Fee-based disclosures

What else clients should know about fee-based accounts

In an asset-based fee relationship, clients pay a fee (charged quarterly) based on the level of assets for the advice and services provided by their financial advisor as a part of the advisory relationship. This fee is based on the level of assets in their account, independent of the level of trading activity. By deciding to pay a fee based on services provided rather than transactions, clients should understand that the fee may be higher than the cost of a commission alternative during periods of lower trading activity.

Clients should understand that the advisory fee charged in the investment account is in addition to the management fees and operating expenses charged by open-end, closed-end and exchange-traded funds. To the extent that clients intend to hold fund shares for an extended period of time, these internal fund expenses should be added to the advisory fee when evaluating the costs of the account. Additionally, certain mutual fund families impose short-term trading charges (typically 1% to 2% of the original amount invested) which are generally NOT waived for fee-based accounts.

Additional considerations

Clients should consider these factors when deciding whether a fee-based account is right for them: i) their past and anticipated investment activity, ii) past and anticipated use of the products and services available in the account, iii) the value and type of eligible assets, iv) the costs and potential benefits of the service, v) investment objectives and goals, vi) additional financial and planning services provided by their financial advisor, vii) personal preferences concerning available payment alternatives.

Clients should also consider whether it would be better to pay separately for each trade executed and each product and service used. Since these factors may change, clients should periodically re-evaluate whether the ongoing use of a particular asset-based fee program continues to be appropriate for their needs.

These additional considerations, as well as the fee-based schedule are listed more fully in the client agreement and the firm’s Form ADV Part II.