Item 5: Fees and Compensation
Warren Financial is paid by clients on the basis of assets under management. Our standard fee schedule
depends on the type of assets to be managed (whether equity or bonds) as well as the size of the assets
to be managed. The wrap fee program (all-in costs) for Warren Financial Private Custom Portfolios is
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0.25%/year for CD ladders, 0.6%/year for fixed income ladders, and 0.6%/year for equity portfolios for
every dollar over the first one-million of assets and 2%/year of assets under management annually for
every dollar under the first one-million of assets. Fees are negotiable. Fees are deducted directly from
the client’s accounts on a quarterly basis prior to each quarter year. Warren Financial has no clients that
prefer to be billed directly instead of having the fee deducted from their investment account, however,
we do not preclude the possibility that such a client may exist in the future. Clients will not likely incur
other fees as a part of Warren Financial’s Wrap Fee asset management. However, custodians such as TD
Ameritrade have their own policies and procedures which we can not fully include here, so those
fees/amounts will not be updated every time a custodian changes their policies. In addition, if Warren
Financial chooses to invest some of our client assets into a mutual fund, alternative private fund, or
public Exchange Traded Fund, those products charge management and other fees which are generally
taken out of the Net Asset Value and not billed directly to the client.
SMAs, the Warren Safer Equity Fund, and breakpoints:
The following description of how billing is handled between the TD SMA accounts and the Warren Safer
Equity Fund, while also providing every client the maximum value from their breakpoint provides a
benefit to the client because the client gets to wait longer before paying their advisory fee to Warren
Financial. Waiting longer typically means that their assets can grow for a longer period of time before
those assets are billed.
If an advisory client decided to invest in the BigDiv/Warren Safer Equity Fund and some TD Ameritrade
separate account assets are moved into that fund (WSEF is a fund which normally adds no additional
cost because normally there is no additional fund management fee) the advisory fee that is associated
with those invested funds will also move over to the WSEF (as described below). Once in the WSEF the
funds only get billed based on the advisory client bill rates, and not based on the management fee rates
as set in the WSEF PPM document as described below.
Advisory fee based wealth management clients get a breakpoint as described above. Advisory fee based
wealth management customers are billed at the end of each quarter for the next upcoming quarter
period. However, WSEF bills in arrears. In order to properly calculate a breakpoint benefit for the
customer (at the time of the billing), we will use the “then-current” value of client assets (as per the
contractual agreement) which would include the value of the most recent assets in the WSEF from last
month-end along with the current TD Ameritrade values (excluding the value of the WSEF which appears
in the TD statements). Each quarter, the most recent WSEF value will still be the last month-end value
of the WSEF. For example, the NAV of the WSEF from Nov 30 will still be the current value of the WSEF
on Dec 31 for the Jan 3 billing for the Jan-Mar wealth management period.
Often to make the calculations easier to calculate and verify, we simply charge the “under break point
fee” on the WSEF side and the “over breakpoint fee” on the TD side (and then make adjustments where
necessary). For example:
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1) If the client has $1m in WSEF and $2m in TD exclusive of the WSEF, then the $2m NOT in WSEF
would get billed at the client BreakPoint fee (typically 0.6%/yr) and the funds IN the WSEF would
get billed at the under BreakPoint fee (typically 2%/yr).
2) If the client has $2m in WSEF and $5m not in WSEF, then the $5m not in WSEF would get billed
at the client BreakPoint fee (typically 0.6%/yr) and the funds in the WSEF would get billed at the
under BreakPoint fee (typically 2%/yr) AND the client would receive a rebate (typically seen as a
reduction in the TD fee) on the WSEF fee charged above the BreakPoint fee (2%). In this
example, the client had $2m in WSEF and therefore $1m is above the breakpoint. The client
would receive a rebate on the 2% in WSEF being charged on $1m above the BreakPoint.
3) If the client has $500k in WSEF and $2m not in WSEF, then the $2m not in WSEF would get billed
at the client BreakPoint fee (typically 0.6%/yr) and the funds in the WSEF would get billed at the
under BreakPoint fee (typically 2%/yr) and since the client hasn’t yet paid 2% on the first full
$1m (but only paid 2% on the WSEF amount of $500k) the client would see a TD fee added to
the TD side of the billing to cover the under-BreakPoint portion.
4) If the client has $1m in WSEF and $0 other funds in TD Ameritrade, the client would get billed
out of the WSEF in arrears monthly and would receive a $0 bill on the TD side.
5) If the client has negotiated a flat rate, with no breakpoint, then we simply carry over their flat
rate to the WSEF.
Only the portion of the advisory fee which comes out of TD side would be billed at the beginning of the
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