Best Investors
Sign in
Best Investors
Sign in
Form ADV Part 1A Item 5E(1) · Answer type: yn · Item 5 - Compensation
Item 5E(1) asks whether the firm is compensated by a percentage of assets under management.
This is the classic advisory fee structure where clients pay an annual percentage of their portfolio value - for example, 1% per year on a $500,000 account equals $5,000 in annual fees. The firm typically deducts fees quarterly from client accounts based on the account balance.
Asset-based fees align adviser and client interests because the adviser earns more when client portfolios grow and less when they decline. This creates incentives for the adviser to focus on long-term portfolio performance rather than transaction generation.
Most wealth management firms use some form of asset-based pricing, often with tiered rates that decrease as account balances increase. The structure works well for ongoing portfolio management, regular rebalancing, and comprehensive wealth advisory services.
Do not confuse 5E(1) with hourly fees in Item 5E(2) for project work, fixed fees in Item 5E(4) for specific services, or commissions in Item 5E(5) for transaction-based compensation.
Yes
The firm marks this box when it charges at least some clients a fee that is a percentage of assets under management - for example, an annual rate billed on account value, often deducted quarterly.
No
The firm does not claim asset-based percentage fees on this checkbox. It may still charge through other Item 5E methods such as hourly, fixed, or commission-based compensation.
5E(1) - A percentage of assets under your management (Yes / No).
This appears in Item 5E, Compensation Arrangements, which lists all the fee structures the firm uses with clients.
Asset-based fees indicate a compensation model focused on portfolio growth rather than transaction activity. This structure typically encourages advisers to take a long-term view of client accounts and avoid unnecessary trading that generates fees without benefiting portfolios.
Firms marking Yes often provide comprehensive portfolio management, regular monitoring, and ongoing client communication included in the annual fee. This differs from transaction-based models where clients pay for each service separately.
However, a Yes on 5E(1) does not reveal the specific fee rates, account minimums, or fee schedules. Advisory firms using asset-based fees may charge anywhere from 0.25% to 2.5% annually depending on services, account sizes, and market positioning.
The checkbox also does not indicate fee negotiability, breakpoints for larger accounts, or what services are included in the fee. Some firms include financial planning and tax advice, while others charge separately for non-investment services.
A Yes does not guarantee cost-effectiveness compared to other fee structures. Asset-based fees can become expensive for larger accounts or clients who need minimal ongoing attention but want professional investment management.
Yes
The firm uses asset-based percentage fees. On Best Investors, Item 5E(1) appears in the compensation section alongside other fee structure checkboxes. Look for additional Yes answers in other Item 5E categories to see whether the firm uses multiple compensation methods.
Review total regulatory AUM in Item 5F(2)(c) and client count in Item 5C(1) to understand the scale of assets subject to percentage-based pricing.
Check services offered in Item 5G to see what advisory functions the firm provides under its fee structure. Comprehensive service firms often justify higher asset-based fees through broader service offerings.
For specific fee rates and terms, review the firm's Form ADV Part 2 brochure and client agreements, which detail actual pricing that this checkbox does not reveal.
No
The firm does not use asset-based percentage fees. Check other Item 5E boxes to see how the firm charges clients. Common alternatives include hourly fees for project work, fixed fees for specific services, or commission-based compensation.
Some firms combine multiple fee structures, using different methods for different services or client types. A firm might charge fixed fees for financial planning while using hourly rates for specialized consulting work.