Item 5: Fees and Compensation
A. Fee Schedule
Lower fees for comparable services may be available from other sources.
Portfolio Management Fees
There are two pricing programs within SGC:
1. Asset Under Management fee only program – open to all SGC customers
2. Asset Under Management fee + performance incentive program – only open to SGC
qualified customers in states that allow performance incentive compensation.
The Asset Under Management fee is calculated based on the client’s total AUM. The Asset
Under Management fee is calculated using the value of the assets in the Account on the
last business day of the prior billing period. The total fees charged will not exceed 2% of
assets under management per year. Adviser shall not be compensated on the basis of a
share of capital gains upon or capital appreciation of the funds or any portion of the funds
of the client except as permitted under WAC 460-24A-150.
Performance incentive compensation is part of Asset Under Management fee +
performance incentive program, a program that involves high risk and high return
investment strategy that needs timely attention. The calculation will be the performance
of the securities over a period using a formula that will include the realized capital losses
and unrealized capital depreciation of the securities over the period. Performance fees will
be calculated only upon the amount of the client's cumulative net investment gain for
which the adviser has not previously received a performance fee.
SGC does not reduce Asset Under Management fees for customers who enroll in Asset
Under Management fee + performance incentive program. These fees are generally
negotiable, and the final fee schedule will be memorialized in the client’s advisory
agreement.
1. Asset Under Management fee Only
Investment Asset $ Fee Only (% of AUM)
AUM <$500,000 2.00%
$500,000<= AUM <$1,400,000 1.75%
$1,400,000<= AUM < $2,000,000 1.50%
AUM>=$2,000,000+ 1.25%
2. Asset Under Management fee + Performance Fee
Fee (% of AUM) + Performance
Investment Asset $
Fee
$1,400,000<= AUM <
1.5%%+20% Performance Fee
$2,000,000
AUM>=$2,000,000+ 1.25%+20% Performance Fee
Asset Under Management fee is paid in advance. The fee is calculated using the value of
the assets in the Account on the close of last business day of the prior billing period. Upon
termination, for any unearned Asset Under Management fees paid in advance, Refunds for
fees paid in advance but not yet earned will be refunded on a prorated basis and returned
within fourteen days to the client via check or return deposit back into the client’s account
or electronic payment. The detailed calculation of refunded fee will be equal to the balance
of the fees collected in advance minus the daily rate* times the number of days elapsed in
the billing period up to and including the day of termination. (*The daily rate is calculated
by dividing the annual asset-based fee rate by 365.).
Performance fees are invoiced and billed directly to the client on an annual basis after
being a client for at least one year. Fees are paid in arrears via cash, check, or electronic
payment.
These fees are generally negotiable, and the final fee schedule will be memorialized in the
client’s advisory agreement. Clients may terminate the agreement without penalty for a
full refund of SGC's fees within five business days of signing the Investment Advisory
Contract. Thereafter, clients may terminate the Investment Advisory Contract generally
with 30 days' written notice.
The following are examples of Asset Under Management fee and performance fee
calculations.
Fee Only Contract
Beginning of Quarter AUM $300,000
Annual Fee % 2.00%
Quarterly Fee% 0.5%
Quarterly Fee $ $1,500
Fee + Performance Incentive
Annual Fee % 1.5%
Beginning of Q1 AUM $1,500,000
Q1 Account Management Fee $5,625
Beginning of Q2 AUM $1,550,000
Q2 Account Management Fee $5,813
Beginning of Q3 AUM $1,650,000
Q3 Account Management Fee $6,188
Beginning of Q4 AUM $1,700,000
Q4 Account Management Fee $6,375
End of Q4 AUM $1,800,000
Capital Gain $300,000
Performance Incentive $60,000 ($300,000*20%)
In computing the market value of any investment of the client’s account, the securities in
the account listed on a national securities exchange or otherwise subject to current last-
sale reporting shall be valued at the amount reported on the statement that client receives
from the custodian.
Pricing Policy
For ‘Asset Under Management Fee Only’ program ---
1. For customers whose investment dollar amount is less than $200,000, SGC will only
recommend structured notes, structured ETFs, registered index linked annuity
products, ETFs, and similar products.
2. If customer purchases/invests multiple products with SGC, SGC will count all
products as AUM.*
* Note: AUM = Asset Under Management
For ‘Asset Under Management fee + performance incentive’ program ---
Only qualified customers (SEC rule 205-3(e)) could apply for ‘Asset Under Management
fee + performance incentive’ program investment strategies, which could involve more
sophisticated investment strategies and require timely attention to accounts. It potentially
brings high returns, but it also involves high risks.
In general, a “Qualified Client” is:
(1) a natural person or company who at the time of entering into such agreement has at
least $1,400,000 under the management of the investment adviser; or
...