ERISA 408(b)(2) Fee Disclosure Notice
Segal Advisors, Inc., doing business as Segal Marco Advisors, is providing you with this notice in compliance with the Department of Labor regulations under section 408(b)(2) of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”), to disclose information about the consulting, investment advisory, and investment management services we provide to pension plans and the compensation we receive for such services. This statement is intended to be read in conjunction with our Form ADV Part 2 (available at http://www.adviserinfo.sec.gov)1 and our retainer agreement with your Plan (your “Agreement”).
Description of Services
Segal Marco Advisors offers consulting, investment advisory, and investment management services. For more information regarding the specific services that we provide your Plan, please review your Agreement and Item 4 (“Advisory Business”) of our Form ADV Part 2.
Service Provider’s Status
Depending on the services that we agree to provide your Plan, we may be acting as a fiduciary under ERISA. In such case, we will acknowledge such fiduciary status in your Agreement. Moreover, we will be acting as a registered investment adviser under the Investment Advisers Act of 1940, as amended when providing our services.2
Your Plan may pay Segal Marco Advisors directly for consulting, investment advisory, and investment management services contemplated in your Agreement in the following four ways:
- Negotiated annual retainer: Your Plan may agree on an amount, generally payable in monthly installments, covering specified services. The negotiated amount may be stated in dollars or as a percentage of assets.3
- Project work: Your Plan may agree to a flat fee for specific projects.
- Performance Fees: Your Plan may agree to pay Segal Marco Advisors based on the investment performance of a portfolio as measured against an agreed-upon benchmark. For example, your Plan might agree to pay a percentage of the outperformance of its portfolio. Alternatively, your Plan might agree to pay an annual bonus solely at the Plan’s discretion. A performance fee provision is generally in addition to a negotiated annual retainer amount.
- Hourly Time Charges: You may agree to periodic billings based on our hourly rates.
A client may agree to use any combination of these direct payment methods. Your specific arrangement, including the manner in which these fees will be received by us, is detailed in your Agreement or described in other communications between us and you. If you would like a copy of your most recent Agreement (or such other communications), please call your Segal Marco Advisors representative. A list of our offices appears here.
Segal Marco Advisors may also receive the following types of compensation:
- Annuity Commissions: From time to time, our affiliate, Segal Consulting, is asked to help a client obtain an individual annuity for a participant in the client’s plan. In those cases, Segal Marco Advisors is asked to obtain the annuity quote. Segal Marco Advisors does not receive commissions directly from the insurers for obtaining quotes and relaying this information to the Segal Consulting client, but we receive the commission received by Segal Consulting under an intercompany agreement if the annuity is purchased. Plan clients have the option to seek annuity quotes and to purchase annuities and other insurance products through insurance brokers and agents that are not affiliated with our firm. The insurer pays three percent (3%) of the “gross consideration” or cost of the annuity. For example, if the price a client pays for an annuity is $1,000.00, the insurer pays three percent of that amount as a commission, or $30.00. Our compensation for this limited annuity placement service has been at the most, less than one-tenth of one percent of the annual revenue of Segal Marco Advisors.
- Provision of Consulting Services to Clients with Investment Management Subsidiaries: Segal Marco Advisors has a number of financial service clients for whom we provide our traditional investment consulting services, where the financial service client or an affiliate may provide investment management services that we might recommend in manager searches on behalf of our other clients. We will disclose to the client any situation where we may recommend an investment manager and where we have also provided consulting services to the investment manager or any affiliate of that investment manager. For a list of current clients utilizing these services, please contact your client service representative.
- Proxy Voting and Corporate Governance Services: Segal Marco Advisors also provides proxy voting and corporate governance services for certain commingled index funds that are sponsored, owned, affiliated or used by its clients, with the approval of those clients and for portfolios managed by financial services companies. Segal Marco Advisors receives an annual hard dollar fee from the managers. The fee is disclosed to Segal Marco Advisors clients who consider investing in these funds. Segal Marco Advisors’ fee (independent fiduciary services, full service consulting and proxy voting) is not affected by whatever decision is made on investing in those funds. For a list of current clients utilizing these services, please contact your client service representative.
- Research and Consultant Summit: Segal Marco Advisors sponsored a Research and Consultant Summit (“Summit”) and certain investment managers paid to belong to the Summit. The membership entitled representatives to attend two conferences each year and provided access to educational material, whitepapers and research pieces for a fee. The membership was not dependent on, and did not (and does not) affect or influence the advice, recommendations or other services that we provide. Our compensation for these memberships represented less than 5% of the annual revenue of Segal Marco Advisors. Note that investment manager participation in the Summit was phased out in June of 2018. For a list of investment manager members of the June 2018 Summit, please contact your client service representative.
- Gifts, gratuities, and non-monetary compensation: From time to time, third-party vendors (such as product providers, mutual fund companies, broker-dealers, etc.) may provide Segal Marco Advisors (and its affiliates) with non-monetary gifts and gratuities, such as promotional items (i.e., coffee mugs, calendars, or gift baskets), and access to certain industry related conferences and meals associated with those conferences (collectively, “gifts”). Segal Marco Advisors has implemented policies and procedures intended to identify, quantify, and track gifts received by it and its affiliates. Pursuant to rules established by the Department of Labor, Segal Marco Advisors has implemented a policy for allocating the value of a gift among multiple clients, where applicable. Under such policy, where potentially reportable compensation is received by Segal Marco Advisors (including its affiliates) in connection with several clients, Segal Marco Advisors will first divide the fair market value of such gift by the number of individual clients to which such gift is reasonably applicable and then allocate the result to each affected client to determine if it exceeds the de minimis threshold under the Section 408(b)(2) regulation and related and associated guidance. Based on historic trends, Segal Marco Advisors does not expect to receive gifts in excess of the de minimis threshold under the regulations with respect to your Account.
Compensation for Termination of Your Account
We do not receive a termination fee or apply a penalty when your account’s enrollment in either program is terminated.
1 Effective January 1, 2017, Segal Advisors, Inc. acquired the assets of Marco Consulting Group; if your plan was a client of Marco Consulting Group, please review the Marco Consulting Group Form ADV for years prior to the acquisition.
2 If your Plan participates in the MasterManager Program (the “Program”) and invests in portfolios of Rogerscasey Target Solutions, LLC (the “RCTS Fund”), please review the section entitled “MasterManager Program” of the RCTS Fund’s Subscription Agreement and the RCTS Fund’s offering documents for a description of the services that we offer under the Program. If your Plan participates in the Marco Consulting Group Trust (the “Group Trust”) and invests in one or more of the investment portfolios established under the Group Trust, please refer to the Group Trust offering documents for a description of the services that we offer under the Group Trust. In providing our services under both the Program and the Group Trust, we will be acting as both an ERISA fiduciary and a registered investment adviser under the Investment Advisers Act of 1940, as amended.
3 If your Plan participates in the Program or the Group Trust, our fees for providing the services contemplated under the Program or the Group Trust are included in the annual retainer specified in your Agreement.