Item 5 - Fees and Compensation
Description
IPA bases its fees on a percentage of assets under management, hourly charges or fixed fees. Retainer
Agreements may be priced based on the complexity of work, especially when asset management is not
the most significant part of the relationship.
The Annual Advisory Service Agreement fee is based on a percentage of the investable assets according
to the following schedule*:
1.00% on the first $1,000,000;
0.75% on $1,000,001 to $2,000,000; and
0.50% on the assets above $2,000,000.
* Existing clients may have a different fee structure.
The minimum annual fee is $2,500. Current client relationships may exist where the fees are higher or
lower than the fee schedule above. IPA, in its sole discretion, may waive its minimum fee and/or charge
a lesser investment advisory fee based upon certain criteria (e.g., historical relationship, type of assets,
anticipated future earning capacity, anticipated future additional assets, dollar amounts of assets to be
managed, related accounts, account composition, negotiations with clients, etc.).
Fees will be assessed and billed quarterly in arrears. [Specifically, the exact amount charged is
determined by the account value at the end of the quarter.] If the Adviser only manages your assets for
part of a quarter, the charge will be prorated. The advisory fee is a blended fee and is calculated by
assessing the percentage rates using the predefined levels of assets as shown in the above chart and
applying the fee to the daily average of the account value or the account value as of the last day of the
previous quarter, resulting in a combined weighted fee. For example, an account valued at $2,000,000
would pay an effective fee of 1% with the annual fee being $20,000 (a quarterly fee of $5,000). Fees are
generally directly debited on a pro rata basis from the client’s account or accounts. The fee payable for
any held away account will be deducted directly from another client account unless the held away
account custodian has provided a mechanism for the client to authorize IPA to deduct our fee directly
from the held away account. In the event that a client’s account has insufficient funds or IPA and the
client agree, the fees will be billed directly to the client. Accounts initiated or terminated during a
calendar quarter will be charged a pro-rated fee based on the amount of time remaining in the billing
period. An account may be terminated with written notice at least 15 calendar days in advance. Since
fees are paid in arrears, no rebate will be needed upon termination of the account.
The fee for a financial plan is predicated upon the facts known at the start of the engagement. The
minimum fee is $4,000 and may range up to $6,000. This is a function of the number of hours expected
for the plan multiplied by our hourly rate of $250. If we calculate too many hours for the scope of work,
we will adjust the final payment accordingly to reduce the total cost. After delivery of a financial plan,
future face-to-face meetings may be scheduled as necessary for up to one month. Follow-on
implementation work is billed separately at the rate of $250 per hour. Similarly, the fee for retainer
clients is calculated based on projected hours per year multiplied by $250 per hour.
Fee Billing
Investment management fees are billed quarterly, in arrears, meaning that we invoice you AFTER the
three-month billing period has ended. Fees are usually deducted from a designated client account to
facilitate billing. The client must consent in advance to direct debiting of their investment account.
Clients receive a statement or invoice detailing the fee calculation including the formula, amount of
assets under management on which the fee is based, and the time period covered by the fee.
Fees for financial plans are billed 50% in advance, with the balance due upon delivery of the financial
plan. The financial plan is guaranteed, which means that if the client is not satisfied a full refund is made
with the return of the financial plan at the time of plan presentation.
Other Fees
Custodians may charge transaction fees on purchases or sales of certain mutual funds and exchange
traded funds. These transaction charges are usually small and incidental to the purchase or sale of a
security. The selection of the security is more important than the nominal fee that the custodian charges
to buy or sell the security.
Expense Ratios
Mutual funds generally charge a management fee for their services as investment managers. The
management fee is called an expense ratio. For example, an expense ratio of 0.50 means that the
mutual fund company charges 0.5% for their services per year. These fees are in addition to the fees
paid by you to IPA. Performance figures quoted by mutual fund companies in various publications are
AFTER their fees have been deducted.
Past Due Accounts and Termination of Agreement
IPA reserves the right to stop work on any account that is more than 90 days overdue. In addition, IPA
reserves the right to terminate any financial planning engagement where a client has willfully concealed
or has refused to provide pertinent information about financial situations when necessary appropriate,
in IPA’s judgment, to providing proper financial advice. Any unused portion of fees collected in advance
will be refunded within 10 days.