Item 5 – Fees and Compensation
Ladenburg is compensated for its advisory services as set forth below. All fees are subject to negotiation.
Ladenburg, in its sole discretion, can waive or reduce advisory fees for certain clients, including employees,
friends, and family members of the Firm. Consequently, some clients can pay different fees than others for
similar services. These fee reductions are based on personal relationships and not on the assets under
management or the complexity of the services provided. The specific manner in which fees are charged by
Ladenburg is established for a client in the client’s written investment advisory agreement with Ladenburg.
Consulting Services
Ladenburg charges either a one-time flat consulting fee, a periodic flat fee, an hourly fee, or a periodic
asset-based fee for consulting services in advance. The fee type and amount or rates are subject to
negotiation between Ladenburg and each client. The actual fee rates paid by the client will be set forth in
the client’s agreement with Ladenburg. The maximum asset-based consulting fee is an annual fee rate of
0.75%. The fee is based on the value of the assets in designated accounts and will be pro-rated for any
partial quarters.
The value of the assets will be based on information provided by the custodian of the assets, the client or
other third party, as applicable. Ladenburg is entitled to rely on the financial and other information that the
client, any custodian, or any other third party provides to Ladenburg. Ladenburg does not independently
verify this information, nor does Ladenburg guarantee the accuracy or validity of such information.
Ladenburg will send the client an invoice for the Fee, which will be due within thirty days of the client’s
receipt of the invoice, unless the client instructs custodian to take instructions from Ladenburg to debit the
fee from one of client’s accounts. The Fee covers only the consulting services provided by Ladenburg under
the consulting services agreement.
In addition to the consulting fee that clients pay to Ladenburg, clients who chose to implement the
recommendations will incur certain fees and charges imposed by custodians, brokers, third party investment
and other third parties such as fees charged by managers.
The fees and charges can include, but not limited to: brokerage commissions, mark-up or mark-downs on
principal transactions, transaction fees, exchange fees, SEC fees, custodial fees, deferred sales charges,
transfer taxes, ADR fees, confirmation, statement, prospectus fees, IRA fees, wire transfer and electronic
fund processing fees.
Each mutual fund, exchange-traded fund (“ETF”) or private fund in which a client may invest also bears
its own investment advisory fees and other expenses. Fund transactions are also subject to applicable
commissions, transaction charges or other fees.
If the client chooses to implement any portion of the recommendations through Ladenburg or an affiliate,
Ladenburg and its affiliates will receive additional compensation. For example, if the client decides to
implement a portion of the recommendations through a Ladenburg advisory program, the client will pay
program fees to Ladenburg in connection with the program as part of the total advisory fee that is negotiated
with the Ladenburg Financial Adviser who will receive a portion of advisory fees for services rendered
under the Ladenburg program.
Similarly, if the client decides to implement a portion of the recommendations through a brokerage account
at LTCO or at another broker-dealer affiliate of Ladenburg’s, the client will pay commissions and fees to
LTCO or the other affiliated broker-dealer. The fee that a client pays to Ladenburg for consulting services
will not be reduced if fees are paid to Ladenburg, LTCO, or its affiliates for other services.
Clients can purchase securities through broker-dealers in initial public offerings, and/or secondary offerings
(“new issues”). If LTCO acts as an underwriter or manager or as a member of the selling group for such
offerings, it will receive compensation equal to either all or a portion of “gross spread” (the difference
between the price the client pays for the security and the price at which LTCO purchased the securities).
The advisory fee is not reduced to offset this new issue securities compensation. The amount of the gross
spread is described in the relevant prospectus, offering circular or official statement.
Certain securities, such as over-the-counter stocks, are traded primarily in "dealer" markets. In such
markets, securities are directly purchased from, or sold to, a financial institution acting as a dealer, or
"principal." Dealers executing principal trades typically include a "mark-up," "mark-down," and/or spread
in the net price at which transactions are executed. When LTCO executes a transaction for a security traded
in the dealer markets, LTCO either will execute the transaction as agent through a dealer unaffiliated with
LTCO, or as principal in accordance with applicable law. In addition to any applicable commission or
transaction fee, the client will bear the cost (including any mark-up, mark-down, and/or spread) imposed
by the dealer as part of the price of the security. Thus, the dealer will receive compensation in connection
with most principal trades. Ladenburg has a conflict of interest in using LTCO to execute principal
transactions because LTCO will receive compensation in connection with the trade as dealer.
LTCO can receive distribution or service (“trail”) fees from the sale of certain mutual funds (including
money market funds) pursuant to a 12(b)-1 distribution plan or other such plan as compensation for
distribution or administrative services and are distributed from the fund’s total assets. The fees received by
LTCO create a conflict of interest. These fee arrangements will be disclosed upon client’s request and are
described in the applicable fund’s prospectus.
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