Item 5: Fees and Compensation
A. Advisory Services Fees – CLASSIC Plus Programs
CFI makes available several fee-based advisory programs through which IARs manage client accounts or, depending on
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the program selected, clients may choose from approved TPMMs to manage their assets within an account. After
consultation with their IAR, a client may select a program appropriate for their objectives, goals, financial situation and
risk tolerance and will enter into an investment advisory agreement with CFI for those services. CFI and the IAR are
generally compensated for the investment management of the advisory account by charging an annual asset-based
advisory fee. Specifics of each program, including the minimum investment, available custodian, applicable TPMM
fees, expenses, and other important information, are disclosed in the investment advisory agreement for each available
program.
In general, advisory fees are negotiable at the discretion of the IAR and may differ from client to client or within various
accounts of a single client. Advisory fees charged may be calculated on a tiered or flat rate schedule. A flat rate
schedule means a set percentage will be assessed against the total value in the account, while a tiered rate schedule
means that fees are blended. For example, as the portfolio value reaches a new account balance threshold, the assets
greater than the prior threshold are charged a successively lower rate. The maximum advisory fee that an IAR may
charge is determined by CFI or the applicable TPMM and is set forth in the program fee schedule below:
CLASSIC Plus Advisory Fee Billing Minimum Maximum
Account Custodian
Programs Method Account Value Advisory Fee
Alpha (N1X) Monthly in Arrears Pershing LLC $25,000 2.25%
Beta (N1W) Monthly in Arrears Pershing LLC $25,000 2.25%
ABJ Monthly in Arrears Pershing LLC $0 2.25%
Monthly or Quarterly Issuing Insurance
AA & VL $25,000 1.50%
in Arrears or Advance Company
Charles Schwab & Co., Inc.
Omega Monthly in Arrears $25,000 2.25%
(“Schwab”)
FlexUMA Monthly in Arrears Schwab / Pershing LLC $0 2.25%
Delta Monthly in Arrears Charles Schwab & Co. $25,000 2.25%
Adviser-Directed Monthly in Arrears Plan Custodian $25,000 1.35%
In addition to the advisory fee, depending on the program selected, additional charges such as transaction charges,
custodial fees, transfer fees, internal fund fees, TPMM investment management fees, and other administrative and
operational related fees may be assessed against the account. These charges are separate and apart from the advisory
fee assessed against the account. Information regarding additional fees and expenses is available in the investment
advisory agreement for the program selected along with the custodial fee schedule, prospectus, or other fee disclosure
document for the particular security or party assessing the charge.
Minimum Account Value
In general, the CLASSIC Plus advisory programs require a minimum account value. Typically, the minimum account value is
$25,000 but could be higher or lower depending on the program selected. For any billing period in which an account does
not meet the minimum account value, CFI may, at its sole discretion, assess a minimum account value administration fee.
Under certain circumstances, CFI may waive the account minimum at its sole discretion. Please refer to the specific
investment advisory agreement for the advisory program selected for more information on any applicable minimum
account value administration fees.
Advisory Annuity and Variable Life Management
An IAR, in the capacity of a Registered Representative of CFI, the Broker-Dealer, may have sold the annuity or variable
life policy to the client and received a commission prior to entering into an advisory agreement. In such cases, CFI
mitigates this conflict, as IARs are generally prohibited from charging an advisory fee for managing the annuity or
variable life sub-accounts for a period of at least twelve months from the date of purchase. In some cases, fees for
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managing the sub-accounts may be deducted directly from the variable annuity or variable life policy. Fee deductions
are generally considered distributions, and may affect the variable annuity or variable life policy terms and may have
adverse tax consequences. Clients are highly encouraged to consult with their CPA or Tax Adviser regarding any tax
ramifications related to fee deductions and/or distributions from an annuity or variable life policy.
Given the complexity of many annuity and variable life policies, including elected guarantees and/or riders, internal
management fees and surrender charges, among other things, clients should discuss the contract terms of their annuity
or variable life policy with their IAR to determine the impact that fee deductions will have on contract terms. Clients
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