Item 5. Fees and Compensation
Investment Management Fees
Pinnacle charges an annual management fee based upon a percentage of the assets being managed
by the firm. The management fee generally ranges between 50 and 150 basis points (0.50% - 1.50%),
depending upon the type of client (e.g., institutional, or non-institutional), investment strategy
selected and the scope and complexity of the services to be provided. The fee is generally prorated
and charged quarterly, either in advance or in arrears, based upon the market value of the assets
being managed by the firm on the last day of the previous quarter. Pinnacle may also base its fee upon
the average month-end value of the assets being managed by the firm during the previous quarter.
As requested by the client, Pinnacle may further customize its billing arrangements to accommodate
the specific requests of the client (e.g., charge a fixed fee). Pinnacle generally relies on market values
presented by the custodian of record when calculating fees.
Fee Discretion
Pinnacle may negotiate to charge a lesser fee based upon certain criteria, such as anticipated future
earning capacity, anticipated future additional assets, dollar amount of assets to be managed, related
accounts, account composition/investment strategy (e.g., fixed income account), held-away accounts,
accommodation accounts, account retention and pro bono activities. Certain legacy clients may also
be subject to a different fee schedule.
Additional Fees and Expenses
In addition to the advisory fees paid to Pinnacle, clients may also incur certain charges imposed by
other third parties, such as broker-dealers, custodians, trust companies, banks, and other financial
institutions (collectively, “Financial Institutions”). These additional charges may include securities
brokerage commissions, transaction fees, custodial fees, fees attributable to alternative assets,
reporting charges, margin costs, charges directly by a mutual fund or ETF in a client’s account (e.g.,
fund management fees and other fund expenses), deferred sales charges, wire transfer and electronic
fund fees, and other standard fees and taxes associated with maintaining a brokerage account.
When Pinnacle believes it is appropriate, the firm may also effect transactions through broker-
dealers other than the account’s custodian. In this event, the client generally will incur both the fee
(commission, mark-up/mark-down) charged by the executing broker-dealer as well as a separate
“trade away” fee charged by the account custodian. Clients are advised that this may result in a higher
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total fee charged to the client. This arrangement poses a conflict of interest as Pinnacle may be offered
certain products and services by the broker-dealers to which it directs trades, which benefits may
not be exclusively for the benefit of client and may be for the benefit of Pinnacle. Pinnacle’s brokerage
practices are described further in Item 12, below.
Direct Fee Debit
Clients can elect to have Pinnacle’s management fees directly debited from their custodial accounts.
In the instance when there are insufficient funds to pull the management fees, Pinnacle is authorized
to sell securities to cover the fee payable. The Financial Institutions that act as the qualified custodian
for client accounts have agreed to send statements to clients not less than quarterly detailing all
account transactions, including any amounts paid to Pinnacle. In the event the client requests that
the firm bill them directly, payment is due upon receipt of Pinnacle's invoice.
Account Additions and Withdrawals
Clients can make additions to and withdrawals from their account any time, subject to Pinnacle’s
right to terminate an account. If assets are deposited or withdrawn from an account after the
inception of a billing period, the firm reserves the right to adjust the fee payable with respect to such
assets to reflect the change in the portfolio value. For the initial period of the engagement, the fee is
calculated on a pro rata basis. Upon termination of an advisory agreement between Pinnacle and the
client, the fee for the final billing period is prorated through the date of termination and the
outstanding or unearned portion of the fee is charged or refunded to the client, as appropriate.
Additions may be in cash or securities, provided that the firm reserves the right to liquidate any
transferred securities or decline to accept particular securities into a client’s account. In most cases,
Pinnacle designs its portfolios as long-term investments, and the withdrawal of assets may impair
the achievement of a client’s investment objectives. All redemptions are subject to customary
settlement procedures and certain positions may take additional time to dispose of due to limited
liquidity or marketability. Clients are advised that when transferred securities are liquidated, they
may be subject to transaction fees, fees assessed at the mutual fund level and/or tax ramifications.
Cash Positions
At any specific point in time, depending upon perceived or anticipated market conditions/events
(there being no guarantee that such anticipated market conditions/events will occur), Pinnacle may
maintain cash positions for defensive purposes. Cash positions (money markets, etc.) may be
included as part of assets under management for purposes of calculating the firm’s advisory fee.
Wrap Fee Programs / UMA Programs / Sub-Adviser Fees
As detailed in Item 4, Pinnacle offers its strategies to a limited number of unaffiliated wrap fee
programs, UMA programs and other financial advisors. Pinnacle is generally paid a fee directly by the
program sponsor or financial advisor, which fee is negotiated on a case-by-case basis.
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