The Valla Accord is easier to understand when you can see it in something familiar. Tide line, summit, harvest, closing, tab, personal best: six pictures, one collection rule.
For qualified clients · Eligible portfolios designed by Valla only
Before the pictures, the rule
One percent. Collected only at a new high.
The Accord's advisory fee is 1% of eligible portfolios designed by Valla. What is different is when that fee may be collected. Each quarter, the eligible portfolio value is tested against its prior high-water mark under the advisory agreement.
When those portfolios remain below the mark, the fee is calculated and deferred rather than withdrawn. When they later reach a new high, deferred and current fees may be collected—but only to the extent payment leaves the portfolios at or above the mark. Anything that cannot be collected under that limit continues to wait while the relationship continues.
That is the rule. Everything below is simply a way to picture it. The advisory agreement and Form ADV contain the actual terms and control over every analogy.
The tide line.
A harbor wall remembers the highest water.
Every harbor wall has a line where the highest tide reached. When the water is below that line—flat or pulled back—the line does not move. Only when the water rises beyond the old line does the wall record a new one. The eligible sleeve's highest point is the line. Collection is permitted only when that line moves up.
What it gets right
The mark only moves up. Recovering to the old line is not a new high, and collection is measured from the line rather than from wherever the water happened to be last quarter.
Where it breaks
Tides return on a schedule. Markets do not. There is no promise the value rises again, and while it remains below the line the fee is deferred, not erased.
The guide paid per summit.
Not per day on the mountain.
Imagine a mountain guide whose pay waits until you stand somewhere higher than you have ever stood. The days spent climbing back to an old ridge—and the days sitting out a storm at base camp—still involve work. When you reach a new summit, collection can occur for that period and the waiting periods, but only from the new height.
What it gets right
The work continues on storm days even though collection waits. Reaching a new summit permits deferred fees to be collected without taking the eligible sleeves back below their prior high-water mark.
Where it breaks
A guide cannot make the weather, and an adviser cannot make the market. Long stretches between new highs are possible, and deferred amounts can make a later collection larger than one period's fee.
The share farmer.
Paid from the harvest, not from the seed.
A farmer who works someone else's land for a share is paid when there is a harvest, out of the harvest. In a drought year the work continues—planting, tending, repairing—but payment waits. The eligible sleeve's high-water mark is the seed corn: the collection limit is designed to keep payment from taking the sleeve below that mark.
What it gets right
The fee can be collected only from value above the applicable mark. When the sleeve is below the mark, nothing is withdrawn for Valla's advisory fee and the capital remains invested.
Where it breaks
A share farmer receives a percentage of the crop. Valla's fee is a 1% asset-based fee that accrues under the agreement; the harvest determines when it may be collected, not its rate.
The agent paid at closing.
Months of work; one check, when it is done.
A good real-estate agent may show a house for months, handle inspections, and keep a difficult transaction moving before being paid at closing. The work happens throughout; payment waits for the event that permits it. Under the Accord, that event is the eligible sleeve reaching a new high under the agreement's calculation.
What it gets right
It separates doing the work from the moment payment is permitted and connects collection to the client reaching the stated financial milestone.
Where it breaks
An agent is generally paid a percentage of a sale price. Valla charges 1% of eligible Valla-designed portfolio assets, not a share of a gain, and the advisory work continues after each new high.
The tab.
We keep track. Collection waits for new ground.
Think of a tab that records the applicable fee each period. While the eligible sleeve has not reached a new high, the tab remains uncollected. At a later new high, it may be settled—but only to the extent the sleeve remains at or above its high-water mark after payment. If the available amount does not cover the full tab, the balance continues to wait.
What it gets right
This is the most literal picture of the mechanics: fees accrue, remain uncollected below the mark, and may be collected from value above the mark, with any remainder carrying forward.
Where it breaks
An ordinary tab is a debt collectible regardless of circumstances. Under the Accord described here, an uncollected balance cannot be withdrawn below the mark and is waived if the advisory relationship ends.
The personal best.
A coach paid when you beat your own record.
Picture a running coach whose pay waits until you set a personal best. Training weeks, injury weeks, and a race finished just behind your record all involve work, but collection waits. Your eligible sleeve is measured against its own prior high-water mark—not a market benchmark or someone else's account.
What it gets right
The test is personal to the eligible sleeve. Returning to an old record is recovery; moving beyond it is the event that permits collection under the agreement.
Where it breaks
Runners choose their races. Markets choose theirs. A long stretch without a new high is possible, and during that stretch the applicable fee is accumulating rather than disappearing.
And one picture that is wrong
It is not a hedge-fund fee.
Performance-based fee can sound like “two and twenty”—a management fee plus a share of investment profits. That is not the Valla Accord. There is one Valla advisory fee: 1% of eligible portfolios designed by Valla, negotiable at Valla's discretion. Valla does not take a percentage of investment gains.
The performance-based feature changes when collection is permitted. In a period below the high-water mark, nothing is collected for Valla's advisory fee. After a later new high, the amount collected in one period may exceed that period's accrued fee because deferred amounts may also become collectible, subject to the agreement's limit.
The arrangement is available only when both conditions are met: the client qualifies under SEC Rule 205-3 and the assets are held in eligible portfolios designed by Valla. Other clients, assets, and services follow the applicable conventional fee terms.
The Valla Accord
Pick the picture that works for you.
Tide line, summit, harvest, closing, tab, personal best. Each is imperfect, but they all point to the same rule: the fee accrues each period and collection waits until eligible Valla-designed portfolios reach new ground under the agreement.