Management Fee Adjustments

Our current management fee schedule was established in 2020 when High Level Wealth Management was first applying for registration as a portfolio manager with the Alberta Securities Commission:

* Minimum fee: $75 / month

The fee tiers were based on assumptions about the number of client households we could support, the estimated assets we would be managing for a typical household, and the costs associated with running the business.

Over the subsequent five years, we’ve gained insight into the average assets invested per household and the amount of our time required to adequately serve a typical client. During this period, we also navigated the COVID-19 pandemic and the resulting high inflation that impacted our business costs. Based on the accumulated data, we have revised our business plan with updated assumptions and we will be introducing a new management fee schedule:

* Minimum commitment of $250,000 per household

To summarize the adjustments:

• Fee tier #1 now applies to the first $500,000 of invested assets (previously $250,000) and the rate increases from 1.00% to 1.25%.
• Fee tier #2 continues to apply on the next $500,000 of invested assets and the rate increases from 0.85% to 1.00%.
• Fee tier #3 now applies to the next $500,000 of invested assets (previously $750,000) and the rate increases from 0.70% to 0.75%.
• Fee tier #4 is unchanged, applying to all invested assets above $1.5 million at a rate of 0.50%.
• New clients must commit to investing at least $250,000 with High Level Wealth Management.
• Existing clients with invested assets below $250,000 can continue paying a minimum monthly fee, but the minimum fee will be gradually increasing over the next few years.

When will these changes take effect?

January 1, 2026

We value honesty and transparency, especially when it comes to discussing the fees we charge. We recognize that these adjustments are material and you deserve time to review the details ahead of any changes taking effect. If the new fee schedule doesn’t work for your circumstances, we want to provide you with sufficient time to make alternate arrangements. With these considerations in mind, the new management fee schedule will take effect on January 1, 2026. Until then, the original fee schedule will remain in place.

Why are higher fees necessary?

Lower than anticipated capacity

The biggest factor necessitating a fee increase is the fact that we won’t be able to support as many client as we initially planned. We originally assumed that we would be able to serve 75 to 100 households. However, given our comprehensive wealth management approach – including investment management, financial planning, and personal tax return preparation – we have been spending more time than anticipated serving each client. Based on several years of operational experience we now expect our ultimate capacity will be in the range of 50 to 60 households, representing a potential revenue reduction of 20% to 50% compared to our original assumptions if our fee schedule remains unchanged.

As an alternative to increasing fees, we considered reducing our service level to accommodate more clients; however we quickly concluded that this was not the best approach for High Level Wealth Management. We pride ourselves on providing professional, trustworthy, client-focused service and none of those attributes can be achieved by cutting corners. We often receive feedback from our clients praising our current model and we do not want to break the trust they have placed in us by eroding the quality of service we provide in order to squeeze in more clients.

Rising business costs

Running a portfolio management firm involves significant fixed costs, meaning many of our expenses exist whether we have 1 client or 1,000 clients. Over the past five years, our costs have increased faster than anticipated, primarily due to high inflation following the COVID-19 pandemic. We also made key upgrades to our financial planning and investment analysis software tools and recently began renting a commercial meeting space for in-person appointments. Given our lower than anticipated client capacity, these costs need to be spread out over a smaller client base, necessitating a fee increase.

Valuing our work appropriately

Another factor contributing to a fee increase is a recognition that we offer a valuable service to our clients and that we have been charging lower fees than other financial advisory firms, while in many cases also providing a higher level of service. A typical mutual fund offered by a large Canadian bank charges fees of roughly 2% per year, and that rarely comes with any financial planning or tax preparation services. After surveying a variety of independent Canadian financial advisory firms, we are confident that our new management fee schedule, with a starting rate of 1.25%, is reasonable and justifiable.

As a single employee operation, clients benefit from always working with Kent directly rather than having to go through an assistant or a call centre. Kent is not a sales-focused advisor simply helping clients select investment products; he helps clients create comprehensive financial plans, he is the person actually constructing investment portfolios behind the scenes, he is the person executing trades in client accounts on a day-to-day basis, and he is the person responsible for ensuring that everything remains compliant with securities regulations. Drawing on 20 years of investment industry experience, Kent has a unique combination of skills and offers integrated wealth management services that are not readily available elsewhere, particularly in the Edmonton region.

How much are my fees increasing?

When these changes go into effect, the majority of clients will see their weighted average management fee increase within a range of 15% to 35%, depending on their total household invested assets. The percentage increase will be lower for households with larger portfolios given that the changes to fee tier #3 are small and fee tier #4 is being left unchanged. For households with invested assets below $250,000 the percentage increase could be larger than 35% due to gradual increases to our minimum monthly fee over the next few years.

For clients with investments in non-registered accounts, it should be noted that our investment management fees are generally a tax-deductible expense. For affected clients, an increase to our management fee will also result in a corresponding higher tax deduction.

For transparency, we’ve created a comparison tool demonstrating the estimated fee increase for a given portfolio size. You can adjust the portfolio size to reflect your household’s invested assets and see the impact for your specific circumstances.

How will the new minimum asset requirement affect me?

As part of these fee adjustments we are implementing a minimum household asset requirement. Going forward, clients seeking to start a new engagement will need to invest at least $250,000 with High Level Wealth Management. This is a departure from our previous policy which applied a minimum monthly fee (currently $75/month) in lieu of a strict minimum asset requirement.

The rationale for a minimum monthly fee was to allow us to work with clients at all stages of life, particularly young professionals with a high ability to save but who had not yet accumulated large balances in their investment accounts. Over the years, this policy worked as intended for a number of clients that steadily grew their investment accounts to a point where the minimum fee no longer applied. However, it also had the unintended consequence of signalling to some prospective clients that our comprehensive wealth management services cost only $75 per month when in fact the true cost of providing those services is much higher. Although this pricing strategy was well-intentioned, it has proved to be unsustainable over the long term.

We recognize that a portion of our existing clients have household invested assets below $250,000 and may be wondering how this policy change affects them. To be clear, we appreciate every client that has placed their trust in High Level Wealth Management and we want to keep working together as you continue to save and grow your investment account balances. For this reason, existing clients affected by this change can continue paying our minimum monthly fee. However, to provide transparency and help you decide if our services will continue to make sense for your circumstances over the long term, we intend to gradually increase the minimum fee over the next few years:

Based on the anticipated increases to our minimum monthly fee, it may not make sense for everyone to continue working with us over the long term. At a certain point, if a household’s invested assets are not growing fast enough to keep up with increases to the minimum monthly fee, investment returns will be overtaken by the fees being paid. For clients in this situation, we are providing this information now to allow alternate arrangements to be made over a reasonable timeline.

Summary

We appreciate that we are introducing material adjustments to our management fee schedule and that you may have a number of questions or concerns related to the changes. By publishing these details ahead of any changes going into effect, we hope that you will have sufficient time to review the details and that you will feel comfortable reaching out to us if anything seems unclear or if you would like to have a further discussion.

Sincerely,

Kent Akgungor, CFA
President and Portfolio Manager
High Level Wealth Management Inc.