High Net Worth Strategy Investment Process

We begin the process with a thorough review of our client's current situation. We seek to identify the client's true financial needs and goals. In seeking to find a solution to achieve the high net worth client's financial goals, we explore values, relationships, and attitudes toward investments. In essence, we spend time getting to know you. Your needs can be financial, physical, or generational. In evaluating your current investment structure, we evaluate the probability of that investment structure helping you pursue your goals as well as the risk the portfolio holds. In working through this process, we engage in a complete asset-liability analysis to facilitate proper risk management. The goal is to earn an acceptable return (Target Return Rate) while maintaining a comfortable surplus of assets beyond liabilities.

At Todd, we understand the complex nature of our clientele and strive to work with them by helping them to establish the investments required to meet those needs. We work very hard to develop realistic cash flow and liquidity requirements, including evaluation of potential liabilities that may be ahead. Finally, we engage in a discussion of lifestyle objectives. Our purpose is to manage your expectations as well as your portfolio. All of our high net worth clients receive a planning document that lays out the primary, secondary, and tertiary objectives.

Once we have the foundation in place, including a definition of acceptable asset classes, we will create a Custom Asset Allocation study. The Asset Allocation analysis is one of the most critical and requires that we have a full understanding of each client's individual goals. The study is extremely sophisticated and is based upon downside deviation as opposed to standard deviation. In short, we care about returns (volatility) that fail to meet the minimal acceptable rate of return not about those that produce reward. In order to accomplish a successful implementation of asset allocation, we evaluate and incorporate the following:

• A thorough understanding of the history of capital markets.
• Matching expected returns to time frame and needs of the client.
• Creation of a series of custom portfolios to maximize returns and minimize risk.
• Diversification of the portfolio among asset classes.

The third step in the process is to utilize our Large Cap Relative Value portfolio in conjunction with Exchange Traded Index Funds (ETFs) to fill in the asset allocation requirements. Our large cap fund over the past 10, 7, 5, 3 and 1 year periods as of 12/31/05* has outperformed the S&P 500. We actively manage the portion of the asset allocation that requires S&P 500 exposure. The rest of the portfolio will be managed with ETFs in order to eliminate management risk and achieve market returns as inexpensively as possible. The final step in the process is to consistently monitor performance and client needs. We recommend meeting with our clients bi-annually to review performance and update any material changes in client objectives or circumstances. Annually, we will reset the asset allocation and generate an updated plan document. In between meetings, client contact is maintained through phone, conference calls, quarterly updates, and newsletters.

* Past performance is no indication of future performance.

HNW Full Description
HNW Investment Process
HNW Characteristics
HNW Performance
HNW Product Summary
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