Item 5 – Fees and Compensation
Fort Pitt charges a maximum investment management fee of 1.00%. Certain legacy clients
obtained by Fort Pitt as a result of the merger completed in 2019 are subject to a minimum
annual fee of $5,000, resulting in a fee rate of more than 1.00%. Individual client fees will vary
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depending on the fee schedule utilized by Fort Pitt at the time of engagement. Clients should
consult their Investment Management Agreement for detailed information about the fee rate
that applies to them.
Fees are paid in advance, calculated quarterly and are based on the market value of the
portfolio, including any cash balance, on the last trading day of the preceding month. Client
fees are not recalculated when/if additional deposits or withdrawals are made during a billing
cycle. However, for any new account, the initial fees paid by the client will be calculated based
on the value of the account on the date that management began through the end of that billing
cycle. For example, if a client opens a new account on January 2nd, the initial quarterly fee will
be calculated based on the value of the account on January 2nd and will be prorated for the
number of days remaining in the billing cycle (in this case, through March 31).
Fort Pitt’s fees can sometimes exceed the yield earned on money market positions held within
client accounts. With respect to margin balances, Fort Pitt’s fees are charged on the “net”
value of the account, taking into account any margin balance. For example, if the value of
securities in an account is $500,000 with a margin balance of $50,000, the fees for that account
will be calculated using a market value of $450,000.
All fees are automatically deducted from clients’ accounts on a quarterly basis, unless
otherwise agreed by the client and Fort Pitt. In certain cases, such as for Retirement Investors
(defined above), Fort Pitt will charge fees in arrears, based on the value of plan assets, as
calculated and paid to Fort Pitt by the Plan recordkeeper. In addition, for certain clients, Fort
Pitt charges fees for services provided to the held-away accounts described in Item 4 above,
just as we do with client accounts held at our primary custodians.
Fort Pitt may, in its discretion, waive certain initial and/or minimum fees. In addition, from time
to time, client fee schedules are subject to negotiation. For example, advisory fees are
discounted and/or waived for employees of Fort Pitt as well as family members and friends at
the discretion of firm management. Any discounted and/or waived fees must be approved by
firm management in writing and must be documented as part of the Investment Management
Agreement.
Clients are responsible for any charges, commissions or fees imposed by mutual funds
(including 12b-1 fees), ETFs, retirement plans, broker-dealers or platform sponsors as a result of
any investment. Such additional fees include amounts charged by the custodian for services
recommended and/or executed by Fort Pitt (i.e., margin interest, transaction fees, pledged
asset fees, trade away fees). These fees are charged separately and are in addition to the fees
charged by Fort Pitt. Fort Pitt is not responsible for charging or collecting fees other than the
investment management fees described above.
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With respect to individual stocks (including ETFs) and depending on the custodian used, the
account balance and whether the client agrees to receive statements electronically, clients may
be entitled to free equity trades. With respect to individual bonds, transaction fees (i.e.,
commissions) are built into the price paid for any purchase or sale of that security. With respect
to mutual fund investing, clients pay no commissions; however, they must pay the expense
ratio of the fund (as described below) as well as any transaction fees charged by the custodians.
Clients should consult with their Financial Adviser prior to investing to determine the amount of
fees to be paid by them for the products that are recommended by Fort Pitt.
How do Mutual Fund Expense Ratios & Share Classes work?
All mutual funds have an internal annual expense ratio that is paid out of fund assets. These
expenses, including a management fee paid to the fund’s adviser are calculated as a percentage
of the fund’s assets. If you invest $10,000 in a mutual fund with an annual expense ratio of
0.50%, you pay $50 a year to cover fund expenses. This amount is deducted from the mutual
fund and gets paid even if the fund has negative returns. Each mutual fund’s Board of Trustees
is required to annually review the expenses to determine whether they are reasonable
compared to other mutual funds.
The underlying investments within a mutual fund are the same across all share classes;
however, the expense ratios and transaction fees associated with the different share classes
vary. Shares with a lower total cost of expense ratio and transaction fees produce higher
returns than other share classes of the same fund. Share classes that charge 12b-1 and
shareholder servicing fees (i.e., marketing, distribution and administrative fees) typically have a
higher expense ratio, but do not charge transaction fees. These are called No Transaction Fee
(“NTF”) shares. Share classes that do not charge 12b-1 or shareholder servicing fees typically
have a lower expense ratio; but they do charge a fee ($10-$25) for each transaction. These are
called Transaction Fee (“TF”) shares. Please refer to the following example of the differences in
expenses between share classes of the same mutual fund.
Annual Cost
Share Expense of $500,000 Transaction
Class Ratio* Investment Fees
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