Who’s Managing Your Money?Moderated by Carolyn Kling, Kling Partners

Presented by:

Paul Spitzer, Advanced Practice Advisors

Carolyn Taylor, Weatherly Asset Management

Herb Morgan, Efficient Market Advisors

Carlee Harmonson, Union Bank

30th Anniversary Celebration

The Del Mar Foundation presents a two-hour panel discussion with local diverse financial professionals who welcome an open audience dialogue.

At this session, the goal of the panel is to provide an understanding of related costs associated with investing and how they affect you as an investor. The panelists will define the differences between banks, trust departments, brokerage firms, investment firms, money managers, mutual funds, exchange traded funds, and other fund structures.

The panelist will present the differences between the role of a Fiduciary and the ‘suitability standard’ to which many companies adhere. You will learn how Trusts play an important role in asset ownership and the correlation of taxes, management, administration fees and investment performance.

Designed to give local residents an opportunity to “ask the experts,” the Del Mar Foundation Legacy Planning Series continues their 30th Anniversary Educational Series.

“Who’s managing your money?”

Paul C. Spitzer, Founding Member

Carolyn P. Taylor, President

Comprehensive Wealth Management

• Comprehensive wealth managers have the highest level of expertise and fiduciary standards in the industry

• More than a just money manager or a financial planner• Combines portfolio management and financial/estate

planning to manage a client’s financial life as efficiently as possible

• Paying a wealth manager to advise on all aspects of your financial life should save and make money over time

• Serious money demands serious legal, tax and financial knowledge and creativity

Services should be timely, applicable and al la carte catered to your needs.

Holistic Wealth Managers-Need to be Dynamic and IndividualizedTax Planning

• Types of taxation:• Income vs. capital

gains tax• Possible offsets • Deductions,

capital loss carry-forward, business income, etc.

• Deferral of income- maximizing contributions to retirement, defined benefit, ESOP and other tax-advantaged vehicles

• Charitable giving

Estate Planning

• Overall gift strategy – fits with Trust documents, taxes and wishes

• The “alphabet soup” – LLC, FLP, QPRT, CRT

Financial Planning

• Concentrated stock positions • Volatility and risk

minimization strategies

• Income strategies – tax preferred, tax deferred, tax-free, and taxable – or blend

• Hierarchy/use of funds• Where to draw

from first considering tax and estate implications

Asset Management

• Asset structures and types of holdings appropriate for each

• Asset location vs. asset allocation

• Risk mitigation for each type of structure

• Types of investments within • Inflation-

protection, income oriented

Significant Events – Steps to Take

• Discuss legal ramifications• Review financial strategies• Decide how best to minimize taxes• Re-evaluate family dynamics, including roles and responsibilities• Divide assets (if applicable) – discuss location and fairness• Define the many “what if ’s” • Create a roadmap to optimizing a long-term plan given the

change in circumstance

Significant events include: divorce, death, remarriage, job loss and health issues.

Multigenerational Wealth

• Introduce the younger generation to the team of advisors• Keep topics and specifics generalFamily Meeting

• Review relevant legal, tax and investment topics as well as asset allocationAnnual Meetings

• Appoint roles for family and non-family members to gain experience and responsibilityQuarterly Meetings

• Meet individually as well to address specific situations and concerns and interplay of how the larger picture fits within

Additional Communication

How to help families transition wealth more smoothly from the older to a younger generation:

Asset Location and Investments

•Asset allocation is the number one driver of risk and return. •Assets include: equities, real estate, alternatives, raw materials, fixed income and international Asset Allocation

•Asset location – by type of account and type of structure or purpose•Retirement vs. Taxable Accounts•LLC, FLP, CRT, Trust (Irrevocable or Living)Asset Location

•Diversification is key•Adding each of the following, as appropriate: covered calls, dividend stocks, non-dollar, low beta, preferred stock

Minimizing Volatility &

Addressing Risk

The goal is to minimize volatility while maximizing after-tax and inflation-adjusted returns.

Highlight of Fiscal Cliff Negotiations

Links to Learn• www.weatherlyassetmgt.com• www.newyorktimes.com• www.wallstreetjournal.com• www.bloomberg.com• Finance.yahoo.com• www.brightscope.com

Herb W. Morgan, President and Chief Investment Officer

Costs Matter• For decades institutional investors have had a massive cost

advantage over retail investors…Not any longer.

**MTraditional Mutual Funds

Mutual Fund Exp Ratio 1.50%

Mutual Fund Trading Costs*(Not reported in expense ratio) .78%

Cap Gains Liability 2.50%

“UNWRAPPED” EXPENSE RATIO 4.78%

Exchange Traded Funds (ETFs)ETF Expense Ratio .20%

ETF Internal Trading Costs (Not reported in exp. Ratio) .01%

Capital Gains Liability** .0%

“UNWRAPPED” EXPENSE RATIO .21%

Source: “Expense Shifting: An empirical study of cost shifting in the mutual fund industry.” Nicolag Sigelkko, Wharton University 1999

**Most ETFS but not all ETFs do not distribute capital gains due to their unique “in kind” creation and redemption structure

Cost Matters

$0

$2 ,00 0,00 0

$4 ,00 0,00 0

$6 ,00 0,00 0

$8 ,00 0,00 0

$1 0,0 00,0 00

$1 2,0 00,0 00

Yea r 0 Yea r 1 Yea r 2 Yea r 3 Yea r 4 Yea r 5 Yea r 6 Yea r 7 Yea r 8 Yea r 9 Yea r 10 Yea r 11 Yea r 12 Yea r 13 Yea r 14 Yea r 15 Yea r 16 Yea r 17 Yea r 18 Yea r 19 Yea r 20

0.21% Total Expenses

4.78% Total Expenses $10,158,314

$4,425,000

Asset Allocation Decisions Matter Most

• Cisco was, is and likely always will be a great company. 1999 Today Facto

Revenue $12.15B $180.0 B 15XNet Income $ 2.10 B $ 40.0 B 20 XMarket Value $300 B $110.0 B - 2/3

So what is “Asset Allocation”?

Institutional Style Asset Allocation

Opportunistic 0% to 10%

Tactical 15% to 30%

Strategic 60% – 80%

Art & Skill

Monkey Math

Courage

Carlee Harmonson, Senior Vice President, Regional Director,Trust & Estate Services The Private Bank

Trust and Estate ServicesTrustees administer personalized, tax-sensitive and court-supervised instruments according to sound fiduciary principles.

Administration

• Living trusts• Testamentary trusts• Charitable trusts• Special needs trusts

Philanthropic Services Grant administration and investment management of:•Foundations•Endowments•Pooled income funds

Estate Settlement • Asset preservation• Complex administrative and accounting services• Preparation and filing of tax returns

Comprehensive Management of Specialty Assets

• Real estate• Mineral, oil, and gas interests• Closely held business interests• Promissory notes

• IRA rollover trusts• Probates• Conservatorships• Guardianships

Wills, trusts, foundations and wealth planning strategies have legal, tax, accounting and other implications. Clients should consult a competent legal or tax adviser.

Role of a TrusteeA trustee ensures your wealth is managed and distributed in accordance with the wishes outlined in your trust. The trustee should maintain a neutral position and balance the interests of current and future beneficiaries. The trustee must avoid conflicts of interest and self-dealing. The trustee must keep beneficiaries informed of trust activity.

As a fiduciary, the trustee is responsible for:• Investing assets appropriately and providing accounting and bookkeeping• Maintaining a complete inventory of all trust assets• Recording all income and principal distributions and receipts• Maintaining documents and records• Filing annual income tax returns• Communicating with and making distributions to beneficiaries throughout the life of the trust

and upon termination, if applicable.

Investingassets appropriately

forgenerational beneficiaries

Accounting and bookkeeping

Tax payment and Recordkeeping

Communication and distribution to beneficiaries

Estate Settlement Services

Executing your wishes as directed in your estate plan is complex and may require extensive probate administration, asset management, sub-trust funding, and disbursements to your beneficiaries.

Your trustee needs to bring objectivity to settling your estate as planned:

Marshalling, investing, and

safeguarding assets

Handling complex administrative and

accounting requirements

Preparing and filing tax returns

Distributing assets when, how, and to whom you specify

Specialty Assets

Many trusts contain specialty assets:

Real EstateManagement

• Management services for commercial, industrial, residential and agricultural property holdings

Mineral, Oil and Gas Interest

• Unique industry expertise and knowledgeable asset managers

Closely Held Business Interest

• Industry specialists who can manage the complexities of private business interests

Loan Management

• Expertise in loans held in fiduciary accounts

Duties of a Trustee

STARTING THE TRUST ADMINISTRATION BOOKKEEPING RESPONSIBILITIES

INVESTMENT MANGEMENT

COORDINATION

RESPONSIBILTIES TO BENEFICIARIES

TAX PAYMENT AND RECORDKEEPING

MAINTAINS NEUTRAL POSITION

DISTRIBUTION UPON TERMINATION

Reviews Trust Agreement

Marshalls the assets

Meets with beneficiary and/or grantor to

determine investment objectives an d

income/principal needs

Manages recordkeeping for all

assets

Completes an inventory of all trust

assets – keeps track of all cost basis and

acquisitions for tax purposes

Arranges for appraisal of trust assets and

determines property insurance needs

Records all income and principal distributions

and receipts

Takes care of all transaction activity

Collects all income, e.g., dividends, interest

payments. Ensures they are reinvested or

distributed as established in

agreement

Draws up investment strategy according to

objectives of trust agreement

Manages investments according to market

circumstances, safety of principal, and

income needs

Regularly reviews performance and

objectives

Makes distributions to beneficiary as directed

by agreement

Supplies detailed statements on a

regular basis outlining principal, income, and

investment activity

Takes care of financial obligations for medical needs, if beneficiary is

ill

Files annual income tax return and

provides information for beneficiary tax

return

Compiles a record of adjusted cost basis and

taxable income

Manages investments to allow minimal tax

exposure

Seeks legal counsel when and if needed

Reports actions to an independent auditor

Follows terms of trust agreement and avoids

conflict of interest

Arranges partial or final distribution according to trust

agreement

Divides the assets of the trust property

between beneficiaries

Supplies accounting information and tax

data

DMF Board Director and Founder of Kling Partners, Carolyn Kling will moderate the panel. Ms. Kling provides family office investment services to family enterprises, family offices and private foundations. Applying valuation tools that integrate business succession and family generational planning and modeling for family members, Ms. Kling evaluates investment portfolios to assess risk adjusted performance on an after tax basis, investment policy, structure, asset allocation, management fees and other risk parameters. Ms. Kling collaborates with client advisors, trust and estate planning attorneys, tax strategists and CPAs to ensure a seamless integrated investment plan to meet investment objectives through generations. Ms. Kling has earned the professional designation of AIFA, Accredited Investment Fiduciary Analyst.

Paul Spitzer, Founder, Advanced Practice Advisors, LLC Mr. Spitzer has been in the financial business for over 25 years. He specializes in Investment Policy Statement construction by aligning the proper asset allocation strategies to each of his clients’ needs. The majority of Spitzer’s career encompassed two decades at AG Edwards, (later Wachovia) where he initiated and concluded two high-profile IPOs valued at $100M each. He is a Member of the Committee for the Fiduciary Standard in Washington DC and is active in various San Diego charities and professional financial associations. Spitzer earned his BA at Idaho State University.

Carolyn P. Taylor, President, Weatherly Asset ManagementMs. Taylor, majority owner of the partnership, is personally and professionally committed to providing comprehensive high-quality investment management services. With over 30 years of portfolio management experience, Ms. Taylor offers a wealth of investment expertise to WAM’s clients. Formerly an investment banker at Dean Witter Reynolds, Inc., NY, a portfolio manager at Neuberger & Berman NY, and Payden & Rygel, LA, Ms. Taylor has managed over $1B in assets during her storied career. Additionally, Ms. Taylor is a member of the Chartered Financial Analysts Society of San Diego, the San Diego Foundation’s Investment Committee, the Jewish Community Foundation and the National Association of Professional Women. Ms. Taylor is a Founding Member of the National Advisors Trust Company with assets of $7.7 B. Ms. Taylor received her BS and BA from Stanford University.

Herb W. Morgan, CEO & Chief Investment Officer, Efficient Market Advisors, LLCPrior to becoming CEO of Efficient Market Advisors, located in Del Mar, Mr. Morgan held the post of Sr. VP of Advisory at Linsco/Private Ledger Financial Services, Inc., Sr. VP with Dreyfus and Sr. VP with ING Funds. Mr. Morgan is involved with philanthropy in education where he served as the Chair of the Investment Committee on the Foundation Chapter of Theta Chi Fraternity, Inc. Mr. Morgan graduated from UC Santa Cruz with a BA in Economics (Honors). Currently Herb is the President of the Board of Trustees of the San Diego City Employees Retirement System (SDCERS) a $5.5 billion dollar public pension plan.  He serves on the SDCERS Investment, Audit, Disability and Business & Governance Committees.  Herb has been seen on CNN, CNBS & Fox News.  Herb writes an investment column for Forbes.

Carlee Harmonson, Sr VP, Reg Dir, Trust & Estate Services The Private Bank, Union BankCarlee leads a team of specialists in wealth planning, investments, risk management and fiduciary services. Carlee has been with Union Bank since 2002 and is a veteran of the trust business with over twenty-five years’ experience in both Personal Trust and employee Benefit Plants. Carlee is a graduate of UC Davis with a BA in Sociology and holds the professional designation “Certified Retirement Services Professional.”