Item 5 - Fees and Compensation
Amount & Calculation of Fees
For Direct Clients Windhaven charges an annual investment management fee (“Fee”) as detailed
in the chart below. Unless such fees are paid directly by the client, the client’s custodian will
deduct management fees from the client’s account and pay the Fee to Windhaven, as full
compensation for Windhaven’s investment advisory services.
Client’s Aggregate Assets Annual Fee
First $5 million 1.0% of
assets
Next $5 million 0.85% of
assets
Next $15 million 0.75% of
assets
Next $25 million 0.60% of
assets
Amount over $50 million 0.50% of
assets
Fees for Direct Clients in a sub-advisory or intermediate channel will typically be as detailed in
the chart below:
Client’s Aggregate Assets Annual Fee
First $10 million 0.75% of
Aggregate Assets
Next $15 million 0.65% of
Aggregate Assets
Next $25 million 0.55% of
Aggregate Assets
Amount over $50 million 0.50% of
Aggregate Assets
Fees generally are not negotiable. Exceptions to the fee schedules above are made at
Windhaven’s discretion. Fees for wrap fee programs or other programs in which Windhaven acts
as an adviser or sub-adviser can differ from those above.
Accounts that are eligible to be combined for Fee breakpoint purposes (“Aggregate Assets”) are
those accounts with the same registrations or accounts having the same address. In addition,
accounts with the following persons may also be eligible: (1) the client’s spouse; (2) the client’s
parents, grandparents and great-grandparents; (3) the client’s children, grandchildren, great-
grandchildren and their spouses; (4) the client’s siblings and their spouses; and (5) an individual
whose relationship to the client, while not listed in the foregoing, is similar to one of the
enumerated relationships. Individual Retirement Accounts (“IRAs”), Roth IRAs and Education
IRAs, as well as Simplified Employee Pension IRAs (“SEP-IRAs”), Savings Incentive Match
Plan for Employees IRAs (“SIMPLE IRAs”), and other personal retirement accounts generally
may be aggregated for this purpose. However, other retirement plan accounts subject to the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), may not be
combined for fee breakpoint purposes unless they have identical account registrations. The
accounts that may be aggregated are subject to negotiation (except ERISA accounts) and must be
requested by the client for Windhaven’s approval.
Windhaven primarily uses Schwab, an affiliate of Windhaven, for pricing when valuing client
assets for Fee calculation purposes. This includes separately managed accounts custodied at
Schwab and for programs sponsored by other brokers (“Broker/Custodian-Related
Programs”). For those accounts not custodied at Schwab, if a security is held that is not
valued by Schwab, the pricing from another custodian is used. For Schwab custodied
accounts, Schwab is responsible for the valuation of those accounts and their related Fee
calculations.
Fees for accounts not custodied at Schwab are charged quarterly, in arrears, on the basis of the
annual rate applied against end-of-quarter valuations and divided by four, according to terms set
forth in the investment advisory agreement (which may vary and are subject to negotiation). In
case of cash flows into or out of these accounts which exceed $50,000, the Fee may be pro-rated.
The Fees for accounts custodied at Schwab will be calculated by multiplying the daily value of the
assets in the account for each calendar day in the quarter by the applicable daily percentage rate
(i.e., the annual percentage rate divided by the number of days in the year) and then adding
together the fee for each calendar day in the quarter. On the last business day of each quarter, the
value of the client’s account assets for that day will be based on the asset values of the account on
the next-to-last business day of that quarter.
If the investment advisory agreement between the Direct Client and Windhaven is terminated,
Windhaven’s compensation will be calculated on a pro-rata basis for the last quarter as provided
above using the value of the portfolio assets as of the date of termination.
Windhaven participates as a portfolio manager in the Managed Account Programs sponsored by
Schwab. More specific information about the Managed Account Programs and the fees paid by
Managed Account Programs’ clients to participate in the program appears in Schwab’s Disclosure
Brochure for those programs, which is provided to program clients. Pursuant to an agreement
between Windhaven and Schwab, Windhaven is entitled to receive an annual fee from Schwab,
payable monthly, based on a percentage on all program assets it manages. Windhaven does not
enter into agreements directly with Managed Account Programs clients and accordingly does not
receive direct compensation from or negotiate fees with them.
Costs in Addition to the Fee
For each arrangement described in the previous section, the Fee does not cover certain costs or
...