Important Information About Baird’s Compensation Under the Bank Sweep Feature of the Cash Sweep Program
Baird receives compensation for offering and providing administrative, accounting, recordkeeping and other services for the Bank Sweep Feature of Baird’s Cash Sweep Program (the “Program”). As further discussed below, for cash balances attributable to all Baird accounts participating in the Program (other than IRA Advisory Accounts, as defined below), this compensation is equal to the difference between the amounts participating banks pay and the interest paid to Baird clients on their cash balances. For IRA Advisory Accounts, this compensation comes in the form of a monthly per account fee (the “Baird Per Account Fee”) charged to all IRA Advisory Accounts, regardless of their cash balances. “IRA Advisory Accounts” are Baird accounts that are both (i) subject to Section 4975 of the Internal Revenue Code, such as traditional, rollover, Roth and inherited IRAs, and Coverdell education savings accounts, and (ii) are managed or advised by Baird in its capacity as an investment adviser.
To allow our clients to better assess the terms of Baird’s compensation under the Bank Sweep Feature, we are providing additional detail on Baird’s actual compensation.
All Accounts Participating in the Program (Other than IRA Advisory Accounts)
For cash held in accounts other than IRA Advisory Accounts, Baird’s actual compensation for the Bank Sweep Feature for the 12 months ended as of the most recent calendar quarter-end was approximately the following percentage of aggregate client cash balances at each interest rate tier below:
Client Household Account Value |
Baird Compensation for 12 Months through 12/31/2024 (% of Client Balances in Bank Deposit Accounts) |
|
Tier 1 | Less than $1,000,000 | 3.025% |
Tier 2 | $1,000,000 - $1,999,9999 | 1.951% |
Tier 3 | $2,000,000 - $4,999,9999 | 1.557% |
Tier 4 | $5,000,000 or more | 1.069% |
IRA Advisory Accounts Participating in the Program
For IRA Advisory Accounts, Baird receives compensation for services provided in the form of a monthly fee charged based on then-current Fed Funds Target Rate (the “FFT Rate”). The Baird Per Account Fee will be assessed to each IRA Advisory Account, regardless of the amount of cash balances held in the IRA Advisory Account. The Baird Per Account Fee will not generally appear on client statements or be deducted from the IRA Advisory Accounts because the fee will generally be paid out of the amount the participating banks pay in respect of the aggregate balances in the Deposit Accounts for IRA Advisory Accounts. Baird’s Per Account Fee Schedule is shown below.
Baird Per Account Fee Schedule for IRA Advisory Accounts in the Program | |
Fed Funds Target Rate (basis points) |
Baird Monthly Account Fee |
0 | $0.00 |
25 | $1.75 |
50 | $3.75 |
75 | $5.75 |
100 | $7.50 |
125 | $9.25 |
150 | $10.50 |
175 | $11.75 |
200 | $12.75 |
225 | $13.75 |
250 | $14.50 |
275 | $15.50 |
300 | $16.00 |
325 | $16.75 |
350 | $17.25 |
375 | $17.75 |
400 | $18.00 |
425 | $18.25 |
450 | $18.50 |
475 | $18.50 |
500 | $18.75 |
525 and above | $19.00 |
The current FFT Rate can be found at: http://www.federalreserve.gov/monetarypolicy/openmarket.htm. For additional information about the Baird Per Account Fee, please see Baird Cash Sweep Program Disclosures or visit rwbaird.com/cashsweeps.
Example Fee Computation
For example, if a client maintained both an IRA Advisory Account with no cash balances and a brokerage account participating in the Program containing $10,000 of cash over the prior 12 months, and such client’s household value was $1,500,0000 over that period, the compensation payable to Baird under the Program would equal (i) the sum of the prior 12 monthly Baird Per Account Fees for the IRA Advisory Account, and (ii) Baird’s compensation on Tier 2 accounts x $10,000. If Baird’s compensation on Tier 2 accounts was 2.4% for the entire 12-month period the compensation paid to Baird over the prior 12 months would be $240 for the brokerage account.
Important Disclosures and Other Options Available
The Bank Sweep Feature presents a conflict of interest to Baird because the significant compensation it earns gives Baird an incentive to have clients participate in the Bank Sweep Feature and maintain meaningful cash balances in the Deposit Accounts and to use the Bank Sweep Feature for their cash balances rather than other cash-equivalent investments. Please note that Baird does not share any of the compensation it receives for the Bank Sweep Feature with its Financial Advisors or pay any amounts to its Financial Advisors based on client balances in Deposit Accounts at the Banks under the Bank Sweep Feature, although as shareholders of Baird’s parent company Baird Financial Advisors benefit by such compensation. Clients should also be aware that if they have advisory accounts at Baird they will pay an investment advisory fee based on their account values, which include the values of cash in their accounts (and in Deposit Accounts at the Banks under the Bank Sweep Feature), and that, in addition to the investment advisory fee, Baird will receive compensation on the client cash sweep balances.
Clients should contact their Baird Financial Advisor to discuss other cash-equivalent or cash-alternative investment options that may be available outside the Cash Sweep Program. Those options include money market mutual funds, certificates of deposit, Treasury bills and notes, ultra-short bond funds, variable rate demand obligations, bankers’ acceptances and commercial paper.