAM and each third-party adviser. The fees shared will not exceed any limit imposed by any regulatory agency. The notice of termination requirement and payment of fees for third-party investment advisers will depend on the specific third-party adviser selected. 3  B. Payment of Fees Payment of Investment Supervisory Fees Advisory fees are withdrawn directly from the client’s accounts with client written authorization. Fees are paid in arrears. Some Custodians do not collect Management Fee's on behalf of the DAM. In those cases DAM will invoice the client quarterly in arrears. Payment of Financial Planning Fees Hourly Financial Planning fees are paid via check in arrears upon completion. Because fees are charged in arrears, no refund is necessary. Payment of Selection of Other Advisers Fees Fees are paid quarterly in arrears. The timing, frequency, and method of paying fees for selection of third-party managers will depend on the specific third-party adviser selected and will be disclosed to the client prior to entering into a relationship with the third-party advisor. C. Clients Are Responsible For Third Party Fees Clients are responsible for the payment of all third party fees (i.e. custodian fees, mutual fund fees, transaction fees, etc.). Those fees are separate and distinct from the fees and expenses charged by DAM. Please see Item 12 of this brochure regarding broker/custodian. D. Prepayment of Fees DAM collects its fees in arrears. It does not collect fees in advance. E. Outside Compensation For the Sale of Securities to Clients Neither DAM nor its supervised persons accept any compensation for the sale of securities or other investment products, including asset-based sales charges or service fees from the sale of mutual funds. 4  Item 6: Performance-Based Fees and Side-By-Side Management DAM does not accept performance-based fees or other fees based on a share of capital gains on or capital appreciation of the assets of a client. Item 7: Types of Clients DAM generally provides investment advice and/or management supervisory services to the following Types of Clients: ❖ Individuals ❖ High-Net-Worth Individuals Minimum Account Size There is an account minimum, $100,000, which may be waived by the investment advisor, based on the needs of the client and the complexity of the situation. Item 8: Methods of Analysis, Investment Strategies, and Risk of Investment Loss A. Methods of Analysis and Investment Strategies Methods of Analysis DAM’s methods of analysis include charting analysis, fundamental analysis, technical analysis, and cyclical analysis. Charting analysis involves the use of patterns in performance charts. DAM uses this technique to search for patterns used to help predict favorable conditions for buying and/or selling a security. Fundamental analysis involves the analysis of financial statements, the general financial health of companies, and/or the analysis of management or competitive advantages. Technical analysis involves the analysis of past market data; primarily price and volume. Cyclical analysis involved the analysis of business cycles to find favorable conditions for buying and/or selling a security. Investment Strategies DAM specializes in the selection and management of Individual Equity Securities, ETF's, Select Debt Instruments and occasionally No-Load Mutual Funds. 5  DAM also uses selection of other advisers, long term trading, short term trading, short sales, margin transactions, and options writing (including covered options, uncovered options, or spreading strategies). Investing in securities involves a risk of loss that you, as a client, should be prepared to bear. B. Material Risks Involved Methods of Analysis Charting analysis strategy involves using and comparing various charts to predict long and short term performance or market trends. The risk involved in solely using this method is that only past performance data is considered without using other methods to crosscheck data. Using charting analysis without other methods of analysis would be making the assumption that past performance will be indicative of future performance. This may not be the case. Fundamental analysis concentrates on factors that determine a company’s value and expected future earnings. This strategy would normally encourage equity purchases in stocks that are undervalued or priced below their perceived value. The risk assumed is that the market will fail to reach expectations of perceived value. Technical analysis attempts to predict a future stock price or direction based on market trends. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. The risk is that markets do not always follow patterns and relying solely on this method may not work long term. Cyclical analysis assumes that the markets react in cyclical patterns which, once identified, can be leveraged to provide performance. The risks with this strategy are two- fold : 1) the markets do not always repeat cyclical patterns and 2) if too many investors begin to implement this strategy, it changes the very cycles they are trying to take advantage of. Investment Strategies Long term trading is designed to capture market rates of both return and risk. Frequent trading, when done, can affect investment performance, particularly through increased brokerage and other transaction costs and taxes. Short term trading risks include liquidity, economic stability and inflation, in addition to the long term trading risks listed above. Frequent trading, can affect investment performance, particularly through increased brokerage and other transaction costs and taxes. Short sales entail the possibility of unlimited loss (unless the position is offset by a stop- loss buyback order) since an increase in the applicable securities’ prices will result in a loss and, over time, the market has historically trended upward. Moreover, short sales necessarily limit the maximum gain that can be made on the investment since a the underlying security can, at most, fall to zero. Short selling can involve significant expenses; there are the costs of borrowing the security to sell, the interest payable on the 6  margin account that holds it (as applicable), and the associated trading commissions. Short sellers also need to consider the risk of buy-ins, which entails a short position against a security being closed out because lenders want the security back. Additionally, short sales are subject to short squeeze risk, which occurs when a shorted security quickly moves higher; this can effectively “squeeze” additional short sellers out of their short positions and, in turn, drive the price of the underlying security even higher. Margin transactions use leverage that is borrowed from a brokerage firm as collateral. Leverage enhances the ability to acquire assets, but also amplifies net profits and losses and increases transaction costs. When losses occur, the value of the margin account may fall below the brokerage firm’s threshold thereby triggering a margin call. This may force the account holder to either allocate more funds to the account or sell assets on a shorter time frame than desired. Solicitor Services / Selection of Other Advisers: Although AAA will seek to select only money managers who will invest clients' assets with the highest level of integrity, AAA's selection process cannot ensure that money managers will perform as desired and AAA will have no control over the day-to-day operations of any of its selected money managers. AAA would not necessarily be aware of certain activities at the underlying money manager level, including without limitation a money manager's engaging in unreported risks, investment “style drift” or even regulator breach or fraud. Options writing or trading involves a contract to purchase a security at a given price, not necessarily at market value, depending on the market. This strategy includes the risk that an option may expire out of the money resulting in minimal or no value and the possibility of leveraged loss of trading capital due to the leveraged nature of stock options. Short term trading, short sales, margin transactions, and options writing generally hold greater risk and clients should be aware that there is a chance of material risk of loss using any of those strategies. Investing in securities involves a risk of loss that you, as a client, should be prepared to bear. C. Risks of Specific Securities Utilized DAM generally seeks investment strategies that do not involve significant or unusual risk beyond that of the general domestic and/or international equity markets. However, it will utilize short sales, margin transactions, and options writing. Short sales, margin transactions, and options writing generally hold greater risk of capital loss and clients should be aware that there is a chance of material risk of loss using any of those strategies. Past performance is not a guarantee of future returns. Investing in securities involves a risk of loss that you, as a client, should be prepared to bear. 7  Item 9: Disciplinary Information A. Criminal or Civil Actions DAM has no criminal or civil actions. B. Administrative Enforcement Proceedings DAM has no administrative enforcement proceedings. C. Self-Regulatory Organization Enforcement Proceedings DAM has no self-regulatory organization enforcement proceedings. Item 10: Other Financial Industry Activities and Affiliations A. Registration as a Broker/Dealer or Broker/Dealer Representative Neither DAM nor its representatives are registered as, or have pending applications to become, a broker/dealer or a representative of a broker/dealer. B. Registration as a Futures Commission Merchant, Commodity Pool Operator, or a Commodity Trading Advisor Neither DAM nor its representatives are registered as a FCM, CPO, or CTA. C. Registration Relationships Material to this Advisory Business and Possible Conflicts of Interests Daniel Scott Short is a Capital Markets Consultant for JVM Realty Corp. From time to time, if appropriate he may offer clients advice or products from those activities. Clients should be aware that while not directly compensated for client activity. Mr. Short can share in advisory fees for funds held away from the custodian. As Mr. Short is paid a monthly retainer and discretionary bonuses this activity may constitute a conflict of interest. DAM always acts in the best interest of its clients and will disclose any conflicts when discussing potential investments with clients. D. Selection of Other Advisors or Managers and How This Adviser is Compensated for Those Selections DAM may from time to time select or utilize 3rd party managers but will never do so without written client authorization. DAM does not have discretion to select 3rd party managers. 8  Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading A. Code of Ethics We have a written Code of Ethics that covers the following areas: Prohibited Purchases and Sales, Insider Trading, Personal Securities Transactions, Exempted Transactions, Prohibited Activities, Conflicts of Interest, Gifts and Entertainment, Confidentiality, Service on a Board of Directors, Compliance Procedures, Compliance with Laws and Regulations, Procedures and Reporting, Certification of Compliance, Reporting Violations, Compliance Officer Duties, Training and Education, Recordkeeping, Annual Review, and Sanctions. Clients may request a copy of our Code of Ethics from management. B. Recommendations Involving Material Financial Interests DAM does not recommend that clients buy or sell any security in which a related person to DAM has a material financial interest. C. Investing Personal Money in the Same Securities as Clients From time to time, representatives of DAM may buy or sell securities for themselves that they also recommend to clients. DAM will always document any transactions that could be construed as conflicts of interest and will always transact client business before their own when similar securities are being bought or sold. D. Trading Securities At/Around the Same Time as Clients’ Securities From time to time, representatives of DAM may buy or sell securities for themselves at or around the same time as clients. DAM will trade client’s non-mutual funds and non-ETF securities before they trade their own. 9  Item 12: Brokerage Practices A. Factors Used to Select Custodians and/or Broker/Dealers The Custodian was chosen based on their relatively low transaction fees and access to mutual funds and ETFs. DAM will never charge a premium or commission on transactions, beyond the actual cost imposed by Custodian. 1. Research and Other Soft-Dollar Benefits DAM receives no research, product, or service other than execution from a broker- dealer or third-party in connection with client securities transactions (“soft dollar benefits”). 2. Brokerage for Client Referrals DAM receives no referrals from a broker-dealer or third party in exchange for using that broker-dealer or third party. 3. Clients Directing Which Broker/Dealer/Custodian to Use DAM allows clients to direct brokerage. DAM may be unable to achieve most favorable execution of client transactions if clients choose to direct brokerage. This may cost clients money because without the ability to direct brokerage DAM may not be able to aggregate orders to reduce transactions costs resulting in higher brokerage commissions and less favorable prices. B. Aggregating (Block) Trading for Multiple Client Accounts DAM maintains the ability to block trade purchases across accounts but will rarely do so. While block trading may benefit clients by purchasing larger blocks in groups, we do not feel that the clients are at a disadvantage due to the best execution practices of our custodian. Item 13: Reviews of Accounts A. Frequency and Nature of Periodic Reviews and Who Makes Those Reviews Client accounts are reviewed at least monthly by Daniel Scott Short, President. Daniel Scott Short is the chief advisor and is instructed to review clients’ accounts with regards to their investment policies and risk tolerance levels. All accounts at DAM are assigned to this reviewer. 10  All financial planning accounts are reviewed upon financial plan creation and plan delivery by Daniel Scott Short, President. There is only one level of review and that is the total review conducted to create the financial plan. B. Factors That Will Trigger a Non-Periodic Review of Client Accounts Reviews may be triggered by material market, economic or political events, or by changes in client's financial situations (such as retirement, termination of employment, physical move, or inheritance). C. Content and Frequency of Regular Reports Provided to Clients Each client will receive at least quarterly a written report detailing the client’s account which may come from the custodian. Item 14: Client Referrals and Other Compensation A. Economic Benefits Provided by Third Parties for Advice Rendered to Clients (Includes Sales Awards or Other Prizes) DAM may receive compensation in the form of fee sharing from 3rd party advisors to which it directs clients. B. Compensation to Non –Advisory Personnel for Client Referrals DAM does not directly or indirectly compensate any person who is not advisory personnel for client referrals. Item 15: Custody When it deducts fees directly from client accounts at a selected custodian, DAM will be deemed to have limited custody of client’s assets and must have written authorization from the client to do so. Clients will receive all account statements and billing invoices that are required in each jurisdiction, and they should carefully review those statements for accuracy. Custody is also disclosed in Form ADV because DAM has authority to transfer money from client account(s), which constitutes a standing letter of authorization (SLOA). Accordingly, DAM will follow the safeguards specified by the SEC rather than undergo an annual audit. 11  Item 16: Investment Discretion For those client accounts where DAM provides ongoing supervision, DAM maintains limited power of authority over client accounts with respect to securities to be bought and sold and amount of securities to be bought and sold. All buying and selling of securities is explained to clients in detail before an advisory relationship has commenced. Custody is disclosed in Form ADV because DAM has authority to transfer money from client account(s), which constitutes a standing letter or authorization (SLOA). Accordingly, DAM will follow the safeguards specified by the SEC rather than undergo an annual audit. Item 17: Voting Client Securities (Proxy Voting) DAM will not ask for, nor accept voting authority for client securities. Clients will receive proxies directly from the issuer of the security or the custodian. Clients should direct all proxy questions to the issuer of the security. Item 18: Financial Information A. Balance Sheet DAM does not require nor solicit prepayment of more than $1,200 in fees per client, six months or more in advance and therefore does not need to include a balance sheet with this brochure. B. Financial Conditions Reasonably Likely to Impair Ability to Meet Contractual Commitments to Clients Neither DAM nor its management have any financial conditions that are likely to reasonably impair our ability to meet contractual commitments to clients. C. Bankruptcy Petitions in Previous Ten Years DAM has not been the subject of a bankruptcy petition in the last ten years. 12