TODD CLARKE, CLS CHIEF EXECUTIVE OFFICER

REINVENT YOUR PRACTICE:

ALTERNATIVES TO TRADITIONAL

SUCCESSION PLANNING

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CLS INVESTMENTS, LLC – EARLY YEARS

• Patrick Clarke

- Started in 1972: Stockbroker

- 1975 started a fee-based, financial

planning business

- 1992 changed business model

from a retail financial planner to

third party asset management firm

CLS History

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EARLY YEARS

• Started as an “overlay” money management firm

• Created AdvisorOne Funds in 1997

- ETF Pioneer

Third Party Money Management Firm

Clarke Lanzen Skalla Investment Firm, LLC

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WANTED TO START ORION

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WANTED TO START ORION

Sold CLS to Orbitex

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ORBITEX YEARS

LESSONS LEARNED

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CREATION OF NORTHSTAR

• CLS assets approximately $750M

• Orion assets approximately $1B

• Gemini assets approximately $1B

After Orbitex (as of January 2003):

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NORTHSTAR TODAY

• Assets under management and administration: $234 billion

• Employees: 553

as of 5/31/2014

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NORTHSTAR HISTORY

• Entrepreneur

• Client Relationships

• Control

• Flexibility

• Ownership

The Beginning of NorthStar

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NORTHSTAR HISTORY

• “I am retired. Retirement is doing what I want, when I want.”

• Selling the Business

– Identity

– Mortality Attached

– Lack of Desire

• Continuity Plan

Succession Planning

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SUCCESSION PLANNING CRISIS

SUCCESSION PLANNING

=

SELL

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SUCCESSION PREPAREDNESS

43% of financial advisors are either approaching or at retirement age*

(Average Age = 51)

1/3 of all advisors are between ages of 55 and 64*

71% of advisors have not defined or implemented a succession plan**

Financial Advisor Stats

*Source: Cerulli Associates

**Source: Pershing Advisor Solutions and Moss Adams1570-CLS-8/6/2014

SUCCESSION PLANNING CRISIS

Selling is a Difficult Proposition

• Valuation Issues

• Retirement Readiness

• Desire

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VALUATION ISSUES

Hypothetical Advisory Business Analysis

Annual Revenues $400,000

Advisor Salaries (40%) $160,000

Overhead (40%) $160,000

Free Cash Flow (20%) $80,000

Valuation (using multiple of 5) $400,000

Down Payment (40%) $160,000

Payout per Year $48,000 for the next five years

= No Pay Day

This example is an illustration of a hypothetical advisory business. Actual valuations will vary.

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RETIREMENT READINESS

Cobbler’s Children Syndrome

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RETIREMENT AGE

At what age do you plan to retire*?

66-70

61-65

76+

not planning to retire50-60

*Source: CLS Market Research1570-CLS-8/6/2014

Business will have to fetch

$750,000 to $1 million

RETIREMENT READINESS

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DESIRE

“I really enjoy the business and working with my clients” – Joe Moyer

“I don’t want to retire. I still enjoy what I’m doing and I guess I’m afraid of the

inactivity that comes with retiring” – Rick Arellano

“I don’t plan on retiring anytime soon…I’m able to travel and take extended

trips without having to talk to the office at all” – Dave Huber

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DESIRE

“…the broader issue is that many advisors simply do not want to retire,

because they enjoy what they do – especially if they can focus the practice

to get rid of the job duties that are the least desirable. In other words,

financial planning is a classic example of a profession that is not exactly a

physically intensive business, and as long as the mind is able and the body

allows for meetings with clients, planners can continue to work.”

– Industry observer, Michael Kitces

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REINVENT YOUR PRACTICE

SUCCESSION PLANNING

=

REINVENT

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REINVENT YOUR PRACTICE

• Buy-Sell Agreement

• Partner with another Advisory Firm

• Outsource

• Junior Advisors

• Combination

Several Options

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REINVENT YOUR PRACTICE

• Human Capital

• Operational Management

• Legal Agreements

Do Something: Key Areas of Focus

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REINVENT YOUR PRACTICE

• Instills Confidence

• Shows Long-Term Viability

• Enforces your Fiduciary Responsibility to Clients

• Allows you to Connect with the

Next Generation

Communicate Solution to Clients

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SUCCESSION PLANNING SUCCESS

• Continuity plan was in place

• Results: client needs outsourced already

• Partners and clients already had a

relationship with the whole team

• Business continued to operate and grow,

uninterrupted

NorthStar Succession Planning Success

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REINVENT YOUR PRACTICE

“…You must constantly be thinking about your own succession

plan because things change…” – Rick Arellano

The One Constant is Change

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CONNECTING WITH CLS

CLSinvest.com/advisoriq

CLS AdvisorIQ Series

CLSinvest.com/salesteam

888.455.4244

internals@clsinvest.com

CLS Sales Team

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DISCLOSURES

The views expressed herein are exclusively those of CLS Investments, LLC, and are not meant as investment advice and are subject to

change. No part of this report may be reproduced in any manner without the express written permission of CLS Investments, LLC.

Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete

or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is

prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular

needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any

security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects

may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly,

investors may receive back less than originally invested. Past performance is not a guide to future performance. Investing in any security

involves certain non-diversifiable risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are

in addition to any specific, or diversifiable, risks associated with particular investment styles or strategies.

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