Fee Calculation Method

This is how fees are calculated in Smart Kx which may be useful for:

drafting your ADV and client contract
reviewing your fee practices
answering questions from clients or regulators

We recommend that you review in detail and include this in your compliance folder. Feel free to actively share this information with your clients and other professionals who support your business.

Quarterly in Advance

Glossary
Period	Quarter
Type	Advance
Rate	Flat Rate, Flat Charge, or Tiered
Days in Period	Number of days in the current billing period (inclusive)
	Flat Rate & Tiered Percentage	Flat Charge
Value	Last business day of the period	N/A
Formula	Fee = Rate * Value / 365 * Days in Period	Fee = Rate / 365 * Days in Period

For tiered billing schedules:

Total all assets that have the same Rate applied (= Value)
Apply the total Value across the applicable Rate tiers
Calculate a Total Fee
Apply the Total Fee pro-rata to each account

Fee Calculation

Example: calculating Q2, 2022 fees on 4/1/22

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Total Value of all assets with Rate

$1,000,000

Fee for Q2, 2022 (91 days)

1%	$250,000	$623.29
0.9%	$250,000	$560.96
0.85%	$500,000	$1,059.59
	Total Fee	$2,243.84

Apply Fee to Accounts Pro Rata

Account 1	$350,000	35%	$785.34
Account 1	$650,000	65%	$1,458.50
	$1,000,000	100%	$2,243.84

Threshold Billing

Example: calculating Q2, 2022 fees on 4/1/22

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Total Value of all assets with Rate

$504,000

Fee for Q2, 2022 (91 days)

= Rate * Value / 365 * Days in Period
= 0.85% * $504,000 / 365 * 91
= $1,068.07

Apply Fee to Accounts Pro Rata

Account 1	$176,400	35%	$373.82
Account 2	$327,600	65%	$694.25
	$504,000	100%	$1,068.07

Amend Contract

Possible amend contract triggers:	What happens in Smart Kx when amending:
Existing fee schedule is updated Bill setting is changed mid-quarter New fee schedule is added to existing contract Account is opened or closed for a client who will remain New account is added for a current client	Old contract is marked “Inactive” on the start date of the new contract Old contract is billed up to the start date of the new contract (rebate if needed) New contract is billed from the start date to the end of the current period (charge if needed) Invoice is generated; data is available to send to custodian

Example: fee schedule amended on 5/15 from tiered rate to 0.8%, calculating Q2, 2022 fees on 4/1/22
Original Rate	$0 – $250k: 1% $250k – $500k: 0.9% $500k – $1m: 0.85% $1m+: 0.8%
Value	$1,000,000
Fee charged for Q2, 2022	$2,243.84
Credit due to client for amount billed after amend date (5/15 – 6/30)	= fee charged for Q2 / days in period * days from amend date to period end date = $2,243.84 / 91 days * 47 days = $1,158.91
Fee before amend date (4/1 – 5/15) (adjust for cashflows if option is on)	= fee charged for Q2 – credit due for amount billed after amend date = $2,243.84 – $1,158.91 = $1,084.93
Amended Rate	0.8%
Fee after amend date (5/15 – 6/30)	= 0.8% * $1,000,000 / 365 * 47 = $1,030.14
Amended fee for Q2, 2022	= fee before amend date + fee after amend date = $1,084.93 + $1,030.14 = $2,115.07
Amount to credit or debit client	= fee charged for Q2 – amended fee for Q2 = $2,243.84 – $2,115.07 = $128.77 (credit)

Terminate Contract

Possible terminate contract triggers:	What happens in Smart Kx when terminating:
Client relationship is terminated Client delinks account	Old contract is marked as “Terminated” as of termination date entered by user Amount “earned” from period start date to termination date is calculated Firm rebates the remaining collected

Example: calculated Q2, 2022 fees on 4/1/22, contract was terminated on 5/15
Rate	$0 – $250k: 1% $250k – $500k: 0.9% $500k – $1m: 0.85% $1m+: 0.8%
Value	$1,000,000
Fee for Q2, 2022	$2,243.84
Credit due to client for amount billed after termination date (5/15 – 6/30) Note: firm must facilitate rebating fee to the client	= fee charged for Q2 / days in period * days from termination date to period end date = $2,243.84 / 91 days * 47 days = $1,158.91 (credit)

Cashflows

This feature is turned “on” to capture account inflows and outflows throughout the billed period.

Example: $100,000 was added on 5/15, calculating Q2, 2022 fees on 4/1/22

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Value as of 3/31/22

$1,000,000

Fee for Q2, 2022

$2,243.84

Value as of 5/15/22

$1,100,000

Fee for Q2, 2022 (calculated using ADB)

1%	$250,000	$623.29
0.9%	$250,000	$560.96
0.85%	$600,000	$1,271.51
	Total Fee	$2,455.76

Amount to credit or debit to client on Q2 invoice

= fee calculated using end of period value – fee calculated using ADB
= $2,243.84 – $2,455.76
= $211.92 (debit)

Quarterly in Arrears

Glossary
Period	Quarter
Type	Arrears
Rate	Flat Rate, Flat Charge, or Tiered
Days in Period	Number of days in the current billing period (inclusive)
	Flat Rate & Tiered Percentage	Flat Charge
Value	Average daily balance (ADB) OR Last business day of the period	N/A
Formula	Fee = Rate * Value / 365 * Days in Period	Fee = Rate / 365 * Days in Period

For tiered billing schedules:

Total all assets that have the same Rate applied (= Value)
Apply the total Value across the applicable Rate tiers
Calculate a Total Fee
Apply the Total Fee pro-rata to each account

Fee Calculation

Example: calculating Q1, 2022 fees on 4/1/22

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Total Value of all assets with Rate

$1,000,000

Fee for Q1, 2022 (90 days)

1%	$250,000	$616.44
0.9%	$250,000	$554.79
0.85%	$500,000	$1,047.95
	Total Fee	$2,219.18

Apply Fee to Accounts Pro Rata

Account 1	$350,000	35%	$776.71
Account 1	$650,000	65%	$1,442.47
	$1,000,000	100%	$2,219.18

Amend Contract

Possible amend contract triggers:	What happens in Smart Kx when amending:
Existing fee schedule is updated Bill setting is changed mid-quarter New fee schedule is added to existing contract Account is opened or closed for a client who will remain New account is added for a current client	Old contract is marked “Inactive” on the start date of the new contract Old contract is billed up to the start date of the new contract (rebate if needed) New contract is billed from the start date to the end of the current period (charge if needed) Invoice is generated; data is available to send to custodian

Example: fee schedule amended on 2/15 from tiered rate to 0.8%, calculating Q1, 2022 fees on 4/1/22

Original Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Value

$1,000,000

Fee before amend date (1/1 – 2/15, 46 days)

1%	$250,000	$315.07
0.9%	$250,000	$283.56
0.85%	$500,000	$535.62
	Total Fee	$1,134.25

Amended Rate

0.8%

Fee after amend date (2/16 – 3/31, 44 days)

0.8%	$1,000,000	$964.38

Total fee for Q1, 2022

= fee before amend date + fee after amend date
= $1,134.25 + $964.38
= $2,098.63

Terminate Contract

Possible terminate contract triggers:	What happens in Smart Kx when terminating:
Client relationship is terminated Client delinks account	Old contract is marked as “Terminated” as of termination date entered by user Amount “earned” from period start date to termination date is calculated Firm rebates the remaining collected

Example: contract was terminated on 2/15, calculating Q1, 2022 fees on 2/15

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Value

$1,000,000

Total fee for 1/1 – 2/15 (46 days)

1%	$250,000	$315.07
0.9%	$250,000	$283.56
0.85%	$500,000	$535.62
	Total Fee	$1,134.25

Monthly in Advance

Coming soon…

Monthly in Arrears

Glossary
Period	Month
Type	Arrears
Rate	Flat Rate, Flat Charge, or Tiered
Days in Period	Number of days in the current billing period (inclusive)
	Flat Rate & Tiered Percentage	Flat Charge
Value	Average daily balance (ADB) OR Last business day of the period	N/A
Formula	Fee = Rate * Value / 365 * Days in Period	Fee = Rate / 365 * Days in Period

For tiered billing schedules:

Total all assets that have the same Rate applied (= Value)
Apply the total Value across the applicable Rate tiers
Calculate a Total Fee
Apply the Total Fee pro-rata to each account

Fee Calculation

Example: calculating March fees on 4/1/22

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Total Value of all assets with Rate

$1,000,000

Fee for 03/2022 (31 days)

1%	$250,000	$212.33
0.9%	$250,000	$191.10
0.85%	$500,000	$360.96
	Total Fee	$764.39

Apply Fee to Accounts Pro Rata

Account 1	$350,000	35%	$267.54
Account 1	$650,000	65%	$496.85
	$1,000,000	100%	$764.39

Amend Contract

Possible amend contract triggers:	What happens in Smart Kx when amending:
Existing fee schedule is updated Bill setting is changed mid-quarter New fee schedule is added to existing contract Account is opened or closed for a client who will remain New account is added for a current client	Old contract is marked “Inactive” on the start date of the new contract Old contract is billed up to the start date of the new contract (rebate if needed) New contract is billed from the start date to the end of the current period (charge if needed) Invoice is generated; data is available to send to custodian

Example: fee schedule amended on 3/15 from tiered rate to 0.8%, calculating March fees on 4/1/22

Original Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Value

$1,000,000

Fee before amend date (3/1 – 3/15, 15 days)

1%	$250,000	$102.74
0.9%	$250,000	$92.47
0.85%	$500,000	$174.66
	Total Fee	$369.87

Amended Rate

0.8%

Fee after amend date (3/16 – 3/31)

0.8%	$1,000,000	$350.68

Total fee for 3/2022

= fee before amend date + fee after amend date
= $1,134.25 + $964.38
= $2,098.63

Terminate Contract

Possible terminate contract triggers:	What happens in Smart Kx when terminating:
Client relationship is terminated Client delinks account	Old contract is marked as “Terminated” as of termination date entered by user Amount “earned” from period start date to termination date is calculated Firm rebates the remaining collected

Example: contract was terminated on 3/16, calculating March fees on 3/15

Rate

$0 – $250k: 1%
$250k – $500k: 0.9%
$500k – $1m: 0.85%
$1m+: 0.8%

Value

$1,000,000

Total fee for 3/1 – 3/15 (15 days)

1%	$250,000	$102.74
0.9%	$250,000	$92.47
0.85%	$500,000	$174.66
	Total Fee	$369.87

Valuations

Smart Kx obtains the valuation files from the custodian where available; these values are pulled nightly for the preceding business day. Smart Kx does not reconcile the valuations, nor pull additional files for those dates if they are posted by the custodian after the initial posting. Smart Kx maintains records of all data files obtained from each custodian. For assets where Smart Kx does not have access to the custodian records or for non-custodial assets, the firm can update the values of the account or asset on the Smart Kx app. The most recent value will repeat itself daily until updated by the user.

Values are Settled and Unsettled transactions.

The following are considered “cash” and included in cash balances:

Net Credit or Debit Settled & Unsettled
Money Market Funds
Margin Balance

The valuation used to calculate the fee is based off of the asset value reported by custodians to Smart Kx by the custodian’s data delivery service; account activities including distributions, trade-settle dates, cashflows, and margin use can cause the amounts reported by the data delivery service and the brokerage account statement issued by the custodian to differ.