Item 5 FEES AND COMPENSATION
Wealth Management and Investment Management Services
The fees charged for investment management services are charged as a percentage of assets
under management, as set forth in the investment advisory agreement between the client and
TMD, and generally depend on the type of assets held by the client. Following is the standard
asset-based fee schedule for TMD:
Assets Under Management Annual Management Fee as a Percentage
of Assets Under Management
First $3,000,000 1.00%
$3,000,001 to $5,000,000 0.80%
$5,000,001 to $10,000,000 0.60%
$10,000,001 and over 0.50%
Such fees are incremental and accordingly, are charged on a “waterfall.” By way of example, a
client with Four Million Dollars ($4,000,000) in assets under management would be charged One
Percent (1.00%) on the first Three Million Dollars ($3,000,000), and Eight-Tenths Percent (0.80%)
on the remaining One Million Dollars ($1,000,000) of assets under management.
Fees for investment management services are deducted directly from client accounts quarterly,
in arrears, and are based on the market value of each clients’ assets under management
(including margin loan balances, cash balances and balances held in a money market account)
as determined by the account custodian at the close of business on the last business day of the
calendar quarter, except for (i) private funds, for which TMD’s annualized fee will be based on the
most recently received net asset value of each private fund and (ii) any holdings for which the
custodian does not provide a market value, for which TMD’s fee will be based on the most recent
valuation for such holding as provided by an unaffiliated third party. If a private fund’s net asset
value is not available, or if a third party valuation is not available for a holding for which the account
custodian does not provide a market value, TMD will make a good faith determination of the fair
value of the private fund or holding if TMD has sufficient information to do so. In any instance in
which TMD makes such a fair value determination, TMD is subject to a conflict of interest because
the fee will be based in part on that fair value determination. Clients may compensate TMD
directly where the assets are held away from the custodian for the client’s account.
Clients receiving investment management services will be responsible for all brokerage fees and
other transaction costs, and custodial fees and expenses. In addition, clients will be responsible
for additional fees and expenses incurred when investing their assets, such as fees charged by
independent managers, mutual fund fees and expenses, ETF expenses, trade away fees for
transactions executed away from the account custodian, mark-ups and mark-downs embedded
in fixed income transactions, and miscellaneous items such as transfer taxes, odd lot differentials,
exchange fees, interest charges, American Depository Receipt agency processing fees, trustee
fees, and any charges, taxes or other fees mandated by any federal, state or other applicable law
or otherwise agreed to with regard to client accounts. In addition, the investment management
fees charged by any utilized External Managers, together with the fees charged by the
corresponding designated broker-dealer/custodian of the client’s assets, are exclusive of, and in
addition to, the fee charged by TMD. For External Managers, clients should review each External
Manager’s Form ADV 2A disclosure brochure and any contract they sign with the External
Manager (in a dual contract relationship).
The fee for investment management services does vary among clients, depending upon various
objective and subjective factors, such as the amount of the client’s assets, the complexity of the
engagement, and the level and scope of the overall investment advisory and/or consulting
services to be rendered. As a result of these factors, these services to be provided by TMD to any
particular client could be available from other advisers at lower or higher fees. For certain clients,
TMD charges an advisory fee for services provided to the held-away accounts mentioned above
in Item 4, just as TMD does with client accounts held at our primary custodian(s). The specific fee
schedule charged by TMD is provided in the client’s investment advisory agreement with TMD.
There are clients of TMD who previously agreed to fee schedules different than the schedule set
forth above. The previously agreed upon fee schedules with these clients will remain in effect
until otherwise terminated by the specific client or TMD. In addition, TMD does not charge advisory
fees for employee household accounts.
Limited-Scope Financial Planning and Consulting Services
Fees for limited scope, non-discretionary financial planning and other services may be charged
on an hourly or fixed fee basis. These fees are negotiable, depending on the nature and
complexity of the client’s circumstances, as well as the individual involved in the planning process
and once determined, are set forth in the client agreement.
Other Compensation
Certain advisory personnel of TMD maintain insurance licenses in their individual capacities which
enables them to receive commissions for sales of insurance policies recommended to advisory
clients. In addition, Mr. Douma is the affiliated producer of the licensed insurance agency TMD
Insurance Services, LLC which also receives commissions for the sales of insurance policies
recommended to advisory clients. TMD Insurance Services, LLC also does business under the
trade name, Scottsdale Financial Group, and with its principal founder, Robert J. Smith. Mr. Smith
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