Item 5 – Fees and Compensation
The Associates offer investment advisory services on a customized and continuous basis,
making investment recommendations for clients based on their individual comfort level,
goals and investment objectives. This includes evaluating and selecting appropriate
investments, and adjusting and re-balancing portfolios with respect to each client’s
particular needs. As further explained in Item 16, this can be done on a discretionary or
non-discretionary basis.
The Associates require a minimum of $250,000 of assets to establish a new account.
However, exceptions are granted for relatives of existing clients, or if a prospective client
anticipates adding additional assets within a reasonable time. In addition, for clients with
several small portfolios, we will use the “bundled” total amount of assets to reach the
minimum account size.
A qualified broker or bank custodian maintains custody of all client funds and securities.
The Associates do not act as custodian in any case and will never have direct access to
clients’ assets, with the exception of having advisory fees deducted from the client’s
account with prior written authorization. All clients receive a billing statement showing the
period of supervision, the amount of the fee, and the method by which the fee was
calculated. When fees are automatically deducted, the Associates encourage clients to
compare our statement to that of the custodian to verify that the appropriate amount has
been deducted. In some cases, clients prefer to pay our fees directly, and this option is also
available, with payment due upon receipt of our statement.
Fees for investment advisory services are based on a percentage of assets under
management. No fees are billed in advance. Fees are billed semi-annually by averaging
the beginning, middle and ending values of the previous six months. Fees are calculated as
follows:
Portfolio Value Annual Fee
On the first $1 million ¾ of 1%
$1 million to $5 million ½ of 1%
$5 million and over Negotiable
Arthur E. Spellissy & Associates, Inc. Page 5 of 13 Firm Brochure
Investment management fees for tax-exempt securities are not deductible; therefore
holdings of those securities are excluded from fee calculation, making our charges fully
deductible to the extent allowable under current tax provisions.
There are no termination fees and the arrangement can be concluded with payment of our
normal management fee for the prior period of supervision. If an agreement for services is
concluded mid-period, the final fee is pro-rated, based on the amount of time services were
provided.
When asked, the Associates recommend that client assets be maintained in a brokerage
account at Charles Schwab Advisor Services, the Institutional division of Charles Schwab
& Company, a registered broker/dealer. (See Item 12 for further discussion of brokerage
practices.) However, clients may select any account custodian they choose. Charles
Schwab does not charge separately for maintaining custody of accounts, but other qualified
custodians may charge a separate custody fee. In addition, account custodians will charge
commission fees for transactions placed in the account, and these fees will vary by
custodian. Clients may also incur certain charges imposed by third parties other than the
Associates, including, but not limited to mutual fund sales loads. As a rule, the Associates
do not recommend mutual fund purchases, but at times clients may already have certain
funds in their portfolio that they wish to keep. The Associates do not receive any portion
of these commissions or fees. Our sole source of revenue is our advisory fees.
Clients should be aware that advisory services billed as a percentage of assets under
management could lead to potential conflicts of interest. There are times when we are
asked for help relating to financial decisions in life such as paying down debt, gifting to
charities or individuals, making a major purchase, or investing in other types of
investments. The goal of the Associates is to make recommendations with the best
interests of the client in mind, without regard to any impact the decision has on us. In all
situations, current tax laws, interest rates and other pertinent variables are used to
determine the most beneficial outcome for the client.
The Associates believe our fees for investment advisory services are most reasonable, and
comparable to fees charged by other investment advisors offering similar services.
However, lower fees may be available from other sources.