Item 5 Fees and Compensation
Boston Financial Management's services are provided to clients on a customized fee basis based on
the size and complexity of the relationship. Such fees are based on a percentage of the gross market
value of the assets under management, including cash and cash equivalents. Generally, the fees our
clients pay range from 0.40% to 1.25% of the assets under management. The specific manner in which
fees are charged is established in a client's written agreement with us. Clients may elect to be billed
directly for fees or to authorize us to directly debit fees from their accounts.
Fees are payable quarterly in advance (except for a few legacy clients that are billed in arrears).
Accounts are valued using the gross market value of the assets under management on the last
business day of the previous calendar quarter.
Some clients may elect to use margin on their investment accounts if they have a cash need or wish to
invest additional funds in marketable securities. In these cases, BFM will calculate the advisory fee on
the entire market value (gross value) of the assets under management without regard to the loan
balance. For example, suppose a client account holds $1,000,000 in assets under management and
has an outstanding margin loan in the amount of $100,000. In this case, the client's custodian
statement will reflect a net market value of $900,000, but the total assets under management (the total
value of the securities held in the account) remain at $1,000,000. BFM will calculate our fee on
$1,000,000 since that is the value of the assets we manage.
In the event of a termination during a quarterly period, the fee would be prorated through the
termination date, and the portfolio valued as of the termination date; except that if the termination
occurred within five (5) days after the client entered into the advisory arrangement, no charge would be
made. Any unearned portion of the quarterly fee will be promptly refunded.
In some instances, we may furnish investment or planning advice through consultations which do not
involve investment supervisory services. In such situations, we and the client may negotiate a fee
based on time spent, or a fixed fee.
In addition to providing investment advisory and portfolio management services, Boston Financial
Management offers intergenerational wealth management services and estate and financial planning
advice, and trust services. This advice is generally offered at no additional charge to our investment
advisory clients. Others wishing to retain us for this advice pay a negotiable fee based on the
complexity of their specific situation.
Our fees are exclusive of brokerage commissions, transaction fees, and other related costs and
expenses which shall be incurred by the client. Clients may incur certain charges imposed by
custodians, brokers, third party investment managers and other third parties such as fees charged by
managers, custodial fees, deferred sales charges, odd-lot differentials, transfer taxes, wire and
electronic fund transfer fees, and other fees and taxes on brokerage accounts and securities
transactions. Mutual funds, exchange traded funds, limited partnerships, other external managers,
hedge funds, private equity funds, and separate account managers also charge internal management
fees, which are disclosed in the fund's prospectus. Such charges, fees and commissions are exclusive
of and in addition to Boston Financial Management's fee, and we do not receive any portion of these
fees and costs.
Client assets are maintained by a "qualified custodian" selected by the client. Certain custodians will
charge you separately for custody services, while other custodians do not charge clients separately for
custody but instead receive compensation from clients in the form of commissions on securities trades
executed through the custodian or other transaction-related compensation. Custodians may
also receive a fee (generally lower than the applicable commission on trades it executes) for clearance
and settlement of trades executed through broker-dealers other than the custodian (this custodial fee is
in addition to the other broker-dealer's fees). We encourage you to review your custodial agreement to
understand the compensation arrangements with your particular custodian.
The value of liquid investments will be determined on the last day of the previous quarter, using values
received from our pricing sources. We generally use prices received from Charles Schwab and/or
Fidelity, which are our primary custodians, to value liquid investments. Our goal is to provide fair and
accurate pricing for all securities.
The value of illiquid and difficult-to-value investments such as private equity, hedge funds, real estate,
etc. will be determined using the most recent value provided by the investment manager, if such
value is available. Otherwise, we will use the original purchase price. Typically, the valuation date for
illiquid investments will lag the valuation of public securities by at least one calendar quarter.
Boston Financial Management, LLC does participate in wrap fee programs. Item 12 further describes
the factors that we consider, including proprietary and third-party research, in selecting or
recommending broker-dealers for client transactions and determining the reasonableness of their
commissions.
Sub-Advisory
When Boston Financial Management acts as a sub-advisor to program sponsors, the sub-advisory
fees that we receive are negotiated between us and the program sponsors and vary for each
relationship and strategy. The fees charged will not exceed any limit imposed by any regulatory
agency. The notice of termination requirement and payment of fees for sub- advisor services will
depend on the specific program sponsors engaging Boston Financial Management as its sub-advisor.
Both the program sponsor fee and the manager's portion are calculated using the value of the assets
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