Withdrawal Fees - Why and how much?
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Withdrawal Fees - Why and how much? Jerry,
What is the deal with the rule in partnership agreements about withdrawing partners receiving 97% of the value of their holdings? Why not 100%? Why not 100% minus brokers fees? Camilo Ortiz
Generally, there are two reasons why a club may
want to charge a withdrawal fee. The first, and probably the
most obvious reason, is that a club will want the withdrawing member to
pay any charges related to the transfer or liquidation of assets to pay off
that withdrawal. The other reason often cited is that a
club may want to discourage member's from using the club as a bank
account. They may want to discourage frequent and repetitive
withdrawals that may have a negative impact on the long term aspect of their
portfolio management. In this regard, some clubs use a sliding
scale where the withdrawal fee reduces the longer that the person has been a
member of the club.
Your club should decide what is appropriate and
document it in your partnership agreement.
As an example, my club charges a 3% fee on the cash
portion of the withdrawal payout plus the actual charges related to stock
transferred, if any.
Thanks for using bivio!
Jerry Dressel
St.Louis, Missouri
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