Item 5. Fees and Compensation
PagnatoKarp offers fee-only asset management and reporting for a quarterly fee at annual rates that are
negotiable for all Clients.
Generally, fees received by PagnatoKarp are AUM-based and range from 0.58% for Clients with AUM in
excess of $100 million to 1.47% for Clients with AUM under $500,000. In some cases, there are AUM-
based rates in place for legacy Client relationships that fall below 0.58% and above 1.47%. These legacy
AUM-based rates are as low as .25% and as high as 1.75%. Each PagnatoKarp advisor negotiates fees
directly with the Client, with such fees dependent upon, among other things, the account/household size,
family and relationship aggregation, pending liquidity events, the use of multiple custodians, competition,
the extent to which Family Office services are utilized, liquidity of investments, and other extenuating
circumstances. In some cases, at PagnatoKarp’s discretion, friends and family of PagnatoKarp are provided
services for no fee or a reduced fee. From time to time, PagnatoKarp performs cash management on a non-
discretionary basis with the Client’s approval in writing for no fee.
For short-term cash management strategies, fees do not exceed .30% (30 basis points). For portions of cash
balances segregated for daily liquidity purposes in a Client’s portfolio, there are no fees charged on those
assets.
Family Office Clients generally are charged based upon AUM or a fixed fee, as noted below, regardless of
whether or the extent to which they utilize Family Office services.
Legacy Non-Family Office fees generally adhere to the following fee schedule:
1.00% on assets up to $3M
0.75% on assets above $3M
Minimum annual fee of $7,500
Annual Flat Fee - In lieu of a quarterly fee assessed based on a Client’s assets under management, Clients
are permitted to negotiate a flat annual fee charged pro-rata on a quarterly basis at the discretion of
PagnatoKarp. The negotiated fee will be agreed to on a Client-by-Client basis depending on the complexity
of the Client’s financial situation, implementation of the Client’s financial plan and investment strategy,
and the extent to which the Client utilizes Family Office services. In certain cases, the negotiated fee agreed
upon can exceed the current standard AUM based fee of 1.47%.
Minimum Fee: In some instances, at PagnatoKarp’s discretion, PagnatoKarp will enter into a fee
arrangement with a Client in which AUM-based fees are subject to an annual minimum fee arrangement.
Minimum fees will be assessed on a quarterly basis such that one-fourth of the minimum annual fee shall
apply if the quarterly AUM-based fee calculation falls below one-fourth of the annual minimum fee.
Grandfathering of Minimum Account Requirements And Collection of Advisory Fees: Pre-existing
advisory Clients are subject to PagnatoKarp’s minimum account requirements and advisory fee
arrangements in effect at the time the Client entered into the advisory relationship. Therefore, our firm's
minimum account requirements will differ among Clients.
Clients should refer to their advisory agreement with PagnatoKarp for their specific fee rates.
The fee is prorated for periods of less than a quarter, such as the initial period of engagement or the final
billing period if terminated. For Clients billed in arrears, if assets are deposited into or withdrawn from a
Client’s account after the inception of a billing period, the fee payable with respect to such assets is adjusted
to reflect the period for which those assets were managed by the Firm, For Clients billed in advance, unless
they have an annual flat fee, if there are significant (defined as $100,000 or more on any given day within
the billing period) assets deposited into or withdrawn from Client’s account after the inception of a billing
period, the fee payable with respect to such assets will be adjusted to reflect the period for which those
assets were managed by PagnatoKarp.
Unless otherwise specified, fees and other applicable charges are deducted first from cash and cash
equivalents held in the Client’s account(s) and then from the proceeds of assets that are sold to cover such
fee and charges.
PagnatoKarp relies on third party valuations for all Client assets to calculate advisory fees. For private
placement investments recommended by PagnatoKarp that invest in private equity opportunities or other
privately held assets, updated valuations are generally only provided at the close of each quarter when a
Net Asset Value (“NAV”) is established for each investor’s capital account associated with their interest in
the private placement. Therefore, the most recent quarter end valuation is used for these assets for the
Firm’s fee billing purposes until an updated NAV is provided to PagnatoKarp.
Advisory fees for Independent Managers recommended by PagnatoKarp are independent of the fees paid
to PagnatoKarp. The amount of these fees varies and are determined by the particular Independent
Manager. (Currently these fees range from 0.12% to 0.93% depending on the asset class.) Clients should
review these fees as disclosed in the investment advisory agreements with the Independent Managers and
as described in their Form ADV Part 2 brochure. Fees will be paid directly to Independent Managers via
direct debit subject to authorization granted to the Independent Managers by each Client.
At times, PagnatoKarp recommends that Clients roll over 401(k) retirement accounts to IRA’s. This
represents a conflict of interest because PagnatoKarp has an incentive to make this recommendation based
on its interest in receiving a fee. PagnatoKarp addresses this conflict by performing an analysis of each
account prior to recommending a rollover. That analysis is designed to provide the Client with clear and
convincing reasons why rolling over the account is in the best interest of our Client.
Financial Planning Fees
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