Item 5. Fees and Compensation
Financial Clarity’s annual fee services, other than for Hourly Financial Counseling, is based
on the value of the specific assets that each client has identified to Financial Clarity as
appropriate for such services (the “Specified Assets). The Specified Assets are displayed
on the initial and subsequent invoices provided by Advisor to the client. These fees are
billed quarterly in advance. The first quarterly fee is due when the client signs an
Engagement Agreement. The quarterly due dates for all fees are based on the effective
date of each client’s Engagement Agreement rather than calendar quarters.
The annual fee is negotiable, but generally is as follows: 0.50% of the value of the Specified
Assets up to and including $10,000,000; plus 0.30% of the value of the Specified Assets in
excess of $10,000,000 and up to and including $100,000,000; plus 0.20% of the value of the
Specified Assets in excess of $100,000,000. The fee for each quarter is calculated by
multiplying the annual fee by the value of the Specified Assets as described above, rounding
that product to the nearest $100 and dividing by four.
The vast majority of the investment managers recommended by Advisor and selected by
clients will charge their own fees. For example, clients that invest in mutual funds, separate
accounts, hedge funds and other investment pools will have investment advisory fees
deducted from their accounts and paid to the managers. In addition, certain funds, such as
hedge funds and private equity funds, will charge performance-based compensation in
addition to management fees. Clients will also be responsible for other investment
expenses, including but not limited to brokerage commissions, related to the investments
made by the advisers they select. Clients will be provided, as applicable, prospectuses,
offering memoranda, or other documents that describe the various fees and expenses
associated with such investments. If a client chooses to enter into an advisory agreement
with a manager, the client will be responsible for any fees and expenses outlined in those
documents.
Fees for Hourly Financial Counseling are negotiable and billed monthly in arrears at a rate
of between $700-1,000 per hour, depending upon the complexity of each hourly financial
counseling client’s situation. Hourly fees are billed to the closest quarter hour and include
all time required to prepare for, and travel to, meetings, develop analyses, meet, record
information, and follow up on action items.
Financial Clarity’s fees for any member of the family may be paid by that member
individually, by a different family member, or the fees for multiple family members may be
paid by a single family member for their benefit, depending upon the arrangement with the
family.
Neither Advisor, nor any of its supervised persons, accepts compensation for the sale of
securities or other investment products. Financial Clarity believes that its fees are
competitive with fees charged by other investment advisers for comparable services.
However, comparable services may be available from other sources for lower fees. Either
the client and/or Advisor may terminate Financial Clarity’s services at any time by informing
the other party in writing. The client is responsible for expenses and the pro rata portion of
Financial Clarity’s fees through the date of termination. The client will receive a pro rata
refund of any prepaid Manager Optimization fees based on the number of days remaining
in the client’s quarterly billing cycle on the date Advisor receives client’s written termination
notice.