Item 5. Fees and Compensation
ADVISORY SERVICES PROGRAM FEES
For clients discussed above, clients pay a fee based upon either a percentage of assets under
the Firm’s advisement or management, a fixed negotiated rate, or a combination of both (the
“Program Fee”).
The asset-based Program Fee generally varies between 50 and 125 basis points (0.50% – 1.50%)
per annum, depending upon the size, nature and complexity of the client relationship. For assets
custodied at Schwab and Fidelity, and managed directly by the Firm, NorthRock charges an
additional 25 basis points (0.25%) annually to cover securities brokerage charges, transaction
fees and other servicing costs. NorthRock does not impose this additional fee for brokerage
charges, transaction fees and other services costs with respect to assets under its management
or advisement that are held away from Schwab and Fidelity; however, clients generally incur
separate custodial expenses and trading costs imposed by other unaffiliated financial Institutions.
See Item 12 for the Firm’s brokerage practices.
The Program Fee is generally charged quarterly, in advance, and calculated using the market
value of the assets being managed by NorthRock on the last business day of the previous quarter.
In the event of delayed reporting for accounts held outside of NorthRock’s chosen custodian(s)
(i.e., employer 401k accounts, Health Savings Accounts (HSAs), deferred compensation
accounts, etc.), NorthRock will use reasonable efforts to obtain updated statements and may use
the market values most recently available. The Program Fee calculation does not generally
include brokerage sweep cash balances, margin loan balances or restricted stock units/awards.
Margin borrowing does not reduce the assets value on which the Program Fee is calculated.
Substitute billing arrangements may also be negotiated on an individual basis. All fees are
outlined in the Wealth Management Agreement executed with each client which may be amended
from time to time according to the terms in the client’s Wealth Management Agreement. For the
client’s initial billing period, the fee is calculated on a pro rata basis from the effective date of the
Wealth Management Agreement. In the event the client relationship is terminated, the fee for the
final billing period is prorated through the effective date of the termination and the outstanding
balance is refunded or charged to the client, as appropriate. NorthRock only prorates its fees to
reflect the number of days in the billing period for the initial billing and final billing period.
Accordingly, except for the initial billing period and final billing period: (1) we do not apply a fee
reduction or pro rata refund for outflows from, or other reductions in the value of, the assets during
a billing period; and (2) we do not apply an interim additional fee to inflows or increases in the
value of assets during a billing period. For the initial billing period: (1) we do not apply a retroactive
fee reduction or pro rata refund for outflows from, or other reductions in the value of, the Assets
during the billing period; and (2) we do not apply an interim additional fee to subsequent inflows
or increases in the value of Assets during the billing period. For the final billing period: (1) we do
not apply a retroactive fee reduction or pro rata refund for partial withdrawals from, or other
reductions in the value of, the Assets during the billing period; and (2) we do not apply an interim
additional fee to inflows or increases in the value of Assets during the billing period.
When NorthRock engages an independent manager to manage all or a portion of a client’s
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investment portfolio, the client will pay a separate fee to the independent manager as described
in the agreement with the independent manager. This fee is in addition to the fees paid to
NorthRock.
Some clients whose accounts were acquired by NorthRock continue to be billed under legacy
billing practices, consistent with their Wealth Management Agreement. In these circumstances,
the clients are billed in arrears based on the quarter end account portfolio value, including cash
and cash equivalents. Fees vary between 45 – 150 basis points (0.45% - 1.50%) based on the
amount of assets NorthRock manages.
FEE COMPARISON
As referenced above, a portion of the fees paid to NorthRock are used to cover the securities
brokerage commissions, transactional costs, alternative investment fees attributable to the
management of clients’ portfolios and other services. Services provided through the Program may
cost clients more or less than purchasing these services separately. The number of transactions
made in clients’ accounts, whether or not the broker-dealer actually charges commissions on
transactions involving certain securities, as well as the amount of commissions charged for each
specific transaction, determines the relative cost of the Program versus paying for execution on
a per transaction basis and paying a separate fee for advisory services. The Program Fees may
also be higher or lower than fees charged by other sponsors of comparable investment advisory
programs.
MINIMUM FEES
As a condition for participation in the Program, NorthRock generally imposes a minimum Program
Fee of $5,000 per year. NorthRock, in its sole discretion, may waive or adjust its minimum annual
fee based upon certain criteria defined by the Firm. Additionally, certain Independent Managers
may impose more restrictive account requirements and varying billing practices from NorthRock.
In such instances, the Firm may alter its corresponding account requirements and/or billing
practices to accommodate those of the Independent Managers.
COMPENSATION FROM PRIVATE FUNDS
As manager and/or general partner to private funds (Fund(s)), NorthRock receives compensation
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