Item 5 – Fees and Compensation
Investment Management
• Advisory fees for portfolio management clients whose assets are held at our qualified custodian,
RBC Clearing & Custody, are deducted directly from client accounts under RBC’s Unified
Managed Account Support System (UMASS). RBC executes billing instructions submitted by
Essex Advisory LLC, and clients receive regular custodial statements reflecting all fee
withdrawals.
Essex Advisory LLC charges a straight tier asset-based fee schedule for Portfolio Management
services. Portfolio value used for fee calculation is the custodian-provided account valuation. For
accounts custodied at RBC Clearing & Custody, valuations and fee debiting are processed under
RBC’s Unified Managed Account Support System UMASS.
Fee Structure
• Fee schedule (maximums):
o Up to $1,000,000 — Up to 2.00%
o $1,000,000 up to $2,000,000 — Up to 1.75%
o $2,000,000 up to $5,000,000 — Up to 1.50%
o $5,000,000 up to $10,000,000 — Up to 1.25%
o $10,000,000 and up — Up to 1.00%
Method of Calculation
ADV 2A – Firm Disclosure Brochure
• The firm uses a straight tier approach (not a blended tier). The applicable single tier rate is the
rate that corresponds to the total asset value of the account as reported by the custodian on the
valuation date.
• Fees are charged monthly based upon the asset value provided by the custodian based on the
ending monthly asset value divided by 365 multiplied by the days in the month.
• Billing is in arrears as indicated in the client agreement. If a client terminates before the end of a
billing period, the firm applies a pro rata fee based on days of service in the period.
Formula
• Annual fee = (Applicable tier rate) × (Custodian-reported asset value)
• Daily fee = Annual fee ÷ 365
• Fee for billing period = Daily fee × (Number of days in billing period)
Expressed in LaTeX:
𝑟𝑟 ⋅ 𝑉𝑉
Daily Fee =
𝑟𝑟 ⋅ 𝑉𝑉
Period Fee = Daily Fee × 𝐷𝐷 = × 𝐷𝐷
where 𝑟𝑟= applicable annual fee rate (decimal), 𝑉𝑉= custodian-provided asset value, 𝐷𝐷= number of days billed.
Numerical Example
• Account value 𝑉𝑉 = $1,250,000(custodian reported)
• Applicable tier rate 𝑟𝑟 = 1.75%(0.0175) because the account value falls in the $1,000,000–$2,000,000
band
• Billing period in the month: 30 days
Calculation in LaTeX:
0.0175×1,250,000 21,875
• Monthly Fee = 365
= 365
≈ 59.93 multiplied by 30 for 30 days = 1797.90
ADV 2A – Firm Disclosure Brochure
The fee for the 30-day billing period would be approximately $1,797.90. Custodial statements will reflect
the fee and any withdrawal executed under UMASS for accounts at RBC.
Additional Disclosures
• Fees are exclusive of brokerage, transaction costs, and other custodian or fund expenses.
• Asset management fees may be negotiated and are subject to the limits disclosed above.
• The firm does not value portfolio securities; valuations used for fee calculation are those provided
by the qualified custodian and retained in the client file.
Advisory fees for portfolio management clients whose assets are held at our qualified custodian, RBC
Clearing & Custody, are deducted directly from client accounts under RBC’s Unified Managed Account
Support System (UMASS). RBC executes billing instructions submitted by Essex Advisory LLC, and
clients receive regular custodial statements reflecting all fee withdrawals.
Lower fees for comparable services may be available from other sources.
Financial Planning
The fee for financial planning can be based on an hourly or fixed rate depending on the nature of the planning.
Fixed fees are generally paid 50% in advance and 50% upon completion. Hourly fees are generally charged as
they incur. In the financial planning agreement, clients are provided a cost estimate based upon the number of
hours and the planner’s hourly rate. There is no minimum/maximum number of hours allowed/required for
financial planning services.
• Hourly Fee: $200 to $400
• Fixed Fee: $500 - $5,000
The applicable fee is determined by the scope and complexity of a particular client’s financial situation as well
as the amount of time and expertise required. In some cases a fee greater or lesser then the typical fee range
may be warranted. Fees for financial planning services are billed directly to the client and paid to Essex
Advisory LLC.
ADV 2A – Firm Disclosure Brochure
Mutual Fund Share Class Disclosures
Essex Advisory strives to select the lowest cost share class available; however, certain mutual fund share
classes charge a 12b-1 fee that generally amounts to an additional .25% expense ratio or more. The purpose of
12b-1 fees, as approved by the SEC, are to cover marketing expenses and shareholder services such as support
services and “other expenses” such as legal, accounting and the administrative functions of the custodian.
When selecting a mutual fund, Investment Advisor Representatives have a fiduciary duty to choose the share
class that helps manage the overall fee structure of the account. The entire fee structure includes such fees as
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