Item 5 Fees and Compensation
This section and Appendix A outline various fees and expenses that are applicable to Hefren-Tillotson’s
advisory programs and types of accounts. We also identify conflicts of interest and efforts to mitigate
these conflicts through supervisory practices. Certain fees may not apply or may be discounted based on
the type of account you have and/or the amount of assets you hold in your Hefren-Tillotson accounts.
Other fees are only charged when the associated services are requested or when special processing is
required. Therefore, some fees listed below may not apply to your account.
Since Hefren-Tillotson is dually registered as a Broker Dealer and Investment Adviser, Clients have
flexibility in how they pay for our professional services – commissions, advisory fees, or a combination
of both. We often find that Clients will use a combination of different types of accounts depending upon
their portfolio structure, needs, and financial goals.
Financial Advisors at Hefren-Tillotson are compensated on a percentage of commission or fee-based
revenue, and this constitutes the majority of the firm’s revenue. The payout percentage to the Financial
Advisor is level across brokerage and investment advisory programs to avoid conflicts of interest.
Fees & Compensation Associated with Hefren-Tillotson’s Investment Advisory Programs:
Asset Management, MASTERPLAN Pathway, Advisory, Pathway Pro, , American Funds F-
2 Direct, & HT Managed Account Programs
For accounts under our Investment Advisory programs, Clients compensate Hefren-Tillotson through an
advisory fee based upon a percentage of assets under management. We receive 12b-1 fees with respect to
certain share classes of some mutual fund companies such as A, B, or C shares, but these fees are rebated
back to clients if received. Hefren-Tillotson participates in Pershing’s FundVest program. The firm does
not receive mutual fund service fees through FundVest for the investment advisory programs listed above.
However, Hefren-Tillotson benefits from no transaction fees for funds on the FundVest program.
Hefren-Tillotson does not participate in or receive any portion of various account fees (outlined in
Appendix A) passed onto clients within these programs. These account fees are charged by the custodian,
Pershing LLC (“Pershing”). Fee schedules for the programs are as follows:
Investment Advisory Fee Schedule
Managed
Asset Masterplan Pathway Account
Management(1) Pathway(1) Advisory(1) Pro (1) Program (2)
1.00% on the first $1,000,000 plus
0.75% on the next $1,000,000 plus
0.50% on the next $8,000,000
Fees are negotiable on assets in excess of $10,000,000
(1) $6.00 transaction service charge will be incurred on equity and ETF transactions
(2) Portfolio Manager Fee (typically ranging between 0.25% - 0.80%) is in additional to the schedule
above and is paid to the respective Portfolio manager for separately managed account strategies
The Investment Advisory Fee Schedule does not include certain additional account fees or
other expenses payable to Hefren-Tillotson that could be incurred. See Appendix A for the
full list of fees and expenses applicable to Hefren-Tillotson accounts.
American Funds F-2 Direct Program offers quarterly fee billing, in arrears, based upon eligible accounts’
average daily balance over the previous off-calendar quarter ending February, May, August, and
November. The program’s management fee is a flat 1.0% and is non-negotiable. Assets are held directly
with American Funds in the F-2 share class, which have no 12b-1 fees. There is a $10 setup fee charged
by the American Funds and an annual $10 custodial fee for IRAs and Coverdell ESAs. Hefren-Tillotson
does not receive any compensation from the setup and custodial fees. Fees can be debited from a single
fund or prorated across the account holdings.
Within Hefren-Tillotson’s Asset Management, MASTERPLAN Pathway, Advisory, American Funds F-2
Direct, Pathway Pro, and Managed Account Programs, HT is compensated based upon a percentage of
assets under management rather than on a transaction-based model. Financial Advisors are
compensated based on a percentage of fee-based revenue. As a result, the Financial Advisor is
incentivized to (1) grow the Client’s investment assets through good investment decisions and (2) keep
the accounts by establishing a lasting relationship through exceptional service and sound advice. Within
these programs, neither HT or Financial Advisors are compensated on 12b-1 or mutual fund service fee
revenue and does not receive additional compensation from the $6.00 transaction service charge or other
account fees that may be incurred in an Investment Advisory account.
Fees & Compensation Associated with Hefren-Tillotson’s Hybrid Program: Portfolio
Review
The Portfolio Review program is a traditional brokerage account with an annual service fee of 0.25% for
financial planning and enhanced reporting services. For accounts under our Portfolio Review program,
Clients compensate Hefren-Tillotson in the following ways:
1. 0.25% annual service fee; plus
2. Standard Brokerage commissions or sales charges on transactions executed; plus
3. Third party payments, such as 12b-1 fees and mutual fund service fees; plus
4. Mark-up on trade processing charges and account services fees, including inactive fees and
account transfer fees for non-qualified accounts.
Third party payments, such as 12b-1 fees, are part of product-level costs that the client incurs under this
program. See Appendix A for the full list of fees and expenses applicable to Hefren-Tillotson accounts.
Fees & Compensation Associated with Hefren-Tillotson’s MASTERPLAN Financial Review
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