A. Description of the Advisory Firm
Taylor Securities Services, Inc. (hereinafter “TSSI”) provides portfolio management to
clients under this wrap fee program as sponsor and portfolio manager.
Total Assets Under Management Annual Fee
$25,000 - AND UP 1.50%
Portfolio management fees are withdrawn directly from the client’s accounts with client’s
written authorization on a monthly basis.
Fees are paid in arrears. TSSI uses an average of the daily balance in the client’s account
throughout the billing period, after taking into account deposits and withdrawals, for
purposes of determining the market value of the assets upon which the advisory fee is
based.
TSSI has limited authority to sell shares or fractional shares of securities if cash needs to
be raised for fee billing.
Clients may terminate the agreement without penalty, for full refund of TSSI’s fees, within
five business days of signing the Investment Advisory Contract. Thereafter, clients may
terminate the Investment Advisory Contract immediately upon written notice.
B. Contribution Cost Factors
The program may cost the client more or less than purchasing such services separately.
There are several factors that bear upon the relative cost of the program, including the
trading activity in the client’s account, the adviser’s ability to aggregate trades, and the
cost of the services if provided separately (which in turn depends on the prices and
specific services offered by different providers).
C. Additional Fees
TSSI will wrap third party fees (i.e., custodian fees, brokerage fees, mutual fund fees,
transaction fees, etc.) for wrap fee portfolio management accounts. TSSI will charge clients
one fee and pay all transaction fees using the fee collected from the client. Accounts
participating in the wrap fee program are not charged higher advisory fees based on
trading activity, but clients should be aware that TSSI has an incentive to limit trading
activities for those accounts since the firm absorbs those transaction costs.
Certain other fees are not included in the wrap fee and are paid for separately by the client.
These include, but are not limited to, margin costs, charges imposed directly by a mutual
fund or exchange traded fund, fees associated with “step out” transactions if the account
uses different custodians or broker-dealers, deferred sales charges, odd-lot differentials,
transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on
brokerage accounts and securities transactions.
Certain available mutual funds offer various classes of shares, including shares
designated as Class A Shares and shares designed for advisory programs, which can be
titled, for example, as “Class I,” “institutional,” “investor,” “retail,” “service,”
“administrative” or “platform” share classes (“Platform Shares”). Client should
understand that another financial services firm may offer the same mutual fund at a lower
overall cost to the client. In other instances, a mutual fund may offer only Class A Shares,
but another similar mutual fund may be available that offers Platform Shares. Class A
Shares typically pay a 12b-1 fee for providing shareholder services, distribution, and
marketing expenses (“brokerage- related services”) to the mutual funds. Platform Shares
generally are not subject to 12b-1 fees. As a result of the different expenses of the mutual
fund share classes, it is generally more expensive for a client to own Class A Shares than
Platform Shares. A client in Platform Shares will pay lower fees over time and keep more
of his or her investment returns than an investor who holds Class A Shares of the same
fund. Other financial services firms may offer the same mutual fund at a lower overall
cost to the investor than is available through the LPL Programs.
TSSI has a financial incentive to recommend Class A Shares in cases where both Class A
and Platform Shares are available. This is a conflict of interest which might incline TSSI,
consciously or unconsciously, to render advice that is not disinterested. Although the
client will not be charged a transaction charge for transactions, Advisor pays a per
transaction charge for mutual fund purchases and sales in the account. TSSI generally
does not pay transaction charges for Class A Share mutual fund transactions accounts, but
generally does pay transaction charges for Platform Share mutual fund transactions. The
cost to TSSI of transaction charges generally may be a factor Advisor considers when
deciding which securities to select and whether or not to place transactions in the account.
D. Compensation of Client Participation
Neither TSSI, nor any representatives of TSSI receive any additional compensation
beyond advisory fees for the participation of clients in the wrap fee program. However,
compensation received may be more than what would have been received if client paid
separately for investment advice, brokerage, and other services. Therefore, TSSI may have
a financial incentive to recommend the wrap fee program to clients.