Item 5: Fees and Compensation
Methods of Compensation and Fees
Krilogy is required to describe our fees, other third party, and external expenses so you will know
how much you are charged and by whom for our advisory Services provided.
Direct Krilogy Clients: When you agree to work with Krilogy, you will be charged fees (“Fees”
or “Fee”) for Krilogy’s Service. The Fee is charged in advance at the beginning of each calendar
quarter based upon the net asset value. Market value of the collective securities, including cash
in your account, is determined either based on independent third-party sources or fair market
value in the absence of market value as provided by your qualified custodian and/or the issuer.
See below in this Item for a more complete discussion. Client account balances on which Krilogy
calculates Fees may vary from account custodial statements based upon independent asset
valuation and other accounting variances, including mechanisms for including accrued interest
in account statements or timing of reporting.
New accounts opened during the quarter will be charged a pro-rated fee for the remainder of the
quarter in which the account is incepted either at the beginning of the next quarter, or upon
Advisor request, at specific Fee pull dates during the quarter. Fees will include capital inflows
and outflows (e.g., deposits and withdrawals) made during the quarter on a pro-rata basis at the
next regularly scheduled billing cycle. In the event a credit for capital flows is higher than the
upcoming quarter’s Fee, the client’s Fee will be zero and the remaining credit will be deemed
earned at the end of the quarter and not carry forward to future quarter Fees. In rare instances,
certain client accounts may be billed in arrears based upon quarter end market value.
The specific Fee schedule charged by Krilogy is established and agreed to in advance in your
Agreement with Krilogy. Krilogy’s annual Fees when based upon AUM/AUA, are not to exceed
2.00% except when the net asset value of the client’s account(s) results in the calculation of the fee
being less than the minimum annual fee. This amount under the firm’s standard tiered fee
schedule is approximately $187,500. Direct Krilogy clients are required to pay a minimum annual
fee of $3,750 -- $937.50 per quarter -- regardless of the value of your accounts under our
management or advisement (AUM/AUA), unless otherwise waived. The Fee calculation does
not include other third-party fees and expenses, such as Schwab or Fidelity brokerage
commissions, mutual fund/ETF management fees and expenses, or third-party advisor fees.
Krilogy maintains several Fee schedules that vary from tiered blended and multiple flat
percentage rate based upon Client’s AUM/AUA to flat dollar fees. Generally, Clients pay a
tiered-blended Fee based upon a percentage of AUM/AUA. Fees for our Client’s typically range
from .50% to 1.50% depending on the size of client accounts and advisor’s specific client practices
for fees including negotiating fees and historically grandfathered fees for clients of advisors who
joined the firm after the client/advisor relationship began. If the Fee is blended, this means the
Fee is tiered and the Fee is calculated by applying a different fee rate to each corresponding range
of the client’s account balances making up the AUM/AUA. On the firm’s standard blended
schedule this means that the first $500,000 of a clients AUM/AUA is charged at an annual fee of
1.25%, the next $1.5 million is charged at 1.00%, the next $2 million at .85%, and so on as more
fully laid out in the Fee Schedule Exhibit in the Agreement. In limited cases, a client’s Fee may
be based upon an annualized flat dollar amount which is not based upon the client’s account size.
Finally, in certain cases, your Advisor may agree to cover the cost of income tax preparation, tax
planning, and/or tax compliance services as well as estate and business legal planning services
without further charge from Krilogy affiliated entities. However, this does not mean that the Fees
charged by Krilogy include those services.
For certain clients who utilize Krilogy’s Total Portfolio program for held-away accounts,
described above in Item 4, these accounts are included in the clients AUM/AUA when calculating
Fees. The Fee for these accounts is deducted from an account under Krilogy’s management or
paid directly by the client on a quarterly basis. Fees from Services for these held-away accounts
will include the assets within these held-away accounts and are charged according to the
valuation of the accounts at the close of the quarter. A client acknowledges that for these held-
away accounts, order management will be performed utilizing the firm’s investment
management software.
For certain client relationships, where the client and advisor decide to utilize an SMA described
in Item 4, the fees and expenses charged by SMA(s) are separate and distinct from those Fees
charged by Krilogy and are withdrawn from the client’s account by the SMA under separate
agreement. Krilogy does not receive any fees or payments from SMA(s). These fees charged by
SMAs are like those expenses and fees that would be charged by Mutual Funds and ETFs as
further outlined below. Additionally, Krilogy’s Fee is separate and distinct from any internal fees
and expenses in the mutual funds, ETFs to their shareholders, transaction charges, or spreads
charged by the custodian that are more fully laid out below.
Fee Discretion: Krilogy’s Fees are negotiable upon request and at the sole discretion of Krilogy
and the Advisor. However, there are limitations based upon the number and types of negotiated
Fee schedules entered in the firm’s systems. The financial advisor receives a portion of the Fee.
Your Advisor has a financial incentive not to negotiate the Fees because the negotiated discount
directly affects the Advisor’s compensation. If the Client does not attempt to negotiate, the Fee
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