fiduciary outsourcing advisor event · service providers . financial advisor investment fiduciary...

Fiduciary Outsourcing Presented by: Rick Keast Senior Vice President Business Development and Marketing Redhawk Wealth Advisors, Inc. (920) 327-0958 [email protected]

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Advisor Event February 18, 2015 Oak Brook, IL

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Agenda

Fiduciary Outsourcing (Rick Keast, Redhawk Wealth Advisors)

Cash Balance Plans (Steve Stone, July Business Services)

Growing a Retirement Plan Business (Brendan McCarthy, F-Squared Investments)

Generating Referrals Through Centers of Influence (Brian Gallary, First Trust)

Target Date Funds – Perfecting the Imperfect (Lee Tenney, 3D Asset Management)

Why Exchange Traded Funds Make Sense in 401k Plans (Sean Kelly, WisdomTree)

Roundtable Discussion - Fiduciaryk

Fiduciary Outsourcing Presented by: Rick Keast Senior Vice President Business Development and Marketing Redhawk Wealth Advisors, Inc. (920) 327-0958 [email protected]

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4

Background

Over 25 years of experience in the retirement industry. Mercer – Partner with largest benefits consulting firm.

KPMG - head consultant to Merrill Lynch. Retirement Plan Services – strategy, product and distribution. PAi – grew into a national firm - from less than 1,000 plans to

over 14,000 plans and $3B in assets over 7 years.

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Agenda

Who is a Fiduciary under ERISA Why Fiduciary Outsourcing How Fiduciaryk Can Help

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Who is a Fiduciary Under ERISA

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Under ERISA – Who is a Fiduciary?

Who is a fiduciary? Plan must have at least one fiduciary - plan administrator. Anyone exercising discretion in the administration of the plan. All members of administrative committee.

What are the responsibilities? Act solely in interest of participants to provide

benefits. Carry out duties prudently. Follow the plan document. Diversify plan investments. Pay only reasonable plan expenses. Hiring and monitoring providers.

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Fiduciary Liabilities

Fiduciaries are personally liable for plan losses caused by a breach of their ERISA fiduciary responsibilities and may be required to: Restore plan losses (including interest). Return ill-gotten gains. Pay the expenses relating to correction of inappropriate

actions (e.g. appraisals, calculations).

When Cogent asked “Retirement Planscape” responders about understanding plan fees, only 35% of sponsors at plans with less than $5 million in assets felt they understood their plan’s fees very well.

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Investment Fiduciaries

What’s the difference between investment fiduciaries?

“What can we sell you?” Non-Fiduciary

Plan sponsor selects investments

Stock brokers, insurance agents, most banks, brokerage and insurance firms.

Fiduciary

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ERISA

3(21)

Fiduciary

“We’ll help you do it”

Co-Fiduciary

Non-discretionary investment advisor

Only recommends list of investments

No legal responsibility or liability

Plan Sponsor selects investments

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“We’ll do it for you”

Full Fiduciary

Discretionary investment manager

We select and monitor investments

Legal responsibility and liability

Examine fees – reasonable

E&O and Fiduciary Liability Insurance

ERISA

3(38)

Fiduciary

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Why Fiduciary Outsourcing

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Why Outsource Fiduciary Services

Your broker-dealer or RIA won’t let you serve in a fiduciary capacity. You don’t want to take on the role. Plan sponsor wants to reduce their risk. A lot of litigation in the press. Don’t want to be burdened with preparing quarterly

reports. Provides for better participant outcomes.

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Mitigating Risk

ERISA

3(38)Fiduciary

Accept liability for managing investment options?

Have a vested interest in reducing investment plan risk and costs?

Can a plan sponsor transfer significant risk?

Provide advice with accountability?

Have investment management discretion?

Question Benefits to Plan Sponsor Eliminates liability for managing investment options.

Reduces investment plan risk and cost significantly.

Gets rid of significant risk.

Receives advice with accountability.

Discretion determines responsibility and liability.

Low Risk High Risk

Yes

Yes

Yes

Yes

Yes

No

Maybe

No

Maybe

No

No

No

No

No

No

FiduciaryERISA

3(21)Fiduciary

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Investments - Center of Litigation

ING - use of proprietary GIC fund Lockheed Martin – underperforming stable

value fund Fidelity – recordkeeping costs Ameriprise – proprietary target date funds Fidelity – high priced Freedom Funds MassMutual – proprietary investments

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Fiduciaryk Overview

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Advisor Benefits

Simple turn-key solutions Industry leading tools and full-service support Team of nationally renowned providers Comprehensive fiduciary oversight Professionally managed portfolios Diversified investment line-ups Comprehensive participant services Straightforward costs

Fiduciaryk – allows you to build better outcomes…

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Advisor Usage

You don’t have to affiliate with Redhawk. You don’t need to have a solicitors agreement with

Redhawk. If Redhawk is serving as the ERISA 3(38) Investment

Manager – agreement directly with the client. Your commissions flow through your broker-dealer as

normal. Your advisory fees flow through your RIA as normal.

Fiduciaryk – any advisor can use…

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Service Providers

Financial Advisor

Investment Fiduciary Services

Custodian & Trading

Recordkeeping &

Administration

Portfolio Managers

Overall plan support

Fiduciary outsourcing

services

Portfolio management

services

Plan design, recordkeeping, administration, and supplemental plan consulting services

Plan custodian, trading, and optional trustee services

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Financial Advisor

Primary Client Relationship Enrollment Meetings and Education Participant One-on-One Retirement Planning Service Summary & Commitment Education Policy Planning Calendar Plan Reviews

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Choose the Level of Fiduciary Outsourcing

Fiduciary Outsourcing Services Silver Gold Platinum

Reporting Module

Investment Monitoring Report

Investment Policy Statement (IPS)

Contact Center Support

Sales Support Module

Investment Monitoring Report / Existing Plan

Fee Analysis and Benchmarking Report

Plan Comparison Report

Fiduciary with Full Discretion Module

Serves as ERISA 3(21) Investment Advisor

Serves as ERISA 3(38) Investment Manager

Full Fiduciary Oversight over Investments

Advisor Advisor N/A Advisor Advisor

N/A N/A

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Fiduciary Outsourcing Fee Schedule

Plan Assets Silver Gold Platinum

$0 - $9,999,999 0.05% 0.10% 0.25%

$10,000,000 - $24,999,999 0.04% 0.08% 0.20%

$25,000,000 – $99,999,999 0.03% 0.06% 0.15%

$100,000,000 - $199,999,999 0.02% 0.04% 0.10%

$200,000,000 or more 0.01% 0.02% 0.05%

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ERISA 3(38) Investment Manager

Fiduciary LineupsRedhawk Investment Committee

• Passive • Blended• Active• Custom

FeeBased

• 25bps • 50bps • Custom

CommissionBased

ETFsCITs

Mutual FundsCITs

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Select Lists

Core Fund Lineups

Portfolio Managers

Fiduciary Lineups

• Passive • Blended• Active• Custom

FeeBased

• 25bps • 50bps • Custom

CommissionBased

ETFsCITs

Mutual FundsCITs

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ERISA 3(38) Investment Manager Manager Tenure

Total Net Assets

3 Year Performance

3 Year Information Ratio3 Year Alpha

3 Year Beta

Track Record

1 Year Performance

5 Year Performance

3 Year Sharpe Ratio

3 Year R-Squared

Net Expense Ratio

Investment Universes

Select Lists

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Select Lists Best-in-Class Fund for each Category One Fund per Fund Family Portfolio Manager’s Portfolios QDIA – Portfolio Manager’s Appropriate Portfolio Quarterly Reporting

Universe of funds that we monitor…

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3 Year Performance5 Year Performance

Benchmark Performance

3 Year Information Ratio3 Year Sharpe Ratio

3 Year Alpha3 Year R-Squared

3 Year BetaNet Expense Ratio

Criteria Track Record I Morningstar Rating I Manager Tenure

YTD Performance1 Year Performance

Track Record I Total Net Assets I Last Quarter Performance

Core Lineups

Select Lists

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Fee Based Lineups

Custom core lineup created from Select List

Each core lineup contains 16 best-in-class funds…

PassiveCore

Lineup – 0.24%

Blended Core

Lineup – 0.34%

Active Core

Lineup – 0.46%

CustomCore

Lineup

SelectList

16 ETFs and CITs 1 Best-in-Class ETF from Selected

Categories Portfolio Manager’s CITs QDIA – Portfolio Manager’s

Appropriate Portfolio Quarterly Reporting

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Commission Based Lineups

Each core lineup contains 16 best-in-class funds… 16 Mutual Funds Levelized Compensation 25bps and 50bps Commissions 1 Best-in-Class Mutual Funds from Selected

Categories Portfolio Manager’s CITs QDIA – Portfolio Manager’s Appropriate

Portfolio Quarterly Reporting

Note: average expense ratios do not include portfolios.

Select List

25bpsCore Lineup -

1.00%

CustomCore Lineup

50bpsCore Lineup –

1.27%

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Portfolio Managers

Tactical manager with target risk portfolios that provide downside protection.

Strategic manager with target risk and target date portfolios. Target date portfolios have downside risk protection component.

Core Fund Lineups

PortfolioManagers

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Professional Money Management

Better outcomes and growing at a fast pace…

Realization that participants do not know the best way to allocate savings across various investments. Same professional money managers reserved for wealth

management HNW clients. A more personalized approach. Managed by a professional money manager. Offer fiduciary protection. 20.7% of plans offered managed accounts in 2008. 35.8% of plans offered managed accounts in 2012.

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Fiduciaryk Site

www.fiduciaryk.com

http://www.fiduciaryk.com/

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Comprehensive Resources/Sales Support

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Sales Resources

Investment Monitoring Report Provides an overview of the fund performance and information for the plan. Includes:

Executive Summary Portfolio Style Report Performance Summary Fund Criteria Report Fund Fact Sheets Disclosures Signature Page

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Sales Resources

Fee Analysis & Benchmarking Provides information on the plan fees and benchmark to the industry - average plan size. Includes:

Summary Fee Expense & Revenue

Sharing Fee Detail Report Glossary

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Sales Resources

Provider Comparison Report Compares the existing plan to up to four new providers. Includes:

Plan Composite Return Analysis

Plan Expense Comparison Summary

Plan Lineup Expense Performance Summary

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Sales Resources

Service Summary Outlines the services you intend to provide and how often you intend to deliver them.

Includes plan assessment, investment menu review, IPS review, performance review, service/fee inventory, investment committee review, education review, and more.

Education Policy Statement Highlights that participant education is a major concern for you, covering:

Why participant education is important. Your process for evaluating its effectiveness. Your preliminary recommendation for the

types of materials and seminars you will provide.

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Sales Resources

Planning Calendar

Allows for preliminary scheduling for meetings and education services.

Includes reminders of key dates in plan administration.

Shows you are thinking ahead and ready to hit the ground running.

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View Product Options

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Request and Manage Proposals

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Transparent Fees – Bundled Schedule

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Fiduciaryk Site

www.fiduciaryk.com

http://www.fiduciaryk.com/

For Internal Use Only – Not For Client Use

About Us National

Recordkeeping Firm

Flexible, Advisor

Focused Model

Optional Fiduciary Services

Integrated Payroll

Deep Consulting Expertise

Bundled and Local TPA

Option


Quick Facts About JULY

1 2 3 4 5

Established in 1994

3,100 Clients in All 50 States

$2.5 Billion in Plan Assets

National Sales Support

160 Dedicated Professionals

CEFEX Certified / SSAE 16 Audited 6


How We Support Advisors

Advisor-Centric Sales Support Independent

Plan Illustrations Webinars / Education

Technical Expertise

Hands-On Setup and Service Dedicated CRM

Advisor-Presented

Fiduciary Options


Plan Types Supported

SOLOk

401k / Safe

Harbor

403(b)

New Comparability

Cash Balance /

DB

401k + Cash

Balance


The JULY Platform – Core Options

Bundled vs. Local TPA

Robust Technology Solutions

Revenue Sharing Neutral

Open Fund Lineup

3(21) / 3(38) Investment Fiduciary Partners


The JULY Platform – Other Services

ERISA Consulting

• Complex Research • IRS Plan Correction • DOL Investigations / IRS Audits

Integrated Payroll

Solutions

• Payroll+ • PayLINK

Comprehensive Fiduciary Solutions

• 3(16) – Plan Administrator • 3(38) – Discretionary Investment Fiduciary

Maximizing Tax Deductions and Retirement Plan Contributions with a Cash Balance Plan

Steve Stone Regional Sales Consultant - Midwest July Business Services

Our Path Today • Why Cash Balance? • How Does it Work?

• Examples • Best Candidates • How to Get Started

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WHY CASH BALANCE

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Cash Balance Plan Advantages

Larger contributions than 401(k)

Minimize cost of employees

Option to pair with profit

sharing plan

Easier for participants to

understand than DB

Flexibility in plan design

Costs do not necessarily increase as

participants age

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Cash Balance Plan Advantages • Larger Contributions

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$53,000 $53,000 $53,000 $59,000 $59,000 $59,000 $59,000

$84,800 $108,650

$140,450

$180,200 $196,100

$209,350 $230,550

$0

$50,000

$100,000

$150,000

$200,000

$250,000

35 40 45 50 55 60 65Age

401(k) PS Contributions Cash Balance Contribution CreditsThis is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

• Benefit statements are easier to understand.

• Annual increases in benefit amount are clear.

Increases participants’ understanding of their benefit

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Flexibility in Plan Design

• Set equal contribution credits for partners / owners

• Exclude partners • Vary contribution levels by group

• Ownership • Practice area

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HOW DOES IT WORK?

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What is a Cash Balance Plan? • Hybrid Plan:

• Technically a defined benefit plan. • Benefit is defined. • No investment risk to the participant. • Annual Contributions are required. • Assets are pooled.

• Provides a lump-sum based benefit formula. • Looks like a profit sharing plan.

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Cash Balance Vocabulary • Each participant has a hypothetical account.

• That account grows each year with a • Contribution credit • Interest credit

• Both the contribution credit and interest credit are specified by the plan document.

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Cash Balance Plan Example Participant Data: Current Year Pay $150,000 Contribution Credit in Document 20% of pay Interest Credit Rate in Document 5%

Hypothetical Account Balance at Beginning of Year $35,000 Contribution Credit $30,000 Interest Credit $1,750 Hypothetical Account Balance at End of Year $66,750

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Plan Type Comparison Characteristic Traditional DB Cash Balance 401K / PS

Contribution Levels? Not limited Not limited Limited to $59,000

Who Bears Investment Risk? Plan Sponsor Plan Sponsor Employee

Direction of Investments? Pooled Pooled Individual/Pooled

Participant Accounts? No Hypothetical Yes

Are Contributions Required? Yes Yes No, can be

discretionary

PBGC Coverage Required? Sometimes Sometimes No

Retirement Benefit Formula? Annuity Lump Sum N/A

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How should Assets be Invested? If Actual Investment Return is Higher than Interest Credit Rate (ICR)

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ICR

How should Assets be Invested? If Actual Investment Return is Higher than Interest Credit Rate (ICR)

Amount of Required Contribution Decreases

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ICR

How should Assets be Invested?

If Actual Investment Return is Lower than Interest Credit Rate (ICR)

Amount of Required Contribution Increases

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ICR

EXAMPLES

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Cash Balance Plan Example 1 One Owner Plans at Different Ages

EE Age Plan Comp.

Deferrals Profit Sharing

Contribution Credit

Total Contribution w

deferrals Owner 65 $265,000 $24,000 $35,000 $230,550 $289,500

Owner 60 $265,000 $24,000 $35,000 $209,350 $268,350

Owner 55 $265,000 $24,000 $35,000 $196,100 $255,100

Owner 50 $265,000 $24,000 $35,000 $180,200 $239,200

Owner 45 $265,000 $18,000 $35,000 $140,450 $193,450

Owner 40 $265,000 $18,000 $35,000 $108,650 $161,650

Owner 35 $265,000 $18,000 $35,000 $84,800 $137,800

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Cash Balance Plan Example 1 One Owner Plans at Different Ages

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

35 40 45 50 55 60 65

Con

trib

utio

n

Age

Deferrals Profit Sharing Cash Balance

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Cash Balance Plan Example 2 One Owner – Maximum in Both Plans

EE Age Plan Comp.


Contribution Credit

Total Contribution w/o deferrals

Owner 50 $265,000 $24,000 $35,000 $180,200 $215,200

NHCE 1 45 $50,000 $5,000 $5,500 $700 $6,200

NHCE 2 40 $45,000 $3,000 $4,950 $700 $5,650

NHCE 3 35 $40,000 $1,500 $4,400 $700 $5,100

NHCE 4 30 $35,000 $500 $3,850 $700 $4,550

NHCE 5 25 $30,000 $0 $3,300 $700 $4,000

% to Owner

61.4% 98.1% 89.4%

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Cash Balance Plan Example 2 One Owner – Maximum in Both Plans

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Owner NHCE1

NHCE2

NHCE3

NHCE4

NHCE5

Con

trib

utio

n

Participant

Cash BalanceProfit Sharing

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Cash Balance Plan Example 3 Two Owners – Maximum in Both Plans

EE Age Plan Comp.


Contribution Credit

Total Contribution w/o deferrals

Owner 55 $265,000 $24,000 $35,000 $180,200 $215,200

Owner 50 $265,000 $24,000 $35,000 $180,200 $215,200

NHCE 1 45 $50,000 $5,000 $3,500 $700 $4,200

NHCE 2 40 $45,000 $3,000 $3,150 $700 $3,850

NHCE 3 35 $40,000 $1,500 $2,800 $700 $3,500

NHCE 4 30 $35,000 $500 $2,450 $700 $3,150

NHCE 5 25 $30,000 $0 $2,100 $700 $2,800

% to Owners

83.3% 99.0% 96.1%

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Cash Balance Plan Example 3 Two Owners – Maximum in Both Plans

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Con

trib

utio

n

Participant

Cash BalanceProfit Sharing

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BEST CANDIDATES

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Best Candidates • Desire contributions greater than $53,000/$59,000

• Maintain steady, predictable profits • Ability to accumulate a large benefit quickly • Older owners and younger employees • Contributions between 5% to 7.5% of pay to employees

• Medical practices, law firms, dentists, and other professional firms

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GETTING STARTED

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The Design Process

Collect Data

• Date of Birth • Date of Hire • Compensation • Desired Contribution

Amount • Goal of Plan Design

Proposal

• Data provided to JULY

• Plan designed based on specific goals and demographics of the client

• JULY representative provides proposal

Review

• Review design with client

• Request any modifications in design

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Plan Implementation • Set up Guide

• Document Preparation

• Document Signed – 12/31/2015 Deadline*

• 2015 Valuation Prepared

• 2015 Contribution Made – 9/15/2016 Deadline*

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*Deadlines are for 2015 calendar year plans.

Maximizing Tax Deductions and Retirement Plan Contributions with a Cash Balance Plan

Steve Stone Regional Sales Consultant - Midwest July Business Services

December 2014

For Institutional Investors Only. Please see “Important Information” on final pages for disclosures that are an integral part of this presentation. Copyright 2015.

Growing a Retirement Plan Business An opportunity for wealth advisors to win retirement plans by bringing professional wealth management to the 401(k) market


About F-Squared Investments

Risk management from the investor’s point of view

• Solutions-based investment management firm that seeks to align investment strategies with the real needs of investors

• Non-benchmark-centric -- focus on protection in down markets, participation in healthy markets

• Over $24 billion in fee-generating assets1

2

1As of 12/31/2014


Question from Business Owners:

Why can’t I get the products my wealth advisor is recommending in my 401(k) plan?

3


n I lose in a short period of time?” Maximum Drawdown - “How much can I lose?”

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S&P 500 Maximum Drawdown: -51% Peak: 11/2007 Trough: 2/2009 S&P 500 Index Morningstar

Target Date 2010 Average Barclays

US Agg Bond Index

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-100%-90%-80%-70%-60%-50%-40%-30%-20%-10%0%

Aver

age

Annu

al T

otal

Ret

urn

2007

-201

4

Maximum Drawdown 2007-2014

Morningstar 2010 TD Average Maximum Drawdown: -31% Peak: 11/2007 Trough: 2/2009

Source: F-Squared analysis, Morningstar data as of 12/31/14. Past performance is not a guarantee of future results.


AlphaSector Investment Process/Portfolio Construction

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• The AlphaSector quantitative engine uses proprietary volatility measures and price trends to assess the health of various sectors, and is designed to de-risk as conditions deteriorate

• The model monitors and adjusts the portfolio to reallocate assets as market conditions change

• AlphaSector U.S. Equity has the ability to invest in any combination of the nine sectors, a combination of sectors and cash alternatives, or 100% in cash alternatives1

Energy

Health Care

Industrials

Materials

Technology

Utilities

Consumer Discretionary

Financials

Consumer Staples

Remaining Sector 1

Remaining Sector 2

Cash Alternatives

25%

25%

50%

1. Bull and Normal Markets 2. Adverse Equity Markets 3. Severe Down Markets

AlphaSector U.S. Equity – Hypothetical Scenarios

Strategy Uses NO Derivatives, Leverage, or Shorting

11.1%

11.1%

11.1%

11.1% 11.1%

11.1%

11.1%

11.1%

11.1%

1

Cash Alternatives1

100%

Above chart is for illustrative purposes only and investment allocations should be considered hypothetical allocations as the time of rebalancing. Scenario 1 represents a “fully invested” portfolio. Scenario 2 represents a portfolio in which only two equity sectors are invested and the remainder of the portfolio is invested in cash alternatives. Scenario 3 represents a portfolio in which all equity sectors are removed in favor of cash alternatives.

1 Short-term Treasury ETFs

5


AlphaSector U.S. Equity Model – Monthly Sector Exposures

6

Historical End-of-Month Signal Allocations Since Inception (10/2008)1

Past performance is not indicative of future results. It is not possible to invest directly in an index. Index performance does not reflect charges and expense and is not based on actual advisory client assets. Index performance does include the reinvestment of dividends and other distributions. F-Squared began managing advisory client assets in February 2009. Source: Morningstar Direct data, F‐Squared analysis. 1Oct 2008–Sept 2014.

50

100

150

200

250

Oct

-200

8

Dec-

2008

Mar

-200

9

Jun-

2009

Sep-

2009

Dec-

2009

Mar

-201

0

Jun-

2010

Sep-

2010

Dec-

2010

Mar

-201

1

Jun-

2011

Sep-

2011

Dec-

2011

Mar

-201

2

Jun-

2012

Sep-

2012

Dec-

2012

Mar

-201

3

Jun-

2013

Sep-

2013

Dec-

2013

Mar

-201

4

Jun-

2014

Sep-

2014

Chan

ge in

Inde

x (lo

g sc

ale)

% o

f Ind

ex P

ortf

olio

Utilities

Technology

Materials

Industrials

Healthcare

Financials

Energy

Consumer Staples

Cons Discretionary

Cash Alternative

AlphaSector Premium Index

S&P 500 Index


AlphaSector U.S. Equity Performance1

7

Returns by Period

Source: Morningstar, F-Squared Investments Past performance may not be indicative of future results. 1The performance shown is of a composite consisting of all discretionary accounts for this investment strategy using the AlphaSector U.S. Equity strategy management fee. Performance returns for periods of less than one year are not annualized. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in U.S. dollars. 2AlphaSector Premium Composite returns (net of fees) reflects the following fee schedule: 85 bps inception-Oct 2013, 100 bps Nov 2013, 125 bps Dec 2013 –present; October 2008-December 2014 3AlphaSector Premium Composite returns (gross of fees), October 2008 – December 2014 THESE ARE COMPOSITE RETURNS. F-SQUARED DID NOT MANAGE ADVISORY CLIENT ASSETS UNTIL FEBRUARY 2009.

2

3


8

Collective Trust Offerings


F-Squared AlphaSector Portfolios for the DC Market

9

EnergyHealth CareIndustrialsMaterialsTechnologyUtilitiesConsumer DiscretionaryFinancialsConsumer Staples

11.1%

11.1%

11.1%

11.1% 11.1%

11.1%

11.1%

11.1%

11.1%

Invest Grade Corporate

Mortgage Backed

High Yield

TIPS

Floating Rate

Intermediate Treasuries

16.7%

16.7%

16.7% 16.7%

16.7%

16.7%

50%

30%

10%

10%

45%

25%

20%

10%

36%

24%

30%

10%

30%

20% 40%

10%

30%

10% 50%

10%

AlphaSector Risk Managed Portfolios1

Aggressive Moderate Aggressive Moderate Moderate Conservative Conservative

AlphaSector U.S. Equity Fund1 AlphaSector Fixed Income Fund1

AlphaSector U.S. Equity AlphaSector International Equity AlphaSector Fixed Income AlphaSector Real Assets

1 Funds listed currently offered by Reliance Trust Company. Target weightings at time of rebalancing when fully invested, and are subject to change. F-Squared defines the inception date of the AlphaSector U.S. Equity Fund as July 2011.


AlphaSector Risk Managed Portfolios – Potential Benefits

10

5 “full market-cycle” portfolios that seek active downside risk management

• Choice of portfolios to match participant preferences and time horizons

Strives to offer participation in healthy markets

• Portfolio construction using low-cost passive investments

Seeks to provide two critical risk controls to help guard against market losses

• Asset class diversification designed to reduce long-term volatility

• Active downside risk management designed to reduce short-term loss

Designed for an improved participant experience

• Strives to avoid significant market declines

• Designed to provide a smoother ride to help participants to stay the course during times of market stress

Target risk portfolios are eligible Qualified Default Investment Alternatives (QDIA)

• Offers a 404(c) safe harbor if used as the default and/or for re-enrollment


Opportunity for Retirement Plans

11

• There is a disconnect between participant needs and investment design

• F-Squared investment strategies offer Plan Sponsors the opportunity to incorporate downside risk

management into their 401(k) plan menu and better meet the needs of their clients

• Ability for advisors to provide retirement plans with investment strategies used by wealth advisors

“Don’t lose my money!” - Average Participant

“Beat the Benchmark” - Investment Industry


Availability

12

Investment Portfolios available as collective trust funds on most major 401k platforms

• Choose your own recordkeeper and add our funds as

investment options within the 401k menu

Turn-key recordkeeping solutions that feature F-Squared professionally managed portfolios as default investment

• “Off the shelf” easy to sell solutions

• Redhawk – Fiduciaryk Solution


Fiduciary(k) Advisor Resources

13


Fiduciary(k) Resources

Fifteen-page comparison report demonstrating advantages over current plan provider

14


Fiduciary(k) Resources

15


AlphaSector Risk Managed Portfolios – Model Portfolio Construction

International Equity: AlphaSector International

Equity

• Eurozone – 22.2% • United Kingdom – 11.1% • Switzerland – 11.1% • Emerging Markets – 22.2% • Pacific ex Japan – 11.1% • Japan – 11.1% • Canada – 11.1%

Real Assets: AlphaSector Real Assets

• Gold • Real Estate • S&P 500

Fixed Income: AlphaSector Fixed Income

• Intermediate Treasuries • TIPS • Investment Grade Corporate • High Yield • Mortgage Backed • Floating Rate

U.S. Equity: AlphaSector U.S. Equity

• Consumer Discretionary • Consumer Staples • Energy • Financials • Healthcare • Industrials • Materials • Technology • Utilities

Short-term Treasury

• 9 ETFs reflecting the primary sectors of the equity market

• Sectors are equally weighted within the sleeve at time of re-balancing

• Maximum weight of 25% of sleeve for any sector ETF

• When 6 or more sectors are removed, a “cash” position starts to build using the Short-term Treasury ETF

• When all 9 sectors are negative, portfolios may maintain minimum equity allocation (5% or less)

• 6 ETFs representing the primary segments of the fixed income market

• Investments are equally weighted within sleeve at time of re-balancing

• Maximum weight of 20% of sleeve for any ETF

• May allocate up to 100% in Short-term Treasury

• 5 ETFs reflecting the most important world economic regions outside the U.S.


• Gold and Real Estate investments are equally weighted within sleeve at time of re-balancing when fully activated (50% maximum)

• S&P 500 ETF used if Gold or Real Estate turns off when the Domestic Equity sleeve is fully allocated


16

The International Index's construction methodology shown above is as of September 2014. Prior to September 2014, the Index utilized a single ETF for exposure to Europe, compared to the three separate ETFs for the Eurozone, the UK, and Switzerland. Additionally, as reflected above, the Index's baseline and maximum allocations among the regions have changed. Performance prior to September 2014 does not reflect the above methodology.


For More Information on F-Squared Investments

Please Contact:

Colin Wood

DCIO Internal Wholesaler, Retirement Solutions

[email protected]

781-772-6214

17

mailto:[email protected]


Important Information

18

Past performance is not indicative of future results. It is not possible to invest directly in an index. Index performance does not reflect charges and expenses, and is not based on actual advisory client assets. Index performance does include the reinvestment of dividends and other distributions. F-Squared Investments began managing advisory client assets in February 2009.

“AlphaSector®” is a registered trademark of F-Squared Investments, Inc. and is used with permission. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from F-Squared Investment Management, LLC or one of its subsidiaries (collectively, “F-Squared Investments” or “F-Squared”). F-Squared reserves the right at any time and without notice to change, amend, or cease publication of the information contained herein. This material has been prepared solely for informative purposes. The information contained herein includes information that has been obtained from third party sources and has not been independently verified. It is made available on an "as is" basis without warranty.

Investment products that may be based on AlphaSector Indexes (as described in further detail below) may not be sponsored by F-Squared, and in such cases, F-Squared does not make any representation regarding the advisability of investing in them. F-Squared serves as the model provider to various investment advisers. There is no guarantee that an investor’s account will achieve its objectives or avoid losses. Inclusion of a mutual fund or an exchange-traded fund in an AlphaSector index does not in any way reflect an opinion of F-Squared regarding the investment merits of such a fund, nor should it be interpreted as an offer to buy or sell such fund’s securities. None of the mutual funds or exchange-traded funds included in an index has given any real or implied endorsement or support to F-Squared or to this index.

F-Squared receives compensation in connection with licensing rights to the AlphaSector Indexes to third parties, typically through a Model Manager Agreement. All information relating to an index is impersonal and not tailored to the specific financial circumstances of any person, entity, or group of persons.

Given the results shown are that of an index, they do not reflect the deduction of any advisory fees or expenses, nor trading costs, both of which will decrease the return experienced by a client. Note that F-Squared’s Model Management clients are responsible for trading and will therefore encounter third party fees for which F-Squared is not responsible. F-Squared’s fees and anticipated expenses will be specified in each client agreement. F-Squared’s fees will be made available upon request and are disclosed in its publicly-available Form ADV Part 2A.

Composite information

The AlphaSector Premium Composite represents live trading of client accounts which track the AlphaSector Premium Index, starting October 1, 2008.

There is no minimum account size required for inclusion in the composite. New funds or accounts are added to the composite upon the first full month of operation and closed funds or accounts are removed from the composite upon the last full month of operation. AlphaSector Premium Composite returns are shown gross of the maximum annual fee.


Important Information (continued)

19

Collective Trust Fund Information

The AlphaSector U.S. Equity Fund, AlphaSector Fixed Income Fund, and Alpha Sector Risk Managed Portfolios are bank collective trust funds for which Reliance Trust Company (“RTC”) serves as trustee and investment manager. Participation in this Collective trust is limited to Eligible Trusts that are accepted by the Trustee as Participating Trusts. As more fully described in the Declaration of Trust, Eligible Trusts include a pension or profit sharing plan that is “tax-qualified” under Section 401(a) of the Internal Revenue Code of 1986 and is not a Keogh plan or a plan that covers any “self-employed individual” (as defined in section 401(c)(1) of the Internal Revenue Code of 1986) and is an Eligible Plan as defined in the Declaration of Trust.

The Funds are not intended as a complete investment program, and there can be no guarantee that they will achieve their goal. The Funds’ returns will fluctuate. Each of the underlying ETFs in which the Funds invest has its own investment risks, and those risks can affect the value of the Funds. The Funds are not insured or guaranteed by any government agency, by Reliance Trust Company, or by the Sub-Advisor.

Reliance Trust, one of the largest independent trust companies in the United States, is chartered by the State of Georgia and regulated by the Georgia Department of Banking and Finance. Reliance Trust is a wholly owned subsidiary of Reliance Financial Corporation. Reliance Trust is headquartered in Atlanta, Georgia. Reliance Financial Corporation is a Georgia based holding company maintaining several financial services companies, including Reliance Trust. Reliance Trust has been in business since 1975, was chartered as a bank and trust company in 1981, and employs about 275 employees.

To request a copy of Fund’s offering circular call (781) 772-2363. The offering circular includes investment objectives, risks, charges and expenses and other information that you should read and consider carefully before investing.

AlphaSector Indexes

Because no investor may invest directly in an index, data for all AlphaSector Indexes represented in this material does not reflect the actual trading of any client account. No representation is being made that any client will or is likely to achieve results similar to those presented herein.

Most AlphaSector Indexes are evaluated for rebalancing on a monthly basis or evaluated for rebalancing on a weekly basis. The following is a summary of the AlphaSector strategies presented in this document.

The AlphaSector U.S. Equity Index (“U.S. Equity”) is designed to provide exposure to the U.S. Equity market, and is constructed as an “asset allocation” overlay onto Exchange Traded Funds (“ETFs”) representing major sectors of the U.S. economy. F-Squared defines the inception date for U.S. Equity, the AlphaSector Premium Index and the AlphaSector Rotation Index as October 2008.

F-Squared may change the exposures and index compositions reflected herein at any time and in any manner in response to market conditions or other factors without prior notice to investors.

Index Maintenance: F-Squared actively maintains the Quant Model that generates the signals utilized to populate the Index. The Quant Model operates based on numerous and complex underlying mathematical assumptions. F-Squared periodically updates or revises these assumptions in an effort to improve the model’s accuracy and responsiveness. These changes alter Index construction moving forward. Consequently, past index performance may not be representative of future performance.

Lack of Index Transparency: F-Squared does not publish detailed information about the Index at this time, including the specific names and weightings of the ETFs comprising the Index or the weekly “buy/sell” signals. Moreover, to date, no independent third-party has verified the accuracy of the Index performance presented herein.


Important Information (continued)

20

Index Calculation Methodology: Index returns are calculated on a monthly total-return basis using published closing market prices for the constituent ETFs, as of the last business day of the month (“Market-Based ETF Valuations”).They are time and asset weighted and reflect the reinvestment of all dividends and other distributions. Monthly returns are geometrically linked to create quarterly and annual returns. All returns are calculated and expressed in U.S. dollars. Prior to April 3, 2014, Index returns were calculated using the published closing net asset values (“NAVs) for the ETFs comprising the Funds, as of the last business day of the month (“NAV Based ETF Valuations”). F-Squared switched from NAV-Based ETF Valuations to Market-Based ETF Valuation to more accurately reflect the manner in which ETFs are most commonly valued. This change did not materially impact Index performance.

References to non-AlphaSector Indexes

Standard & Poor’s 500 Index (Total Return) (“S&P 500”) is a broad-based unmanaged index of 500 stocks, which is widely recognized as a representative of the equity market in general

Risk Disclosure No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of the AlphaSector Indexes and Strategies are disclosed in the publicly available Form ADV Part 2A. None of the indexes referred to herein reflect the deduction of the fees and expenses to be borne by a client, whose managed account may trade and invest in different financial instruments than those in a particular index. Concentration, volatility, and other risk characteristics of a client’s account also may differ from the indexes shown herein. Each of the above indexes is included merely to show general trends in the market during the periods indicated. Inclusion of these indexes is provided only for reference purposes and is not intended to imply that any AlphaSector index was comparable to any index in either composition or element of risk. There is no guarantee that any client will achieve performance similar to, or better than, an index mentioned herein. Any projections, market outlooks, or estimates in this presentation are forward-looking statements and are based upon certain assumptions and should not be construed as indicative of actual events that will occur. F-Squared Investments is not offering or rendering investment or financial planning advice through this material, which is limited to the dissemination of general information about the Adviser's services. Any Investment products that may be based on any of F-Squared’s indexes, may not be sponsored by F-Squared. F-Squared serves as the model provider to various investment advisers. F-Squared Investment Management, LLC or one of its subsidiaries is the source and the owner of all AlphaSector Indexes and their performance information. Sources: Morningstar, F-Squared Investments. All rights reserved. F-Squared Institutional (“F-Squared”) leverages advanced volatility measurement technologies to create customized solutions for institutional investors that seek to generate attractive risk-adjusted returns over time. Our investment approach utilizes sophisticated mathematical algorithms and volatility modeling that are designed to identify and capitalize on changes in volatility regimes. F-Squared offers long-only and alternative solutions for a range of institutional investors, from public and private pension plans to endowments and foundations. For more information visit our website at www.f-squaredinvestments.com.

RETADV.RH.PRES 1/15 cc953

http://www.f-squaredinvestments.com/

Broker/Advisor Use Only – Not For Use With the Public

Brian D. Gallary Senior Vice President

Head of Wealth Management Consulting


Source: FA Magazine, 2013. This chart represents financial advisors > $500,000 in revenue.

0%

10%

20%

30%

40%

50%

60%

70%

Client Referrals

Centers of Influence

Networking Non-Client Referrals

Using Social Media

Sponsored Events



Centers of Influence

Client Referrals

Networking Non-Client Referrals

Using Social Media

Sponsored Events

0%

20%

30%

50%

60%

70%

80%

90%

40%

10%



Cultivating Centers of Influence

Generating Client

Referrals

Better Networking

Abilities

Generating Non-Client Referrals

Using Social Media

Producing Sponsored

Events

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% Other


“Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true.”

~Peter Thiel


8

• Create pipeline

• Conduct meetings

• Generate referrals


• Frequency of contact (9-10 meetings) • Brief meetings (20 minutes) • Focus on the process • Success = 4 or 5 consistent referral sources


• Open − Confirm agenda − One broad question

• Body − Socratic listening − Differentiate with ONE message

• Close − Get the next meeting on the books


• The answer has information • Euphoria fades quickly • Time management • Lowers “irritation” factor


• Yes • No • Just give me a call

− Ask for assistant’s name − Ask to be introduced − Develop relationship with assistant


• The difference between success and failure • Create a checklist and be forensic

− Do they have the right size clients? − Are they referring today? − Who are they referring to? − Why are they referring to them? − Who’s the decision maker when it comes to referrals? − Do they have their own investment management practice? − Do they refer for a fee? − After the first meeting, what’s their predisposition?

• It’s not just what they say… It’s how they say it • You only want to meet with those who are currently referring


• Open − Confirm agenda − One broad question

• Body − Socratic listening − Differentiate with ONE message

• Close − Get the next meeting on the books


• No expectations for referrals • Expectations for referrals • Quid-pro-quo • Refer for a fee • Landmines

− The con − In-house manager


• Like you • Trust you • Think you are credible


• Create pipeline – Start with existing clients – Keep it simple

• Conduct meetings – Frequency is key – Game of attrition

• Generate referrals – Identify the “right” referral sources

Target Date Funds: Perfecting The Imperfect

© 3D Asset Management. All rights reserved.

Where is the Target Date Market Today?

$670 Billion

$300 Billion

Target-Date Mutual Fund AUM

Target-Date Collective Trust AUM

* Barrons, Target Date Funds Take Over, July 5th, 2014


0

50

100

150

200

250

0

50

100

150

200

250

300

350

Net Assets ($ Billion)N

umbe

r of F

unds

No. of Funds Net Assets ($Billion)

Where It All Began & How We Arrived to Today…

November 1993 BGI Launches “LifePath” Portfolios

Marketed as the “Set it & Forget it”

One-stop Investment

Source of fund count and asset data: SEC, “Target Date Funds – a good idea co-opted”, File Number 4-852, https://www.sec.gov/comments/4-582/4582-3.pdf Source of provider inception data: Target Date Analytics, LLC, “A Brief History of Target Date Funds”, http://www.ontargetindex.com/docs/I_ABriefHistoryOfTargetDateFunds.pdf

https://www.sec.gov/comments/4-582/4582-3.pdf


Competitor Market Entry – Why is this important?

0

50

100

150

200

250

0

50

100

150

200

250

300

350

Net Assets ($ Billion)N

umbe

r of F

unds

No. of Funds Net Assets ($Billion)

Source of fund count and asset data: SEC, “Target Date Funds – a good idea co-opted”, File Number 4-852, https://www.sec.gov/comments/4-582/4582-3.pdf Source of provider inception data: Target Date Analytics, LLC, “A Brief History of Target Date Funds”, http://www.ontargetindex.com/docs/I_ABriefHistoryOfTargetDateFunds.pdf

https://www.sec.gov/comments/4-582/4582-3.pdf


To vs. Through

2 J.P. Morgan, Target Date Compass, 2014

With the inconsistency between managers it is easy to see why 32% of Plan Sponsors do not understand how their plan’s Target Date funds are constructed. 2

2009 2011

Target 2010 Funds 26-67% 20-70%

Target 2050 Funds 84-99% 38-95%

1 Aurum, Rethinking TDFs as QDIAs, March 2013

32%

Target Date Fund equity allocations vary greatly between providers and can change dramatically over time. 1


Where is the TD market today?

70% of DC Plans with a QDIA option use Target Date funds*

* ING Retirement Research Institute, Participant Preferences in Target Date Funds, Feb 2012

41.8% of 401k contributions go into Target Date funds

70% 41.8%


Over 70% of total TDF assets are with Vanguard, T. Rowe Price and Fidelity


Fidelity Investments

Vanguard

T. Rowe Price

Other Major Players

Where is it all going? Who is making the decision?


Even though 61% of TDF users prefer multi-manager approaches…*

* ING Retirement Research Institute, Participant Preferences in Target Date Funds, Feb 2012

…Only six of the largest 21 Target Date managers allocate to non-proprietary funds*

61%

But are we listening to the audience?


Why should we be concerned

Parking Space for Poor Performers

Seeding Vehicle for New Funds/Managers

Limited to the Asset Classes Offered within Family

Encourages Practice of Self-dealing


Investor Appetite for Risk Age Cohort TDF Year1 Big 3 TDF Equity

Allocation2 FinaMetrica Equity “Comfort Range”3

20’s 2060

90% 54% – 73% 2055

30’s 2050

85% - 90% 50% - 69% 2045

40’s 2040

83% - 90% 47% - 66% 2035

50’s 2030

70% - 85% 45% - 64% 2025

60’s 2020

51% - 72% 38% - 57% 2015

70’s 2010 50% - 55% 30% - 49% 1Age 65 assumed retirement 2Morningstar Target Date Survey 2012 3This represents the range of growth assets that FinaMetrica defines as “Comfort,” an allocation to growth assets above this range is “significantly greater than (a person) would normally choose to take on.” Source of data: Meridian Wealth, “The Disconnected Reality of Today’s Target Date Funds”, The Meridian Blog, June 10, 2013 http://meridianwealth.com/2013/06/10/the-disconnected-reality-of-todays-target-date-funds/

Over exposure to equity coupled with a Static Glidepath is where the problem lies


What do TDF Users Really Want?

93% of TDF users want a TDF to provide protection against market losses in years nearing retirement.*


93%


The Investor Shakeout

*Morningstar, “Target-Date Series Research Paper: 2010 Industry Survey”, http://corporate.morningstar.com/US/documents/MethodologyDocuments/MethodologyPapers/TargetDateFundSurvey_2010.pdf

In 2008, The available 2010 TDF’s were Down on Average 23% in 2008, But Ranged Individually From -9% to -41%*

-41%

7%

-9%

31%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

2008 2009Low High


What is the solution?

We believe the key to creating a sustainable retirement income, and overcoming the fear of running out of money in retirement is rooted in the effective management of three fundamental risks:

• Volatility Risk • Sequence of Returns Risk • Investor Behavior Risk


PrudentPath™ Target Date Series

Founded in 2006, 3D Asset Management is an independent global investment manager who partners with financial advisors to deliver the benefits of Exchange-Traded Funds (ETFs) to individual investors and retirement plan participants. Through rigorous portfolio construction and monitoring, 3D builds diversified portfolios that attempt to control cost, manage risk and simplify global investing. 3D enables financial advisors to more efficiently manage client relationships by providing effective and value-creating solutions.

Founded in 2008 when data from their models was first licensed, Newfound Research is a Boston-based registered investment adviser and quantitative asset manager focused on rules-based, outcome-oriented investment strategies. Newfound specializes in tactical asset and risk management and has pioneered the research and use of dynamic, volatility-adjusted momentum models. In the last five years, Newfound’s models have been utilized to help drive the investment decisions for billions of dollars in assets.

Risk-Based Target Date

Strategic Tactical

3D Asset Management has partnered with Newfound Research to approach target date fund construction and management in a unique way.

Working together to integrate a tactical process into a strategic portfolio.

Thank You

Contact: Lee Tenney VP, Retirement Plans

Financial Advisor Services (248) 202-5444

[email protected]

Why Exchange Traded Funds Make Sense in 401k Plans

Important Information

2

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund’s before investing. To obtain a prospectus containing this and other important information, please call 1-866-909-WISE (9473) or visit wisdomtree.com to view a prospectus online. Read the prospectus carefully before you invest. There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Funds focusing their investments on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development and generally experience greater price volatility. Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation, intervention and political developments. Due to the investment strategy of the WisdomTree Emerging Markets Equity Income Fund it may make higher capital gain distributions than other ETFs. Investments in real estate involve additional special risks, such as credit risk, interest rate fluctuations and the effect of varied economic conditions. Please read each Fund’s prospectus for specific details regarding each Fund’s risk profile.

Neither WisdomTree Investments, Inc. nor its affiliates, nor Foreside Fund Services, LLC and its affiliates provide tax advice. All references to tax matters or information provided on this site are for illustrative purposes only, and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties. Investors seeking tax advice should consult an independent tax advisor.

WisdomTree Funds are distributed by Foreside Fund Services, LLC.

WIS006261 2/2015

1In some circumstances, an index mutual fund may be subject to lower fund expenses than an ETF. 2Investment style defines how the fund is managed, with passive management tracking the performance of indexes and active management run by an investment manager. 3Holding Transparency: Exchange traded funds have their holdings visible on a daily basis. Diversification does not eliminate the risk of experiencing investment losses. ETF shares are not sold or bought at their net asset value (NAV) like mutual fund shares. ETF shares’ market price may be at, above or below the funds’ NAV. The NAV of the fund will fluctuate with changes in the market value of its portfolio holdings, and the market price of an ETF’s shares will fluctuate with changes in the NAV as well as supply and demand in the market for the shares. The market price of ETF shares may differ significantly from their NAV during periods of market volatility. ETF shares may only be redeemed directly with the fund at NAV by Authorized Participants, in very large redemption/creation units.

Exchange Traded Funds (ETFs): Similar Characteristics of Two Familiar Investment Ideas Obviously, there are many differences between mutual funds, stocks and ETFs, but they do share some similar characteristics.

3

ETFs are typically exchange tradable during the day, as are individual stocks, but it’s important to note that ETFs are subject to risk similar to those of stocks including those regarding short-selling and margin account maintenance.

Individual Stocks

Diversified basket of securities, like a mutual fund, that typically trades on

exchanges intraday, like a stock.

ETFs

ETFs are typically diversified baskets of securities like mutual funds.

Mutual Funds

While individual stocks offer ownership shares in individual companies and don’t have expense ratios, they also are subject to unique company-specific risks and are not diversified. ETFs and Mutual Funds both offer diversification and we compare some of their other characteristics below.

1Active: approach that does not seek to track returns of an underlying index after costs, fees and expenses. 2Sources: WisdomTree, Bloomberg. (12/31/13) 3Brokerage or commission fees may apply 4Revenue sharing refers to agreements in place where part of a fund expense ratio is paid to give an investment option, such as a mutual fund, eligibility for investment on a particular platform.

Introduction to ETFs

Trades when markets are open, like individual stocks • Investors therefore know the price of the shares of their ETF during the trading day

Able to Accommodate a Diverse Array of Investment Strategies • Can track the returns of an underlying Index or can follow a more active1 approach • Typically lower expense ratios as opposed to active1 mutual funds

ETFs Offer Potential Benefits • Wide product offering – approximately 1,500 ETFs are available2 • Know underlying holdings each day • No minimums, redemption fees or holding restrictions3 • No revenue sharing4

4

Past performance does not guarantee future results. Diversification does not eliminate the risk of experiencing investment losses. Transactions in shares of WisdomTree ETFs may result in brokerage commissions.

Why Might Financial Professionals Use ETFs? Similar to mutual funds, there are some ETFs that deliver strong performance over

certain periods of time and there are some that do not. Neither approach outperforms the other in all cases at all times.

Specific sector and country ETFs exist, allowing investors to have the potential to garner precise exposure based on a particular view

While not always cheaper than every mutual fund, many ETFs do in fact have lower expense ratios than many mutual funds

The ETF structure has the potential for tax efficiency

Many ETFs can offer a diversified basket of underlying assets

ETFs can be traded at any point in time when the market is open

At the end of each day, an investor in an ETF knows the underlying assets held by the ETF

Holdings are displayed daily on the website

5

Diversification

Tradability and flexibility

Cost effectiveness

Tax efficiency

Transparency

Performance

Express a view

Sources: WisdomTree, Morningstar Direct as of 1/9/2014. 1U.S. Large Cap: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s U.S. Large Value, Large Blend or

Large Growth categories. 2U.S. Mid Cap: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s U.S. Mid Value, Mid Blend or Mid

Growth categories. 3U.S. Small Cap: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s U.S. Small Value, Small Blend or

Small Growth categories. 4Foreign Large Cap: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s Foreign Large Value, Foreign

Large Blend or Foreign Large Growth categories. 5Foreign Mid/Small Cap: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s Foreign Mid/Small Cap

Value, Foreign Mid/Small Cap Blend or Foreign Mid/Small Cap Growth categories. 6Diversified Emerging Markets: Contains the U.S. listed Mutual Funds, ETFs and WisdomTree ETFs respectively that fit within Morningstar’s Diversified

Emerging Markets category. 7Median Fees: Calculated as the median net expense ratio by prospectus as the most recent prospectus as of 1/9/2014. The median was used as

opposed to the average so as to not allow mutual funds with high expense ratios or ETFs with low expense ratios to have undue influence on the ultimate number shown. The median calculation is not impacted by extreme values, either to the higher or low end.

ETFs Have the Potential to Be Less Expensive than Mutual Funds

6

ETFs Are Increasingly Offered as Investment Options Within Retirement Plans

Options, Options & More Options: The Crux of the matter is that ETFs and Mutual funds represent an increasingly wide array of different investment strategies. Since every investor has different goals and risk tolerances, the increasing array of options is important in helping to accomplish these needs.

7

ETFs + Mutual Funds

Transparency of Holdings on a Daily Basis

Operational Improvements

Know What is Owned…Daily: Many times, plan participants are unable to see what their investment options are holding on a daily basis. With ETFs, holdings can be accurately assessed daily. This could help investors to align their choices with their goals and risk tolerances.

Breaking from Tradition: Since mutual funds arrived before ETFs onto the investment landscape, retirement plans became accustomed to allocating assets solely at the end of a given trading day when mutual funds price their net asset values based on the behavior of their underlying holdings through the day. Even though ETFs do not price their shares in the same manner, solutions are beginning to proliferate that allow ETFs to be traded in these plans.

Retirement Plan Implementation: What Might Participants See?

Individual ETFs as Investment Options • Retirement plans are required to make available the list of investment options • Offer participants the opportunity to reassess their choices to make sure that

they’re still congruent with their investment goals • Participants might see ETFs as options to be chosen from the list.

Model Portfolios of Multiple ETFs • Participants may not be able to comfortably analyze the differences between

individual ETF options • Terms like “Aggressive”, “Conservative” or “Moderate” in terms of their risk

tolerance might be easier • Model portfolios will likely use multiple underlying ETFs to execute on these

themes • Typically rebalance so that the top performing ETFs within the model do not

end up dominating the exposure

8

Conclusion

As the landscape of investment options changes, it’s important to understand how this could impact the ability of investors to realize their goals

ETFs have certain attributes that might be attractive to retirement plan participants

Retirement plans with ETFs as potential options are growing in number

9