Item 5: Fees and Compensation
Compensation
Narwhal bases its fees on a percentage of assets under management, and hourly. Narwhal’s fee
schedules are described below.
Investment Advisory Services
Fees for investment advisory services are billed as a percentage of assets under management
according to the schedule below:
Assets Under Management Annual Fee
$0 to $500,000 1.50%
$500,000 to $1,000,000 1.25%
$1,000,000 to $5,000,000 1.00%
$5,000,000 to $10,000,000 0.90%
Over $10,000,000 0.75%
Advisory fees are payable quarterly in arrears. Fees are calculated based upon the month-end
values of assets under management for the three months of each quarter. Trade date (as
opposed to settlement date) is used for fee calculations. Upon termination of a client account,
the fee will be billed through the last date the portfolio is advised. Fees are prorated for new
clients who are added mid-quarter.
Financial Planning
Narwhal generally does not charge a separate fee for financial planning services.
Retirement Plan Advisory Services
Fees may be asset-based, flat, or project-based. Depending upon the capabilities and
requirements of the Plan’s recordkeeper or custodian, we may collect our Fees in arrears or in
advance. Typically, Sponsors instruct the Plan’s recordkeeper or custodian to automatically
deduct our Fees from the Plan account; however, in some cases a Sponsor may request that we
send invoices directly to the Sponsor or recordkeeper/custodian.
In determining the value of the Account for purposes of calculating any asset-based Fees,
Advisor will rely upon the valuation of assets provided by Sponsor or the Plan’s custodian or
recordkeeper without independent verification.
Unless we agree otherwise, no adjustments or refunds will be made in respect of any period for
(i) appreciation or depreciation in the value of the Plan account during that period or (ii) any
partial withdrawal of assets from the account during that period. If the Agreement is
terminated by us or by Sponsor, we will refund certain Fees to Sponsor to the extent provided
in the Agreement. Unless we agree otherwise, all Fees shall be based on the total value of the
assets in the account, without regard to any debit balance.
Tax Return Preparation
Narwhal charges on an hourly basis for tax return preparation and other tax consulting services.
Individuals are typically charged $175 per hour for tax related services, while corporate clients
are charged $225 per hour. All fees are charged in arrears.
Calculation and Payment
The specific manner in which fees are charged by Narwhal is established in a client’s written
agreement with Narwhal. Narwhal will generally calculate fees in arrears on a quarterly basis.
Clients may also elect to be invoiced directly for fees or to authorize Narwhal to directly debit
fees from client accounts.
Except for the terms of agreement specific to Retirement Plan Advisory Services, accounts
initiated or terminated during a calendar quarter will be charged a prorated fee. Upon
termination of any account, any prepaid, unearned fees will be promptly refunded, and any
earned, unpaid fees will be due and payable.
Agreement Terms
A client agreement may be canceled at any time upon 30 days’ notice by either party, for any
reason upon written notice. If the client made an advance payment, Narwhal will refund any
unearned portion of the advance payment.
Neither Narwhal nor any of its supervised persons (employees) accept compensation for the
sale of securities or other investment products.
Cash Balances
Some of your assets may be held as cash and remain uninvested. Holding a portion of your
assets in cash and cash alternatives, i.e., money market fund shares, may be based on your
desire to have an allocation to cash as an asset class, to support a phased market entrance
strategy, to facilitate transaction execution, to have available funds for withdrawal needs or to
pay fees or to provide for asset protection during periods of volatile market conditions. Your
cash and cash equivalents will be subject to our investment advisory fees unless otherwise
agreed upon. You may experience negative performance on the cash portion of your portfolio if
the investment advisory fees charged are higher than the returns you receive from your cash.
Retirement Plan Rollover Recommendations
As part of our investment advisory services to our clients, we may recommend that clients roll
assets from their employer’s retirement plan, such as a 401(k), 457, or ERISA 403(b) account
(collectively, a “Plan Account”), to an individual retirement account, such as a SIMPLE IRA, SEP
IRA, Traditional IRA, or Roth IRA (collectively, an “IRA Account”) that we will advise on the
client’s behalf. We may also recommend rollovers from IRA Accounts to Plan Accounts, from
Plan Accounts to Plan Accounts, and from IRA Accounts to IRA Accounts.
If the client elects to roll the assets to an IRA that is subject to our advisement, we will charge
the client an asset-based fee as set forth in the advisory agreement the client executed with our
firm. This creates a conflict of interest because it creates a financial incentive for our firm to
recommend the rollover to the client (i.e., receipt of additional fee-based compensation).
Clients are under no obligation, contractually or otherwise, to complete the rollover. Moreover,
if clients do complete the rollover, clients are under no obligation to have the assets in an IRA
advised on by our firm. Due to the foregoing conflict of interest, when we make rollover
recommendations, we operate under a special rule that requires us to act in our clients’ best
interests and not put our interests ahead of our clients.’
Under this special rule’s provisions, we must:
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