Item 5 – Fees and Compensation
Advisor receives an annual management fee of up to 1.10%, which fee depends on the size of
the account, nature of the investment strategy, services provided to the client, and whether a sub-
advisor or fund is retained to pursue a particular strategy for the client. Fees are negotiable at
Advisor’s sole discretion, and not all clients pay the same fee. The fees for each client’s account
are contained in the corresponding investment management agreement between Bel Air and the
client. Fees are charged quarterly based on the value of the assets in the accounts. Advisor
prorates the fee for the initial period and at the end of the relationship.
Advisor typically charges an annual fee of 0.25% to 1.10% for equity strategies and 0.10% to
0.60% for internally managed fixed income strategies. The fee for allocation to outside managers
and/or sub-advisors and/or Designated Affiliated Funds (defined below) (not including the U.S.
Equity Strategy) typically ranges from 0.25% to 0.75%. Fees may be negotiated outside of these
ranges in the Advisor’s discretion.
If a sub-advisor is engaged by a client, the client will pay the fee charged by the sub-advisor as
an asset management fee, as well as an oversight fee to Advisor. Similarly, if a client invests in
mutual funds, ETFs or other pooled investment vehicles, there will be costs at the fund level (e.g.,
the expense ratio, management fees, performance fees, etc.) as well as an oversight fee paid to
Advisor. As such, with respect to investments made in a fund or managed by a sub-advisor clients
will incur costs in addition to the advisory fees payable by such client to the Advisor. Bel Air has
entered into an agreement by which the US Equities Strategy is made available to clients of Bel
Air. That strategy is managed by investment professionals associated with Fiera Capital Inc.,
which is an affiliate of Fiera US Holding Inc., which in turn owns all of the membership interests
of Bel Air Securities LLC (“BAS”). Bel Air and BAS are affiliates due to common management.
See Items 10 and 12 for more details regarding the relationship between Bel Air and BAS.
The fee charged by and paid to outside managers and/or sub-advisors (including the U.S. Equities
Strategy) will typically be within the range noted above; however, fees may be negotiated outside
such range in the Advisor’s discretion.
Advisor relies on valuations provided by third-party managers when calculating certain advisory
fees, and there is a risk that those valuations may be inaccurate.
When acting solely as an investment advisory consultant, Advisor is paid a fixed fee or a fee
based on a percentage of the assets monitored by Advisor. The fixed fee arrangements are
charged quarterly. The fee arrangements based on a percentage of the assets monitored by
Advisor are charged quarterly based on value of the assets in the accounts. The fee arrangement
for Advisor’s consulting services is negotiated with each client.
Advisor’s fees are exclusive of brokerage commissions, transaction fees and other related costs
and expenses which will be incurred by the client. Clients will be charged brokerage commissions
(for equity, options, and ETF transactions) and ticket charges (which are applied to most
transactions). For mutual funds, ETFs or other pooled investment vehicles, investors will incur
fund level expenses (commonly referred to as the “expense ratio”). Where Advisor has the
authority to determine or select the broker, clients typically pay the same commission rate whether
the transaction is executed through BAS or a third-party prime or executing broker.
In selecting mutual funds, Advisor seeks funds that have the most favorable expense ratios
available (based on the client’s ability to qualify for the applicable share class) and, when feasible,
does not impose sales charges or Rule 12b-1 fees (e.g., distribution fees). There will be
circumstances in which a mutual fund that is selected for client investments will pay or incur such
charges (which will be incurred by the client through ownership of the mutual fund). For those
funds for which there is a Rule 12b-1 fee or sales charge, BAS usually will receive these related
fees when permissible. Mutual funds that pay 12b-1 fees or sales charges may have share
classes that do not pay such fees or sales charges. Investing, or remaining invested, in share
classes that pay 12b-1 fees will generally reduce the overall return of such investments in
comparison to non-12b-1 share classes (when available) of the same mutual fund.
Due to the common management and an expense sharing agreement between Advisor and BAS,
when BAS receives a fee or commission, a portion of the economic benefit will be received by
Advisor to reimburse for various expenses paid by Advisor that benefit BAS. This presents a
potential conflict of interest in that it may create an incentive to recommend investment products
or funds based on the compensation received rather than solely on the needs of the client. Advisor
will only effect transactions through BAS, however, when it is consistent with its duty to its clients.
Clients have the option to purchase securities (including mutual funds) through other brokers or
agents not affiliated with Advisor; however, such investments might be subject to different
expenses (such as a different expense ratio for differing share classes) and will be subject to the
charges imposed by the other broker-dealer. Advisor does not typically reduce its advisory fee to
offset any Rule 12b-1 fee, commissions, or other expense incurred by clients except as required
by applicable law.
BAS has entered into a Fully Disclosed Clearing Agreement with Pershing LLC (“Pershing”). The
clearing agreement provides that BAS will use Pershing as its clearing agent. For transactions
processed by or through Pershing, clients are typically charged a fee (which is described as a
...