Item 5: Fees and Compensation
A. Fee Schedule
Lower fees for comparable services may be available from other sources.
Portfolio Management Fees for Separately Managed Accounts
Portfolio Management Fees (“Management Fees”) are based on a percentage of assets
under management. The specific Management Fees charged by the Firm for SMA’s will
be outlined in each client’s Investment Advisory Agreement.
Management Fees range from 25 basis points to 150 basis points (0.25% to 1.50%) of assets
under management using the following fee schedule:
Total Assets Under Annual Fees
Management
Up to $500,000 1.50%
$500,001 to $1,000,000 0.75%
Over $1,000,000 0.25%
Draco uses an average of the daily balance in the client's account throughout the billing
period, after taking into account deposits and withdrawals, for purposes of determining
the market value of the assets upon which the Management Fee is based.
These fees are generally negotiable and the final fee schedule will be memorialized in the
client’s Investment Advisory Agreement.
Clients may terminate the Investment Advisory Agreement upon written notice.
Fees for Dravo Subscribers
We provide investment advisory services through our mobile application, Dravo, under
a subscription freemium model:
Free Tier: No subscription fee. Access to a limited selection of In-House Strategies
(as described below in Item 8) curated by the Firm.
Premium Tier: Monthly fee range from $9.99 to $29.99 and users at this Tier
(“Premium Subscribers”) receive access to all available In-House Strategies. The
fees are based on the number of In-House Strategies that the Premium Subscriber
chooses.
Copy-Trade & Sector-Investing features. Dravo’s Copy-Trade and Sector-Investing
Strategies are available to all users (Free and Premium Subscribers) at no additional
charge. The Firm does not assess per-trade commissions or performance-based fees for
these functions. Please see “Other Fees and Expenses” below for information on third-
party fees.
At this time, the Firm does not charge an asset-based (“AUM”) advisory fee for use of
Dravo. If, in the future, the Firm implements an AUM-based advisory fee, we will provide
all clients advance notice of the applicable rate(s), billing methodology, and effective date,
and will deliver or make available an updated Brochure reflecting the change. Free and
Premium Subscribers will have the opportunity to opt out/cancel prior to the effective
date if they do not wish to be billed an AUM fee. Any AUM fee will be in addition to, or
replace, subscription fees as disclosed at that time.
Premium Subscribers may cancel Premium at any time within the App. Upon
cancellation, access to the Premium Tier will continue through end of the paid period.
Trial terms (if any) are disclosed at sign-up.
Other Fees and Expenses
The above fees are separate from third-party costs that may apply to client accounts,
including, but not limited to:
Brokerage and custody fees (e.g., ticket charges, spreads, account maintenance,
wire/transfer fees) assessed by the client’s broker-dealer/custodian;
Underlying fund expenses (e.g., ETF or mutual fund expense ratios); and,
Regulatory fees and taxes (e.g., exchange, SEC, or other transaction fees).
We do not receive any portion of these third-party fees.
Fee Negotiability, Discounts, and Promotions
We may offer promotional pricing, waivers, or discounts. In the event an AUM Fee is
implemented, certain clients may receive discounted AUM rates based on their
participation in Firm programs (such as, but not limited to, referrals or participation in a
beta-user program). Any such discounts may differ among clients receiving substantially
similar services and may be modified or discontinued with notice.
Compensation for Sale of Securities
Neither the Firm nor any supervised person accepts commissions or other sales-based
compensation for recommending securities, funds, or brokerage/custody services. We do
not receive 12b-1 fees, revenue sharing, or similar payments related to securities
recommended in Dravo or otherwise.
Conflicts and Mitigation
Differences between Dravo’s Free and Premium Tier access and any future
implementation of an AUM Fee or AUM discounts for Dravo Subscribers may create an
incentive for the Firm to encourage subscription upgrades, higher asset balances, and/or
participation in Firm programs (e.g., referrals, beta). We address these conflicts through
clear, advance disclosure of fees and eligibility criteria, supervision, and client choice
(including the ability to cancel or opt out before any AUM Fee becomes effective).
Performance-Based Fees for Portfolio Management of Some Separately Managed
Accounts
Total Assets Under Annual Management Fee Annual Performance Fee
Management (on all assets managed) (on capital appreciation)
Up to $500,000 2.00% 20.00%
$500,001 to $1,000,000 1.75% 20.00%
Over $1,000,000 1.50% 20.00%
Some Separately Managed Account clients may elect to have Draco manage their
portfolios with a performance-based fee for portfolio management. Those clients will pay
an annual fee based on the table above of assets under management along with a 20.00%
performance fee based on capital appreciation. If the client's portfolio rises in value, the
client will pay 20.00% on that increase in value, but if the portfolio drops in value, the
client will not incur a new performance fee until the portfolio reaches the last highest
value, adjusted for withdrawals and deposits, which is generally known as a “high water
mark.”
The high water mark will be the highest value of the client’s account on the last day of any
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