Fees

Transparent with examples

Fees

There are two fee structures, to accomodate two kinds of investors.

Do you want to have a guarantee that you won’t pay anything unless you make money? Use our performance fee of 10%, which ensures that if you lose money overall, you won’t owe a fee.

Do you want to know that the fee is a small percentage of your total assets, and be assured that it will stay that way for a long term? Use our Wealth Management fee schedule.

It is your choice.

This is the relevant sections from the Brochure:

Wealth Management Fee Schedule

 

Assets (CHF) up to 2.5 million 2.5 to 5 million 5 to 10 million 10 to 20 million
Low risk/return Portfolio 0.65% 0.60% 0.55% 0.45%
Medium risk

Portfolio

0.80% 0.75% 0.70% 0.50%
Mixed risk/return Portfolio 0.80% 0.80% 0.80% 0.50%
High risk/return

Portfolio

1.0% 0.90% 0.85% 0.75%

 

 

“Wealth Management Fee Schedule” above. Fees according to the schedule are due at the end of every quarter, one fourth of the fees set above.

Either 412 Investments or a client may terminate services upon written notice to the other party. My Wealth Management agreement may be terminated without cost or penalty. If the client terminates after 412 Investments has provided all agreed upon services but prior to the time for which payment is due, then all fees due under the agreement will be immediately due. After the termination date, the firm will have no further duties or obligations to you under the Wealth Management agreement.

If you choose, you may grant Pittsburgh Investment Advisor (legally 412 Investments) limited discretionary authority in the Wealth Management agreement to bill your custodian directly and to instruct your custodian to deduct my advisory services fees directly from your Wealth Management custodial account.

Termination of Wealth Management and Advisory Services

If the Wealth Management services are terminated, fees will be prorated through the date of termination. Clients are responsible for any fees earned up to the date of termination within the quarter terminated. A pro rata portion of any prepaid, unearned fees will be promptly returned no later than 14 days following receipt of termination notice. Termination of my agreement shall not affect liabilities or obligations incurred from transactions initiated under my agreement prior to the termination date, such as the purchase of investments by me for your account. You are responsible for any cost incurred in transferring assets from your account to a different account and any management fees accrued and unpaid at the time of termination. After the termination date, the firm shall have no further duties or obligations to you under my agreement.

 

 

When a copy of this brochure is not provided within 48 hours prior to signing the contract, the client has five business days to cancel the contract, without penalty.

 

 

General Information on Fees

Mutual funds, exchange traded funds (ETFs) and other investments the firm may use typically charge their shareholders various advisory fees and expenses associated with the establishment and operation of the funds. These fees will generally include a management fee, shareholder servicing, other fund expenses, and sometimes a distribution fee. If the fund also imposes sales charges, you may pay an initial or deferred sales charge. Each fund’s current prospectus discloses these separate fees and expenses. A copy of the prospectus is available from the fund.

Consequently, for any type of fund investment, it is important for you to understand that you are directly and indirectly paying two levels of advisory fees and expenses: one level of fees to the fund and one level of advisory fees to me. Most mutual funds and ETFs may be purchased directly, without using my services and without incurring my advisory fees.

My fees are exclusive of brokerage commissions, transaction fees, and other related costs and expenses that you will incur. You may incur certain charges imposed by custodians, and brokers. The firm does not receive any compensation from these fees or commissions.

Fees Directly Withdrawn from Client Accounts

You may elect to be billed directly for my fees or you may authorize me to debit my fees from your accounts. If you provide me such authorization, at the same time the firm will submit my request for payment to your custodian, you will be sent a notice from me, in writing, stating the exact amount of the withdrawal and the specific manner or basis on which the firm calculated the fee. In addition, the custodian’s periodic statements will show each fee deduction from your account. You may withdraw this authorization for direct billing of these fees at any time by notifying me or your custodian in writing. If 412 Investments bills you directly, the fees are due within 30 days of the date of each invoice.

 

 

PERFORMANCE FEE OPTION

Performance Fees are calculated as 10% of all money gained, using a “high water mark” to ensure that if returns go up and down like a wave, you will only owe money off the “high tide”. This will protect you from owing high fees if there is no overall gain.

Instead of paying a management fee to 412 Investments, clients have the option to elect a performance-based fee of 10% quarter over quarter.

An example sheet of the performance based calculation is included after Part 2B in Exibit A. It uses industry standard calculations based on “high water marks” and client deposits and withdrawals.

 

 

There will be no discrimination between those who chose performance based fees over asset-based fee structures, both will receive the same stock picks and the same services.

 

 

Performance-based fees can only legally be used in Pennsylvania by those who meet the following qualifications:

i.)                  A natural person who or a company that immediately after entering into the contract has at least $1,000,000 under the management of the investment adviser; or

 

ii.)                 A natural person who or a company that the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, has a net worth (together, in the case of a natural person, with assets held jointly with a spouse) of more than $2,100,000 at the time the contract is entered into.

 

A specific, mathematical example is below if you are interested.

EXIBIT A:

HIGH WATER MARK AND PERFORMANCE FEE CALCULATION EXAMPLES
Below are given Performance Fee (PF) and High Water Mark (HWM) calculation examples.  
These calculations assume the fees are withdrawn from the balance of the investment.
Quarter 1 had a near $20,000 net trading LOSS
and no additions / withdrawals
Beginning balance $500,000.00 The High Water Mark (HWM) is set equal to the beginning balance on start of trading
Ending balance $480,457.69 10/1/2015 -3.91%
Cash added / withdrawn $0.00
Cash adjusted balance $480,457.69 (as if there were no additions/withdrawals)
Net quarterly profit/loss from trading ($19,542.31)
High water mark (HWM) $500,000.00
Amount above the HWM ($19,542.31) (Negative -> drawdown)
10% Performance (incentive) fee $0.00 (There is no performance fee if there is no net profit)
Reduction coefficient 1.000000 (Only in the case of withdrawal during drawdown the reduction coefficient will be < 1 ; otherwise it equals to 1)
New high water mark $500,000.00 The HWM is above the ending balance by the amount of drawdown.
If there are no withdrawals, the HWM will never go down.
Quarter 2 had a near $100,000 net trading PROFIT
and $30,000 cash withdrawal
Beginning (after fees) balance $480,457.69
Ending balance $550,606.48 1/3/2016 20.84%
Cash added / withdrawn ($30,000.00)
Cash adjusted balance $580,606.48 (to reflect the addition / withdrawal)
Net quarterly profit/loss from trading $100,148.79
High water mark (HWM) $500,000.00
Amount above the HWM $80,606.48 (Positive -> run-up)
10% Performance (incentive) fee $8,060.65
Reduction coefficient 1.000000
New high water mark $542,545.83 If the performance fee is deducted from the trading account, then new HWM = ending balance – performance fee;
If the performance fee is paid directly, then new HWM  = ending balance.
Quarter 3 had a near $42,000 net trading LOSS
and $200,000 cash withdrawal
Withdrawal during drawdown is an important case.
Beginning (after fees)  balance $542,545.83
Ending balance $299,957.50 4/3/2016 -7.85%
Cash added / withdrawn ($200,000.00)
Cash adjusted balance $499,957.50
Net quarterly profit/loss from trading ($42,588.33)
High water mark (HWM) $542,545.83
Amount above the HWM ($42,588.33) (Current drawdown)
10% Performance (incentive) fee $0.00
Reduction coefficient 0.599966 Ratio (ending balance) to (cash adjusted balance); used for HWM calculation (case of withdrawal during drawdown)
New high water mark $325,509.05 New HWM = ending balance + (the amount above HWM * Reduction coefficient)
There is no reduction if withdrawal is made on equity run-up – see case #2 above.
Quarter 4 had a $24,000 net trading PROFIT,
and  $50,000 addition
Beginning (after fees) balance $299,957.50
Ending balance $374,604.27 7/3/2016 8.22%
Cash added / withdrawn $50,000.00
Cash adjusted balance $324,604.27
Net quarterly profit/loss from trading $24,646.76
High water mark (HWM) $325,509.05
Amount above the HWM ($904.78)
10% Performance (incentive) fee $0.00
Reduction coefficient 1.000000
New high water mark $375,509.05
Quarter 5 had a $3880 net trading PROFIT,
and  $50,000 addition
Beginning (after fees) balance $374,604.27
Ending balance $428,484.95 10/3/2016 1.04%
Cash added / withdrawn $50,000.00
Cash adjusted balance $378,484.95
Net quarterly profit/loss from trading $3,880.69
High water mark (HWM) $375,509.05
Amount above the HWM $2,975.90
10% Performance (incentive) fee $297.59
Reduction coefficient 1.000000
New high water mark $428,187.36
total gain for customer: $66,545.60
total performance fees over 5 quarters: $8,358.24

ADDITIONAL COMPENSATION

ITEM 5:


Benjamin Shniper does not receive any economic benefit from a non-advisory client for the provision of advisory services.