ASSET ALLOCATORS HAVE BECOME OBSOLETE We believe that the Robots have it right! Recently, you may have heard about “Robo Advisors” being offered by some of the large fund families and discount brokerage houses. Basically, by using computers with logic-based capacities, this service offers investment advice based on input provided to the computer (Robot) by the investor. The initial target market is younger investors who have grown up with the internet and are comfortable interacting with automated facilities. The main thrust of the Robot is to recommend an Asset Allocation (dispersion amongst equities, fixed income, real estate, commodities, alternatives, etc.), based on user inputs, and using funds to fulfill the recommended allocation. And while there are many social and demographic implications of this new strategy, it is our view that from an investment perspective, the market is now setting the price for asset allocation and financial advisory advice, at $0. First: Brokers became Financial Advisors; then Financial Advisors became Asset Allocators; and now Asset Allocators have become obsolete. The vast majority of Financial Advisors specialize in designing asset allocation models and selecting managers or funds to invest in the various segments. This approach is grounded in the theory that the Asset Allocation is the largest driver of return and that Individual Stock Selection is the least important contributor. The advisor/broker is essentially a quasi-consultant and charges a fee to oversee the activities of the portfolio, which include:

a. Adjusting the model (tactically, in response to market and economic conditions)

b. Assessing the performance of the managers

c. Record keeping, etc. We believe that this Model is ineffective for the following reasons:

1. Results in excessive holdings, causing performance to converge to the mean (the Market), thus making it impossible to outperform the market.

2. Results in Manager and Funds’ cross-holdings (same security in multiple accounts).

3. Generates two levels of fees, making it impossible to generate returns in excess of the market over an extended period of time, sentencing the investor to mediocrity:

a. Management fee to the Mutual Fund for selecting stocks

b. Advisory fee for Asset Allocation, Manager Review, and Reporting

4. The operating performance of the companies that an investor holds is the biggest driver of long-term performance.

5. In fact, excess returns over the market will only be generated by:

a. Owning companies that generate superior returns relative to peers and the market as a whole

b. Identifying these companies before they are widely covered by Wall Street

c. Searching for great companies - Globally

d. Paying a reasonable price for securities acquired

e. Selling when companies lose their strategic edge or become significantly overvalued due to momentum

f. Avoiding bubbles by understanding the value of your holdings

g. Asset Allocation across multiple strategies and asset classes, while important for diversification, does not warrant a fee of 30 - 100 basis points

h. A macro understanding of Global Economic, Political and Demographic Trends - best utilized in culling or adding to individual stock positions

An investor should pay a manager for finding great companies across the globe before the pack, watching and monitoring them daily and understanding valuations that lead to bubbles, not deciding the dispersion between stocks, bonds or real estate. Leave that to the Robots! The preceding represents the views and opinions of The Stanley-Laman Group, Ltd., a Registered Investment Advisor serving individual and institutional investors and is not intended to be investment advice suitable for all investment objectives. The investment strategies above involve the risk of loss of principal.