Sierra Financial Advisory Incorporated

Item 5: Fees and Compensation

There are three possible modes of compensation:

1.     Financial Planning Services: This service is only available to Clients who intend to employ
mode #3 listed below and pay for advisory services. SFA use to offer financial services as a
separate service at an hourly rate. While that option is no longer available to new clients, current
or former clients of SFA who have utilized the hourly payment option may continue to utilize this
service option.

2.      Commission-based compensation: In the course of business, investment advice may be
provided on a non-fee basis with the compensation for such activity from sales commissions only.
Normally, an advisory fee is not charged on assets that create a commission. Advisory fees,
however, will be charged when consideration must be given to the breadth or depth of the
service provided that goes beyond that required for transaction compensation by commission.
At the initial conference with the client, an agreement will be completed stating the type of
service to be rendered, the structuring of the fee, and the amount to be paid. A copy of the
required brochure or ADV and disclosure material will be delivered by SFA to the client. Typically,
a commission-based product is recommended and used when the product has been determined
by SFA to be suitable for the client and the best option is offered on a commission basis such as
fixed annuities or long-term care insurance contracts. For insurance business, agents for SFA are
licensed in CA, WA, and OR and may only conduct such business in those states for insurance
business unless additional licensing is obtained. When a commission-based product is
recommended to the client, this may pose a conflict of interest to SFA and its agents, as
commissions are usually paid up front and therefore offer a strong short-term incentive verses
an ongoing fee arrangement. When a commission product is recommended, the client will be
presented with and will be required to sign disclosure documentation as to the fees, surrender
charges, and restrictions of the product in question.

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3.      Advisory Fees: Continued services for periodic portfolio review and updating, periodic
financial plan review, newsletters, periodic financial advice, and account processing activities.
Compensation for this service is based on a percent of assets under management, to be billed
quarterly. For accounts with Charles Schwab as custodian, fees are charged in arrears of service.
For accounts with LPL Financial as custodian, fees are charged in advance of service. The
advertised fee schedule is disclosed below and on the advisory agreement. Fees are deducted
from the accounts under management when possible. In the event that fees cannot be
conveniently deducted from an account, an invoice for the fees will be sent to the client for
payment by check. At the initial conference with the client, an agreement will be completed
stating the type of service to be rendered, the structuring of the fee, and the amount to be paid.
A copy of the required brochure or ADV and disclosure material will be delivered by SFA to the
client either in hard copy or digital form.

The standard fee schedule is:
              Value of Invested Assets*                Quarterly Fee        Annualized Rate
                     Up to $100,000                     0.375%                    1.50%
                    $100,001 to $2,500,000              0.25%                     1.00%
                    Over $2,500,001                     0.15%                     0.60%

 This fee schedule is a sliding scale. For example, the first $100,000 of a portfolio would be
charged 1.5% annually. The next $2,400,000 is charged 1% annually up to a total portfolio size
of $2,500,000 and so forth. The result is that smaller portfolios pay a higher overall percentage
fee than larger portfolios while larger portfolios pay a higher fee by dollar amount but a lower
fee by percentage. These fees may be negotiable on a case by case basis. Sierra Financial
Advisory believes that its advertised fee schedule is competitive in the marketplace based upon
the service and expertise that is being rendered. Other providers that offer similar services may
charge more or less than the fees charged by Sierra Financial Advisory.

SFA does not charge fees in addition to the schedule agreed upon by SFA and the fee-based client.
However, additional costs to the client may include fees charged by the custodian for accounts
held at their firm. These may include stock transaction fees, mutual fund transaction fees and
early withdrawal penalties, annual maintenance fees, and special request fees such as money
wires by fed funds. SFA utilizes Charles Schwab Advisor (Schwab) and LPL Financial (LPL) as
custodians for most fee-based accounts and additional custodians for special circumstances. For
fee-based accounts, there are no loads or commissions charged on mutual fund purchases.
Funds that normally charge an up-front commission waive the fee for institutional clients. Each
fund has its own set of operating expenses to support each fund’s management team and
business structure. Fund fees vary greatly from fund to fund. The client will not see these fees
deducted from their portfolio as they are taken from fund investments before net returns are
calculated and reported by the fund. However, the client of SFA still pays for these fees through
their investment portfolio and these fees are in addition to the fees charged by SFA. SFA attempts

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to minimize ancillary fees charged by a custodian and will make recommendations to that effect.
Although SFA recommends Charles Schwab or LPL Financial, SFA is also capable of managing
...

Item 7: Types of Clients
The client base of SFA is composed primarily of individuals and family accounts. In addition,
SFA manages accounts for small business retirement plans, trusts, estates and charitable
organizations, and small business corporations. Minimum portfolio size for advisory
management is $500,000 per client or household. This minimum is a total aggregate of assets
to be managed and is not a required balance for each individual client account. SFA may accept
clients with less than $500,000 of investable assets on a case by case basis.