Advisory Services Guide

Transcription

1 Financial West Investment Group Inc. Registered Investment Advisor (RIA) Advisory Services Guide SEC File Number Member FINRA/SIPC 4510 E. Thousand Oaks Blvd. Westlake Village, CA For Broker User Only - Not Intended For Distribution Updated on December 31, 2012 Information is subject to change Page 1 of 36 Revised Guide 12/31/12

2 Advisory Service Guide Index 1. PURPOSE OF THIS GUIDE 2. HOW TO GET STARTED DOING FEE BASED BUSINESS WITH FWG 3. RIA DEPARTMENT CONTACT INFORMATION 4. ADVISOR MANAGED ACCOUNTS PROGRAM (AMAP) 4.1 AMAP New Account Paperwork 4.2 AMAP Policies and Procedures 5. SCHWAB MANAGED MUTUAL FUND PPROGRAM UNDER (AMAP) 5.1 Schwab Maximum Fee Schedule 5.2 Schwab New Account Paperwork 5.3 Schwab Policies and Procedures 6. THIRD PARTY MONEY MANAGER PROGRAM (TPMM) 6.1 TPMM Fee Schedule 6.2 TPMM New Account Paperwork 7. FINANCIAL PLANNING AND CONSULTING PROGRAM 7.1 Fee Schedule 7.2 New Account Paperwork 8. FWG IN-HOUSE MANAGED ACCOUNTS PROGRAM 8.1 Alpha Optimization Program (AOP) managed by Robert Kelsey 8.1a AOP Maximum Fee Schedule 8.1b NFS Account *Transaction Fees 8.1c AOP New Account Paperwork 8.2 High Impact Portfolio (HIP) managed by Tom Moser 8.2a HIP Maximum Fee Schedule 8.2b NFS Account *Transaction Fees 8.2c HIP New Account Paperwork 8.3 Progressive Track Investments (PTI) managed by Rick Torgerson 8.3a PTI Maximum Fee Schedule 8.3b PTI New Account Paperwork Page 2 of 36 Revised Guide 12/31/12

3 9. NON DISCRETIONARY FEE BASED ACCOUNTS (NDFBA) 9.1 NDFBA Maximum Fee Schedule 9.2 NDFBA New Account Paperwork 9.3 NDFBA Policies and Procedures 10. MANAGED ACCOUNT SOLUTIONS PROGRAM (MAS) 10.1 MAS Separate Accounts Program (SMA) 10.1a SMA Fee Schedule 10.2 MAS Multi-Managers Accounts Program (MMA) 10.2a MMA Fee Schedule 10.3 MAS Unifed Managed Accounts Program (UMA) 10.3a UMA Fee Schedule 10.4 MAS Mutual Fund Advisory Program (MFW) 10.4a MFW Fee Schedule 10.4b ETF Core and Total Return Strategy 10.4b1 ETF Progam Fee Schedule 10.5 MAS Rep As Portfolio Manager (RPM) 10.5a RPM Fee Schedule 10.6 MAS Enhanced Performance Reporting 10.7 MAS New Account Paperwork 11. SOLICITORS PROGRAM 12. ADVISORY FEE BILLING PROCEDURES 12.1 Advisory Fee Billing procedures apply to the following RIA Programs: 12.2 Monthly Management Fees FOLIOfn Platform only 12.3 Quarterly Management Fees NFS Platform 12.4 Proated Management Fees 12.5 Financial Planning and Consulting Fees 12.6 Rejected Fees 12.7 Waived Fees 12.8 Significant Contributions and Withdrawals Page 3 of 36 Revised Guide 12/31/12

4 13. CLOSURE OF RIA FEE BASED ACCOUNT PROCEDURE 14. NFS PREFIX BY RIA PROGRAM AND ADDITIONAL FEES & MISC. INFORMATION 14.1 Fee Based Accounts Prefixes 14.2 Fee Based Accounts Transaction Fees Program Charges 14.3 How to view the list of NFS mutual funds on Streetscape 15. OTHER RIA POLICY AND PROCEDURES b-1 PROCEDURES (NFS Fee Based Accounts Only) 15.1a Qualified Plan 15.1b Non-Qualified Plans 15.2 FWG Journal of Assets Review Commission to a Fee based account review 15.3 FWG Mutual Fund C Shares in a Fee Based Account 15.4 Fixed Income Transactions in a Fee Based Account 15.4a Prior written disclosure regarding the conflicts arising from principal bond trades. 15.4b Disclosure for each transaction of the capacity in which the RIA/BD is acting, and client consent before each transaction. (2 Consent Forms Pre-execution and Pre-settlement forms) 15.4c New Issues Principal Transactions: 15.4d Trading Procedures 15.5 FWG Agency Cross Transactions 15.6 Advisor and Employee Personal Trading Procedures 15.7 Performance Advertising Procedures 15.8 Block Trading Policy and Procedures 15.8a Block Trade order procedures in fee based accounts 15.9 Trade Errors Page 4 of 36 Revised Guide 12/31/12

5 1. PURPOSE OF THIS GUIDE This Service Guide is intended to provide information and guidance to the Advisor using the available programs under Financial West Group s (FWG) RIA. This service guide also includes FWG s internal policy and procedures which the Advisor is required to understand and adhere to while doing fee based business with FWG. 2. HOW TO GET STARTED DOING FEE BASED BUSINESS WITH FWG Complete Form Schedule B Available on the FWG website under the RIA Department Area How to get started in fee based business Pay $ annual - SEC filing, IARD, and State Registration Fees. License requirements Series 7 and 65 or 66 All new fee based clients must receive a copy of FWG s Form ADV Part 2A and 2B. 3. RIA DEPARTMENT CONTACT INFORMATION Phone: (805) / Fax: (805) Jill Jaglowski - RIA Department Manager (X 1117) [email protected] Direct Questions relating to becoming an advisory Rep under FWG s RIA Oversees all RIA Projects, RIA Compliance, Quality Control Administers the In-house Managed Accounts Program Managed Account Solutions (MAS) Platform Nicole White - RIA Department Supervisor (X 1110) [email protected] Reviews all new account paperwork for all RIA Programs, Advisory Fees - Controls billing of all advisory fees for all RIA Programs. Schwab Administrator Mutual Funds Program, Schwablink.com user set up, and Authentication card set up. RIA Performance reporting, Portfolio Compliance Reviews, Quality Control 4. ADVISOR MANAGED ACCOUNTS PROGRAM (AMAP) Overview This program allows the FWG Advisor to directly manage the investment portfolio on a discretionary or non-discretionary basis using National Financial Services as our primary clearing firm. Accounts in this program may include no load or load waived mutual funds, stocks, investment grade bonds and other securities individually approved by FWG, which may include covered calls and hedged put options. The minimum account size for this program is $25,000. The maximum fee schedule for this program is a follows: Maximum Advisor Fee Account Size (subject to negotiation) $25,000 - $500, % $500,000 - $1,000, % Over $1,000, % Page 5 of 36 Revised Guide 12/31/12

6 4.1 AMAP New Account Paperwork NFS New Account paperwork Investment Advisory Agreement Investment Policy Statement (IPS) This document is recommended but not required. Provide the client with a copy of FWG s ADV Part 2A and 2B 4.2 AMAP Policies and Procedures Minimum account size is $25,000 (Maximum of 2 accounts can meet this minimum). If an account is under $25,000, FWG charges $15.00 per account per quarter. This amount comes out of the portion the representative charges to the client. Purchases on equities under $5.00 in a fee based account may only be allowed on companies that have at least 2 billion in market cap. Stocks must have 2 years trading history (No IPO purchases are allowed) 20% Over concentrated Position - Purchases of any one stock can not exceed 20% of the portfolio value without written consent from the client. Performance Reports The RIA Department generates performance reports on a quarterly basis, and then sends the reports in a pdf file to the Advisor. The Advisor is then responsible for adding a cover letter with the report and mailing or ing the report to the client. The S&P 500 is the default benchmark within our performance reports. Based on the clients stated risk tolerance within the IPS, you have the option to have a blended benchmark compare to the account performance within the client s quarterly performance report. This can be requested through Nicole White. 5. SCHWAB MANAGED MUTUAL FUND PPROGRAM UNDER (AMAP) Overview Financial West Group s Managed Mutual Fund Program at Schwab Institutional allows the client to invest their assets into no-load mutual funds, or load funds purchased at NAV, without a sales charge. 5.1 Schwab Maximum Fee Schedule Account Size MAXIMUM Advisor Fee $25,000 - $250, % $250,000 - $500, % $500,000 - $1,000, % Over $1,000,000 Negotiable 5.2 Schwab New Account Paperwork To gain access to the Schwab Institutional website and to get your own Schwablink number, please contact Nicole White, [email protected] Schwab New Account Application FWG Investment Advisory Agreement Provide client with a copy of FWG s ADV Part 2A and 2B FWG (Financial West Group) Schwab Master Account PAM (Progressive Asset Management) Schwab Master Account Page 6 of 36 Revised Guide 12/31/12

7 IMPORTANT NOTE: All new account applications need to be sent to Nicole White for review and approval before processing. Copies will be made and then sent onto Schwab to be opened. Please contact Nicole White to get set up with access to schwabinstitutional.com. 5.3 Schwab Policies and Procedures Minimum account size is $25,000 (Maximum of 2 accounts can meet this minimum). If an account is under $25,000, FWG charges $15.00 per account per quarter minus the 9.25bps. is Schwabs broker workstation for our Advisors. Schwab retains all trails. No transaction fees on most mutual fund trades. If you decide to purchase a transaction fee fund, Schwab will alert you before the trade is placed of the transaction fee charge. Quarterly The RIA Department generates performance reports, conducts compliance reviews, and bills the fees. 6. THIRD PARTY MONEY MANAGER PROGRAM (TPMM) Overview Money Managers manage your client s account by investing their money on a discretionary basis based on their financial goals and objectives. The Money Manager is between the client and the Advisory Rep, and receives an asset-based fee for their service. The Advisor will receive part of this fee. The Approved Money Manager list can be found on the FWG website under the RIA Section>RIA Fee Based Programs>Third Party Money Manager Program> Approved Products. 6.1 TPMM Fee Schedule The fee schedule varies between all Money Mangers. Contact Money Manager directly for their Fee Schedule. 6.2 TPMM New Account Paperwork Depending upon where the Money Manager clears through will determine which New Account paperwork your client will need to complete. Contact the Money Manager directly to see what paperwork needs to be completed. All original documents must flow through the RIA Department. The RIA Department staff will then make copies and then forward direct to the Money Manager. Provide client with a copy of FWG s ADV Part 2A and 2B There are two types of arrangements an Advisor will have with the Money Manager. Advisory Fee The Money Manager pays out an Advisory Fee to the Advisor. Referral Fee - The Advisor is considered a Solicitor and will therefore be paid a referral fee. All clients under a Referral Fee arrangement must sign the Managers Solicitation Disclosure Document along with FWG s Solicitation Disclosure document. This form can be found on the FWG website under RIA>Third Party Money Manager Program >Solicitation Disclosure Document. Page 7 of 36 Revised Guide 12/31/12

8 7. FINANCIAL PLANNING AND CONSULTING PROGRAM Overview In this program, the FWG Advisor will provide financial planning or investment consulting services for a fee. The nature and scope of services are subject to negotiation between the Advisor and the client, and may include financial planning, tax planning analysis, personal risk management review, and estate asset coordination and planning, cash flow analysis, retirement planning, and education planning and asset allocation. 7.1 Fee Schedule Consulting services are generally provided on an hourly basis, at a rate up to $ per hour, subject to negotiation, or on a fixed fee basis, or a percentage of assets managed, as negotiated with the client. The end client must receive a copy of FWG s ADV Part 2A and 2B. 7.2 New Account Paperwork To include with new plans: Financial Planning and Consulting Agreement. Copies of any plans or written recommendations for the client (if there are none at this time please make note and attach to agreement). A check made payable to FWG or a letter of authorization to debit the fee from the clients NFS account (if applicable). To include with any check for existing client: A check made payable to FWG or a letter of authorization to debit the fee from the clients NFS account (if applicable). Invoice with your name - there is a generic invoice the Advisor can use available on the FWG website under RIA Department/ Financial Planning and Consulting. Copies of any plans or written recommendations for the client. To Include with 401(k) Plans: Financial Planning and Consulting Agreement. ERISA Qualified Retirement Plans Direct Business New Account Form. Copies of any plans or written recommendations for the client. List of Investments that have been selected for the plan. 8. FWG IN-HOUSE MANAGED ACCOUNTS PROGRAM Overview FWG offers the Advisor three managed trading strategies under our In-house managed accounts program. Our In-house managers are FWG registered representatives who, in addition to managing their own book of business, will use their proven investment strategy to manage your client portfolios as well. 8.1 Alpha Optimization Program (AOP) managed by Robert Kelsey This program is actively managed using investment models that follow a strict buy and sell discipline. Clients may choose the socially-screened version of the AOP models. This program can be opened using either NFS or FOLIOfn as the custodian, depending on the account size. Please contact Robert Kelsey for more information directly at (805) Page 8 of 36 Revised Guide 12/31/12

9 8.1a AOP Maximum Fee Schedule FOLIOfn - Minimum account size is $25,000 (WRAP account, no transaction fees) Account Size Platform Fee MAXIMUM Advisor Fee $25,000 - $49, %.85% $50,000 - $74, % 1.45% $75,000 - $99, % 1.65% $100,000 - $124, % 1.80% $125,000 - $250, % 1.85% NFS - Minimum account size is $100,000 (*Transaction fees apply) Account Size Manager Fee MAXIMUM Advisor Fee $100,000 - $500,000.50% 2.50% $500,001 - $1,000,000.50% 2.00% Over $1,000,001.50% 1.50% 8.1b NFS Account *Transaction Fees $14.95 for equities, $25 for government bonds, $14.95 for municipals, $25 for options up to 10 contracts, $35 for options between 11 and 25 contracts, and $75 for foreign securities. 8.1c AOP New Account Paperwork FOLIOfn is an online platform Follow the FOLIOfn New Account set up procedures to get started. The procedures are available on the FWG website under RIA/In-house Managed Accounts Program / Alpha Optimization Program / FOLIOfn New Account set up procedures doc. FOLIOfn Account Send in a copy of the New Account /client information page off of the Foliofn website signed by the client. Remember this is an online program and the Advisor sets up the Account and gives access to the RIA Dept. and Manager to trade. All of the details on how to go through the website are within the procedures as stated above. NFS Account NFS New Account paperwork. Investment Advisory Program Agreement. Advisor Disclosure Form.- This form can be found under the Alpha Optimization Program on the FWG website. Provide client with a copy of FWG s ADV Part 2A and 2B 8.2 High Impact Portfolio (HIP) managed by Tom Moser The High Impact Portfolio is managed by Tom Moser. Mr. Moser provides a customized approach to investing in companies that address the urgent problems of our day, namely those associated with energy use, water quality, food and nutrition, proactive healthcare and sustainable development. This program clears though NFS only. If you would like more information on this program please contact Tom Moser directly at (520) Page 9 of 36 Revised Guide 12/31/12

10 8.2a HIP Maximum Fee Schedule NFS (Minimum account size is $50,000 transaction fees apply above 40 trades per year) Account Size Platform Fee MAXIMUM Advisor Fee $50,000 - $100, % 1.15% $100,001 - $150, % 1.60% $150,001 - $250, % 1.80% Next $250, % 2.10% Next $500, % 1.90% Next $1,000, % 1.55% Next $3,000, % 1.65% Over $5,000, % negotiable Minimum Platform/Manager fee - $$ per year per account ($ per quarter) 8.2b NFS Account *Transaction Fees $14.95 for equities, $25 for government bonds, $14.95 for municipals, $25 for options up to 10 contracts, $35 for options between 11 and 25 contracts, and $75 for foreign securities. 8.2c HIP New Account Paperwork NFS New Account paperwork. Investment Advisory Program Agreement. Advisor Disclosure Form.- Form is under the High Impact Program on the FWG website. Provide client with a copy of FWG s ADV Part 2A and 2B 8.3 Progressive Track Investments (PTI) managed by Rick Torgerson This program is managed by Progressive Asset Managements (PAM), Rick Torgerson. PAM is a division of FWG that specializes in socially responsible investing. The program consists of a suite of portfolios, each of which tracks index benchmarks in the following asset classes: Large Cap Growth, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, and International. 8.3a PTI Maximum Fee Schedule Minimum Account Size $25,000 Progressive Asset Management (PAM) Advisor Fee Schedule: Account Size Platform Fee MAXIMUM Advisor Fee $25,000 - $100, % 2.00% $101,000 - $250,000.95% 2.05% $251,000 - $500,000.90% 2.10% $501,000 - $750,000.80% 1.70% $751,000 - $1 Million.75% 1.75% Over 1 Million.75% 1.25% NON-Progressive Asset Managment Advisor Fee Schedule: Account Size Platform Fee MAXIMUM Advisor Fee $25,000 - $100, % 1.95% $101,000 - $250, % 2.00% $251,000 - $500,000.95% 2.05% $501,000 - $750,000.85% 1.65% $751,000 $1 Million.80% 1.70% Over 1 Million.80% 1.20% Page 10 of 36 Revised Guide 12/31/12

11 8.3b PTI New Account Paperwork FOLIOfn is an online platform Follow the FOLIOfn New Account set up procedures to get started. The procedures are available on the FWG website under RIA/In-house Managed Accounts Program / FOLIOfn New Account set up procedures doc. FOLIOfn Account Send in a copy of the New Account /client information page off of the Foliofn website signed by the client. Remember this is an online program. The Advisor sets up the Account and gives access to the RIA Dept. and Manager to trade. All of the details on how to go through the website are within the procedures as stated above. Investment Advisory Program Agreement. Provide client with a copy of FWG s ADV Part 2A and 2B 9. NON DISCRETIONARY FEE BASED ACCOUNTS (NDFBA) Overview Advisory Managed Non Discretionary Fee Based Accounts can be opened using only NFS as the custodian. These accounts are client driven and rely on the client to make the investment decisions. These accounts are offered either as transaction fee or Asset Based fee with an 80 or 240 trade threshold. Once the trade threshold is reached per year the normal fee based account transaction fees apply. 9.1 NDFBA Maximum Fee Schedule NFS Transaction fee Program Account Size MAXIMUM Advisor Fee $25,000 - $500, % $500,000 - $1,000, % Over $1,000, % Asset Based Program (80 trade threshold minimum Platform fee is $625 per year) Account Size Platform Fee MAXIMUM Advisor Fee (FWG/NFS) First $250, % 2.30% Next $250, % 2.55% Next $500, % 2.32% Next $1,000, % 1.86% Next $3,000, % 1.90% Over $5,000, % 1.92% Asset Based Program (240 trades minimum Platform fee is $1,250 per year) Account Size Platform Fee MAXIMUM Advisor Fee (FWG/NFS) First $250, % 2.00% next $250, % 2.35% next $500, % 2.31% next $1,000, % 1.85% next $3,000, % 1.89% Over $5,000, % 1.91% Page 11 of 36 Revised Guide 12/31/12

12 9.2 NDFBA New Account Paperwork NFS New Account paperwork Investment Advisory Agreement Investment Policy Statement (IPS) This document is recommended but not required. Provide the client with a copy of FWG s ADV Part 2A and 2B Non-Discretionary Addendum form Must be signed by client. (This form can be found under the FWG website> RIA> RIA Programs>Advisor Managed Accounts Program) 9.3 NDFBA Policies and Procedures Minimum account size is $25,000 (Maximum of 2 accounts can meet this minimum). If an account is under $25,000, FWG charges $15.00 per account per quarter. This amount comes out of the portion the representative charges to the client. Performance Reports The RIA Department generates performance reports on a quarterly basis and then sends the reports in a pdf file to the Advisor. The Advisor is then responsible for adding a cover letter with the report and mailing or ing the report to the client. The S&P 500 is the default benchmark within our performance reports. Based on the clients stated risk tolerance within the IPS, you have the option to have a blended benchmark compare to the account performance within the client s quarterly performance report. This can be requested through Nicole White. 10. MANAGED ACCOUNT SOLUTIONS PROGRAM (MAS) Overview The Managed Accounts Solutions Program (MAS) is designed to help the Advisor attract the higher net worth clients seeking a higher level of service, with the benefit of a professional investment advisor. This all-in-one program will help annuitize your book of business, increase your recurring revenue stream, assists the Advisor in the transition from commission to a fee based model, and save time with one platform to help grow your fee based business. Because MAS is integrated directly into Streetscape, NFS s premier broker workstation, it is designed to streamline your ability to manage your book, target clients, and grow your fee-based business. Through MAS, the Advisor will have access to a selection of programs below MAS SEPARATE ACCOUNTS PROGRAM (SMA) (NFS Prefix KWW) The SMA Program provides the Advisor access to a range of separate account managers and investment disciplines or investment models, including certain statistical data on certain money managers available through the SMA Program ( money manager due diligence ) to assist the Advisor in evaluating managers. The program also includes money management, performance reporting, and associated services and support (including, but not limited to, trading, reconciliation, and fee calculation). Page 12 of 36 Revised Guide 12/31/12

13 10.1a SMA Fee Schedule (Product Level 66) NFS Prefix - KWW Equity and Balanced Managed Accounts Fixed Income Managed Accounts Manager Blend Managed Accounts Mutual Fund Choice Managed Accounts Account Value *Platform Fees Max Client Fee *Platfor m Fees Max Client Fee *Platform Fees Max Client Fee *Platform Fees Max Client Fee First $250, % 3.00% 0.45% 2.50% 0.60% 3.00% 0.45% 2.50% Next $250, % 3.00% 0.40% 2.50% 0.45% 3.00% 0.40% 2.50% Next $500, % 2.50% 0.33% 2.00% 0.32% 2.50% 0.33% 2.00% Next $1,000, % 2.00% 0.30% 1.50% 0.28% 2.00% 0.30% 1.50% Next $3,000, % 2.00% 0.27% 1.50% 0.24% 2.00% 0.27% 1.50% > $5,000, % 2.00% 0.24% 1.50% 0.20% 2.00% 0.24% 1.50% **Min Program Fees $ $ $ $ Min Account Size $ 100, $ 100, $ 100, N/A *Platform Fees The fees shown above represent the total platform fees, but exclude the Money Managers and Advisor portion of the fee. The Advisors portion and Money Managers portion of the fee will be in addition to the platform fee. Money Manager fee varies. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees Included Postage and Service Fee (trade confirm) $ MAS - MULT-MANAGER ACCOUNT PROGRAM (MMA) (NFS Prefix K70) The Multi-Manager ( MMA ) program combines multiple investment styles facilitating diversification within one single account. The program provides the Advisor with access to professional money management, manager due diligence, performance reporting, and associated services and support (including but not limited to, trading, reconciliation, and fee calculation). Additionally, the MMA includes ovelay portfolio management to coordinate trading and rebalancing of the account. 10.2a MMA Fee Schedule (Product Level 94) Prefix K70 Account Value *Platform Fees Maximum Client Fee First $250, % 3.00% Next $250, % 3.00% Next $500, % 2.50% Next $1,000, % 2.00% Next $3,000, % 2.00% > $5,000, % 2.00% **Minimum Program Fees $ Minimum Account Size $ 250, *Platform Fees The Platform fee includes the Money Manager, Overlay Portfolio Manager fee, and Clearing fees, but does not include the Advisors portion of the fee. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees - Included Postage and Service Fee (trade confirm) $6.00 Page 13 of 36 Revised Guide 12/31/12

14 10.3 MAS UNIFIED MANAGED ACCOUNTS PROGRAM (UMA) (NFS Prefix K76) The MAS Advisor-Directed Unified Managed Account ( UMA ) program enables the Advisor to select and combine Separate Account Manager (SMA) models, Mutual Funds, and ETFs within a single account. The program includes professional money management, performance reporting, and associated services and support (including, but not limited to, trading, reconciliation, and fee calculation). Additionally, the UMA includes overlay portfolio management to coordinate trading and rebalancing of the account. 10.3a UMA Fee Schedule (Product Level 94) Prefix K76 Account Value *Platform Fees Maximum Client Fee First $500, % 3.00% Next $500, % 2.50% Next $1,000, % 2.00% Next $3,000, % 2.00% > $5,000, % 2.00% **Minimum Program Fees $ Minimum Account Size $ 150, *Platform Fees The Platform fee includes the Overlay Portfolio Manager fee, and Clearing fees but excludes the Money Manager fee and the Advisors portion of the fee. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees - Included Postage and Service Fee (trade confirm) $ MAS MUTUAL FUND ADVISORY PROGRAM (MFW) (NFS Prefix K72 and K77) The Wrap Strategists program provides models of mutual funds and/or ETFs. Features include professional money management, performance reporting, and associated services and support (including, but not limited to, trading, reconciliation, and fee calculation. 10.4a MFW Fee Schedule (Product Level 69) Wrap Strategiest Under K72 Prefix Include: Icon Strategic Advisors Portfolios Veris Wealth Partners (SRI ETF Portfolios) PMC SIGMA Mutual Fund Solutions Program Page 14 of 36 Revised Guide 12/31/12

15 Icon Strategic Advisors Veris Wealth PMC SIGMA Account Value *Platform Fees *Platform Fees *Platform Fees *Platform Fees Maximum Client Fee First $250, % 0.40% 0.35% 0.45% 3.00% Next $250, % 0.40% 0.35% 0.45% 3.00% Next $500, % 0.33% 0.27% 0.38% 2.50% Next $1,000, % 0.28% 0.22% 0.33% 2.00% Next $3,000, % 0.24% 0.20% 0.28% 2.00% > $5,000, % 0.21% 0.17% 0.24% 2.00% **Minimum Program Fees $150 $150 $150 $150 $150 Minimum Account Size $50,000 $50,000 $50,000 $50,000 $50,000 *Platform Fees The Platform Fee excludes the Wrap Strategist Manager Fees and Advisors portion of the fee. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees - Included Postage and Service Fee (trade confirm) $6.00 Wrap Strategiest Under K77 Prefix Include: BCM - Beaumont Financial Partners Weatherstone Capital Management isectors BTS Asset Management BCM Weatherstone isectors BTS Account Value *Platform Fees *Platform Fees *Platform Fees *Platform Fees Maximum Client Fee First $250, % 0.60% 0.55% 0.55% 3.00% Next $250, % 0.45% 0.45% 0.45% 3.00% Next $500, % 0.35% 0.35% 0.35% 2.50% Next $1,000, % 0.29% 0.29% 0.29% 2.00% Next $3,000, % 0.26% 0.26% 0.26% 2.00% > $5,000, % 0.22% 0.22% 0.22% 2.00% **Minimum Program Fees $450 $450 $400 $400 Minimum Account Size $50,000 $50,000 $50,000 $50,000 *Platform Fees The Platform Fee may exclude the Wrap Strategist Manager Fees and Advisors portion of the fee. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees - Included Postage and Service Fee (trade confirm) $6.00 Page 15 of 36 Revised Guide 12/31/12

16 10.4b ETF Core and Total Return Strategy The PMC Tactical ETF Portfolio Series aims to deliver enhanced returns with defined risk controls. The ETF Portfolio Series quantifies relationships between key Economic, Technical, Fundamental and Risk factors for each equity category, and aggregates these measures to generate bullish or bearish tactical signals. Two versions within each risk return category are Core and Total Return. Core Strategy: To actively monitor and quantify the risk-adjusted expected returns of equity sectors and countries relative to fixed income and dynamically alter corresponding allocations accordingly. Total Return Strategy: To actively monitor and quantify the risk-adjusted expected returns of equity sectors relative to fixed income, and dynamically alter corresponding allocations accordingly. By using leveraged ETFs where available, we seek to increase total returns by increasing allocations to where we believe we can achieve enhanced risk-adjusted performance with an emphasis on higher yielding asset classes. Below is the breakdown of model portfolios available and the fee schedule for this program. 10.4b1 ETF Progam Fee Schedule Tactical ETF Core Wrap Strategy Tactial ETF Total Return Wrap Strategy NFS Prefix K77 Minimum - $50,000 NFS Prefix K77 Minimum - $100,000 Program Risk Program Risk ETF Conservative Growth Conservative Growth ETF Conservative Conservative ETF Country Rotation Moderate ETF Conservative Growth Conservative Growth 10.5 ETF Fixed Income Capital Preservation ETF Growth Growth ETF Growth Growth ETF Moderate Moderate ETF Moderate Moderate ETF Moderate Growth Moderate Growth ETF Moderate Growth Moderate Growth ETF Sector Rotation Moderate ETF Sector Rotation Moderate ETF Conservative Conservative PMC Tactical ETF Portfolio Series Fee Schedule Account Size Sponsor Fee PMC Managers Fee Sample Advisor Fee First $250, %.30% to.40% 1.00% next $250, %.30% to.40% 0.85% next $500, %.30% to.40% 0.75% next $1,000, %.30% to.40% 0.70% next $3,000, %.30% to.40% 0.65% over $5,000, %.30% to.40% 0.60% **Minimum Program Fees - $ *Platform Fees The Platform Fee may exclude the Wrap Strategist Manager Fees and Advisors portion of the fee. **Minimum Program/Sponsor Fees On a quarterly basis and per account basis, if the Platform Fee is less than the quarterly minimum fee, then the quarterly minimum fee is applied and is debited out of the Advisors portion of the fee. Billing Mode Advance (upfront) / Asset Based Transaction Fees - Included Postage and Service Fee (trade confirm) $6.00 Page 16 of 36 Revised Guide 12/31/12

17 10.5 Rep as Portfolio (RPM) Program The Rep as Portfolio Manager Program provides modeling and diagnostic tools, enabling representatives to act as portfolio managers and manage model portfolios for their clients. Other tools include a web-based proposal generator, rebalancing, drift tolerance controls, and system-generated alerts related to drift and rebalancing. Performance reporting is not included in the platform fee. 10.5a RPM Fee Schedule Monthly Platform Fee Charged to the Advisor - $200 per month Performance Reporting - $75.00 annual fee charged to the client (optional) Maximum Advisory fees and Transaction Fees - Please reference the AMAP program fee structure MAS Performance Reporting Performance Reporting - $75.00 annual fee charged to the client (optional) 10.7 MAS New Account Paperwork After you complete a proposal through the MAS system, all necessary paperwork will be generated and populated with the information you have provided on the client. You will be required to print out all of the documents, have the client sign, and then submit to FWG s RIA Department. 11. SOLICITORS PROGRAM Financial West Group may pay referral fees to independent persons or firms ( Solicitors ) for introducing clients to us. Whenever we pay a referral fee, we require the solicitor to provide the prospective client with a copy of this document (our Firm Brochure) and a separate disclosure statement that includes the following information: The Solicitor s name and relationship with our firm; The fact that the Solicitor is being paid a referral fee; The amount of fee paid; and Whether the fee paid to us by the client will be increased above our normal fees in order to compensate the Solicitor. As a matter of firm pratice, the advisory fees paid to us by clients referred by solicitors are not increased as a result of any referral. 12. ADVISORY FEE BILLING PROCEDURES Overview The FWG Advisor may receive a fee based on a percentage of assets under management, or a fixed or hourly fee for providing financial planning and consulting services. For asset based fees, FWG debits management fees monthly or quarterly, depending on the program and platform. See details below. Page 17 of 36 Revised Guide 12/31/12

18 12.1 Advisory Fee Billing procedures apply to the following RIA Programs: Advisor Managed Accounts Program In-house Managed Accounts Program Schwab Institutional Mutual Fund Program Non-Discretionary Fee Based Program 12.2 Monthly Management Fees FOLIOfn Platform only The FOLIOfn platform is only set up for the Alpha Optimization Program (AOP) managed by our in-house manager Robert Kelsey and Progressive Track Investments (PTI) managed by Rick Torgerson. Monthly management fees are calculated based on the previous months end value and the number of days in the subsequent month. The fees are debited from the clients account around the 10 th of the month and then paid out to the Advisor on the 25 th of that same month Quarterly Management Fees NFS Platform Quarterly management fees are calculated based on the quarter end value, and the number of days in the subsequent quarter for upfront billing. Within 7 business days of the quarter end, the advisor will receive a breakdown of their fees to review. The Advisory fees will be debited from the clients account the third week after quarter end and then paid out to the Advisor on the on their commission run on the 10 th of the following month Proated Management Fees New Accounts New Account fees are prorated based on the number of days from the start date within the previous month through to the number of days in the following month for FOLIFfn Accounts and quarter for NFS Accounts. Significant Contributions and Withdrawals Contribution and withdrawals in the amount of $10,000 and greater will generate prorated fees through to the next billing period. Closed Accounts The agreement may be terminated by either FWG or the client at any time upon 30 days written notice without penalty. Any prepaid and unearned fees will be refunded to the client upon termination Financial Planning and Consulting Fees Advisors charge either an hourly, fixed or quarterly Advisory fee for Financial Planning and Consulting. Page 18 of 36 Revised Guide 12/31/12

19 Send copy of client invoice to FWG along with the fees payable to FWG. The Advisor will then be paid out the fee the following payroll Rejected Fees Every quarter we send out notifications to our advisors to make sure there is enough cash to cover the Advisory fees first with the billing reports and thereafter with the performance reports sent to the Advisor prior to debiting fees. A $15.00 fee will be charged directly to the Advisor for every account that incurred a rejected fee for not having enough cash to cover the debit. We will do a second attempt to debit the fees on the last business day of the month. All fees originally rejected and go through on the second attempt will be paid on the 25 th commission run instead of the 10 th of that month. Fees that are rejected after the second attempt will not debited and paid until the following quarter Waived Fees If an Advisor chooses to waive the advisory fee charged to the client, a $15.00 minimum fee will be charged directly to the Advisor per quarter. The Advisor will need to decide whether or not the account is more appropriate to be set up as a commission account versus a fee based account Significant Contributions and Withdrawals Contribution and withdrawals in the amount of $10,000 and greater will generate a prorated fee through to the next billing period. The agreement may be terminated by either FWG or the client at any time upon 30 days written notice without penalty. Any prepaid and unearned fees will be refunded to the client upon termination. Management Fee Billing Cycle Advanced Billing Calendar AMAP, TPMM (clearing through NFS), MAS and Schwab Platforms First Quarter (90/91 Days) Second Quarter (91 Days) Third Quarter (92 Days) Fourth Quarter (92 Days) January (31 Days) December New Accounts Q1 Quarterly Cycle December Contributions December Terminations April (30 Days) March New Accounts Q2 Quarterly Cycle March Contributions March Terminations July (31 Days) June New Accounts Q3 Quarterly Cycle June Contributions September Terminations October (31 Days) September New Accounts Q4 Quarterly Cycle September Contributions September Terminations February (28/29 Days) Q1 Quarterly Cycle Paid January New Accounts January Contributions January Terminations May (31 Days) Q2 Quarterly Cycle - Paid April New Accounts April Contributions April Terminations August (31 Days) Q3 Quarterly Cycle - Paid July New Accounts July Contributions July Terminations November (30 Days) Q4Quarterly Cycle - Paid October New Accounts October Contributions October Terminations March (31 Days) February New Accounts February Contributions February Terminations June (30 Days) May New Accounts May Contributions May Terminations September (30 Days) August New Accounts August Contributions August Terminations December (31 Days) November New Accounts November Contributions November Terminations Page 19 of 36 Revised Guide 12/31/12

20 13. CLOSURE OF RIA FEE BASED ACCOUNT PROCEDURE Overview It is the Advisors responsibility to fill out the RIA Fee Based Account Closure of Account Form when your client closes their fee based account. This form can be found under the RIA Department forms on the FWG website. The completed document can be faxed to the RIA Department at NFS PREFIX BY RIA PROGRAM AND ADDITIONAL FEES & MISC. INFORMATION Overview All fee based accounts held at NFS are set up with an NFS New Account prefix that correlates with FWG s RIA programs; if they are not set up properly the account will have to be repapered with all new account documents Fee Based Accounts Prefixes K2Q Asset Based Fee 240 Trade Threshold Program K70 MAS - Multi Manager Accounts Program (MMA) K71 - PAM Reps - NON-Discretionary 80 Trade Asset Based Pricing Wrap Program K72 MAS - Wrap Strategist Program K73 High Impact Program Wrap Fee Program K74 - Tarzana Branch - Fee based (Transaction Fee Based Program) K75 - PAM Branch (Transaction Fee Based Program) K76 MAS - Unified Managed Accounts Program (UMA) K77 MAS Wrap Strategist Program K7F - FWG & PAM - Discretionary 80 Trade Asset Based Pricing Wrap Program K7K MAS - Rep as Portfolio Manager Program (RPM) KWX - FWG Branch - Fee Based (Transaction Fee Based Program) KWT - FWG Reps - NON-Discretionary 80 Trade Asset Based Pricing Wrap Program KWW MAS - Separately Managed Accounts Program (SMA) 14.2 Fee Based Accounts Transaction Fees Program Charges Stock Trades - $18.95 (unless otherwise noted below) Options 1 to 10 Contracts - $ to 25 Contracts - $ Contracts - $50.00 Municipal and Corporate Bonds - $14.95 Government, CD's and Mortgage Backed Securities - $25.00 Mutual Funds (Transaction Fee list of funds) - $10.00 Mutual Funds Non-Transaction Fee (NTF) list of funds - $0.00 (subject to change) PIP's and SWP's - $0.00 High Impact (charged when over 40 trade threshold) - $14.95 transaction fees Alpha Optimization Program (AOP) - $14.95 transaction fees MAS Accounts All MAS accounts except Rep as Portfolio Manager (RPM) Accounts have clearing included within the asset based platform fee, however there is a $6.00 postage and services fee charged on each trade charged to the client. The RPM program follows the same transaction fee schedule as above. Page 20 of 36 Revised Guide 12/31/12

21 14.3 How to view the list of NFS mutual funds on Streetscape Please visit: Streetscape /Resources /Products & Services /Under Leading Investment Solutions /Mutual funds/bottom of page Institutional Funds Network /IFN Fund Directory 15 OTHER RIA POLICY AND PROCEDURES b-1 PROCEDURES (NFS Fee Based Accounts Only) 15.1a Qualified Plans (Ex: IRA s, PSP s, Defined Contribution Plans) All 12b-1 fees in an NFS fee based qualified plan account are credited back to the client on a quarterly basis. See rule below: The prohibition on receipt of 12b-1 fees applies to both ERISA plans and IRA accounts under the Internal Revenue Code ("IRC").Section 4975, applies to both ERISA Plans and IRAs under the definition of "plan" in Section 4975(e)(1), and imposes an excise tax on certain prohibited blotransactions, as defined in Section 4975(c).The term "prohibited transaction," as defined in Section 4975(c)(F) includes receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan. This rule is interpreted to mean that an investment adviser (who is deemed a fiduciary to an ERISA plan or IRA account if he provides continuous investment advice for a fee) may not receive compensation from someone other than the ERISA plan or IRA account in connection with a purchase of a security on behalf of the plan or account.12b-1 fees are paid by a mutual fund to a broker dealer as a result of the plan's investment in the mutual fund, and are therefore deemed to be a prohibited transaction under IRC Section 4975 if the broker is also the investment adviser to the ERISA plan or IRA account. 15.1b Non-Qualified Plans All 12b-1 fees paid out on a non-qualified NFS fee based account flow through to the Advisor through their commissions FWG JOURNAL OF ASSETS REVIEW Commission to a Fee based account review Overview This review is set up to prevent double dipping from occurring in our fee based accounts. For example, when a broker places a front end load mutual fund trade in a commission account, receives the commission, and then decides within a short period of time to move the position into a fee based account, this is considered double dipping and is strongly discouraged and considered highly unethical. As part of FWG s oversight responsibility, all journal requests from an NFS commission account into Fee Based Account will go through a review process. The formula below is used to calculate whether or not a rebate on previous commissions received is due to the client. The rebate will be credited back to the client through the following quarter s advisory fee billing. Page 21 of 36 Revised Guide 12/31/12

22 Security Type Time Held Credit Mutual Funds Over 2 years No credit 1 2 years 6 month credit 0 1 year 1 year credit Equity Over 1 year No credit Less than a year 6 months credit 15.3 FWG MUTUAL FUND C SHARES IN A FEE BASED ACCOUNT Overview This review is set up to prevent another form of double-dipping with regards to holding Mutual Fund C shares in a fee based account. Mutual Fund C shares cannot be purchased at any time in a fee based account. If an Advisor attempts to purchase a C share mutual fund in a fee based account a review/release report pulls up and the trade is cancelled. Below are the quarterly procedures FWG follows on C share mutual funds transferred into a fee based account. Quarterly the RIA Department will review the C share class mutual funds held long in our fee based accounts. Qualified Accounts The C share trails will automatically be credited back to the client through their NFS Account. The Advisory fee calculation will include the C share portion of the account. Non-Qualified Accounts FWG will ask the Advisor to sell the C share mutual fund position. If the Advisor chooses not to sell the position, FWG will mark the position as unsupervised in our Advent performance reporting software. This position will not be included in the billing or performance reporting FIXED INCOME TRANSACTIONS IN A FEE BASED ACCOUNT Overview SEC Rule 206(3) requires prior written disclosure and client consent for each principal transaction that takes place in a managed fee based account. PROCEDURES The following FWG disclosures and client consent procedures have been put in place to comply with SEC Rule 206(3): 15.4a Prior written disclosure regarding the conflicts arising from principal bond trades. FWG s ADV Part II of Schedule F and IA Agreement disclose that FWG may engage in principal transactions, subject to delivery of written disclosure to the client for each transaction. Prior to each principal transaction, either (1) before execution or (2) before settlement of the transaction, the Advisor will deliver the Client Disclosure Form (these forms can be found under / RIA / All RIA Department forms) to the client containing information regarding the price, best price and markup on the transaction, and the Advisor will obtain the client s consent either orally or in writing. The Advisor will then deliver the form to the Fixed Income Department advising that the Client Disclosure Form has been delivered and the client s consent has been obtained. Page 22 of 36 Revised Guide 12/31/12

23 15.4b Disclosure for each transaction of the capacity in which the RIA/BD is acting, and client consent before each transaction. (2 Consent Forms Pre-execution and Pre-settlement forms) (1) Pre-execution Consent form - The Fixed Income Department will provide the client consent form to the Advisor disclosing the principal capacity FWG is acting and that FWG will either match or better the best price in the market utilizing quote systems such as Bloomberg, BondDesk Trader, and MuniCenter. (2) Pre-Settlement Consent form The Bond Department will provide the client consent form to the Advisor disclosing the principal capacity FWG is acting along with the details of the trade which includes, Purchase Price Best Price Markup/down The Advisor will be responsible for forwarding this disclosure form onto the client, and obtaining the client s consent either verbally or in writing, which can be done either over the phone, through an or a fax. The Advisor will then be responsible for sending back to the Fixed Income Department (Fax # ) the confirmation of disclosure and consent form stating how they received consent from the client prior to the trade being placed for pre-consent and before settlement after the trade is placed for post-consent. 15.4c New Issues Principal Transactions: In addition to the procedures above, If a New Issue fixed income trade is placed in a fee based account, there is a built in sales concession (sales credit) on most new issues given that Syndicate rules state the trade must be priced at par. The concession will be credited back to the client by reducing the advisory fee by the sales credit amount within the following quarter s fee calculation. 15.4d Trading Procedures All fixed income trading on fee based managed accounts must be directed only through Williams Financial Group at or FWG s Trading Desk at The following Advisor Managed Account NFS Prefixes fall under rule 206(3) and will require prior disclosure on principal bond trades: Fee Based Accounts Prefixes - K71, K73, K74, K75, K7E, K7F, K7K, KWX, KWT, and TPN 15.5 FWG AGENCY CROSS TRANSACTIONS Overview We currently do not allow Agency Cross Transactions to occur in our Fee Based Accounts, therefore we do not act under Rule 206(3)-2(a)(2). Financial West Group (FWG) may make purchase and sale transactions between two clients, provided such transactions comply with these procedures and Rule 206(3)-2 under the Investment Advisers Act of 1940, as amended. The agency cross transaction procedures are Page 23 of 36 Revised Guide 12/31/12

24 designed to promote fairness among the client accounts managed by FWG and to conform to applicable regulatory principles. Agency Cross Transaction An "agency cross transaction" shall mean a transaction in which FWG acts as an investment adviser in relation to a transaction in which such investment adviser (or affiliate) recommends the transaction to both the buyer and seller. Price Each agency cross transaction shall be effected at the independent current market price of the security. Such market price shall be: Reported Securities The last sale price with respect to such security reported in the consolidated transaction reporting system or the average of the highest current independent bid and lowest current independent offer for such security if there are no reported transactions in the consolidated transaction reporting system that day. Non-Reported Exchange Traded Security The last sale price on the principal exchange for which such security trades or the average of the highest current independent bid and lowest current independent offer for such security if there are no reported independent transactions on such exchange that day; Non-Reported NASDAQ Quoted Security The average of the highest current independent bid and lowest current independent offer reported on Level 1 of NASDAQ; Other Securities The average of the highest current independent bid and lowest current independent offer determined on the basis of reasonable inquiry. Investment Management Agreement Each agency cross transaction shall be consistent with the terms of the investment management agreement of each participating client. Records a. FWG shall generate and maintain (for a period not less than six years, the first two years at its principle place of business) the following information for each agency cross transaction: b. The name of each participating client; c. The issuer and class of securities; d. The date and time of the transaction; e. The number of shares and dollar amount; and the price and basis for, and appropriateness of the price. Consent A given client may participate in an agency cross transaction, provided he or she has executed a written consent prospectively authorizing FWG to effect agency-cross transactions for his or her account. Page 24 of 36 Revised Guide 12/31/12

25 Price The price of the securities allocated shall be at the average share price for all transactions of the clients in that security on a given day, with all transaction costs shared on a pro rata basis. Confirmation FWG will send to both clients participating in the agency cross transaction a written confirmation at or before the completion of each transaction containing: a. A statement of the nature of such transaction; b. The date such transaction took place; c. An offer to furnish upon request, the time when such transaction took place; d. The source and amount of any compensation or other remuneration received or to be received by FWG or an affiliate thereof; and the statement in bold print: "Client's written consent authorizing FWG to effect agency cross transactions on his or her behalf may be revoked at any time by the client by means of written notice. Annual Report FWG shall send to each client, at least annually, a written statement identifying the total number of agency cross transactions during the period since the date of the last such statement, the total amount of all commissions or other remuneration received or to be received by FWG for such period. Such statement shall accompany a regular account statement sent to the client showing his or her account activity over the relevant period. Disclosure A description of FWG's agency cross transaction procedures shall be disclosed in its Form ADV. Such disclosure shall state that FWG will act as broker, and have a potentially conflicting division of loyalties and responsibilities regarding both clients to the transaction ADVISOR AND EMPLOYEE PERSONAL TRADING PROCEDURES Purpose. The purpose of the Advisory Representative and Employee Personal Trading Procedures ("Procedures") is to govern the personal securities trades of "access persons" (as defined below) of FWG whose personal interests, in certain circumstances, may conflict with those of FWG. While FWG has full confidence in the integrity of all of its employees, officers and directors, it recognizes that certain of these persons have or may have knowledge of present or future client transactions and, in certain circumstances, the power to influence transactions made by or for clients. If such individuals engage in personal transactions in securities that are eligible for investment by clients, these individuals could be in the position where their personal interests may conflict with the interests of clients.. General Principles. These Procedures are based on the principle that access persons of FWG owe a fiduciary duty to its clients. This duty includes the obligation to conduct their personal securities transactions in a manner that does not interfere with the transactions of any client or otherwise to take unfair advantage of their relationship with clients. In recognition of this duty, FWG hereby adopts the following general principles to guide the actions of the access persons: Page 25 of 36 Revised Guide 12/31/12

26 a. Access Persons have a duty at all times to place the interests of clients first. b. Access Persons have the duty to conduct all personal securities transactions in a manner consistent with these Procedures and in such a manner to avoid any actual or potential conflict or abuse of a position of trust and responsibility. c. Access Persons must refrain from actions or activities that allow a person to profit or benefit from his or her position with respect to a client, or that otherwise bring into question the Access Person's independence or judgment. d. All personal securities transactions by Access Persons must be accomplished so as to avoid even the appearance of a conflict of interests with the client. Definitions. a. "Access Person" means: i. any director or officer of FWG; ii. each advisory representative and employee of FWG who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a Security by a Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales; iii. any natural person in a control relationship to FWG who obtains information concerning recommendations made by FWG with respect to the purchase or sale of a security by a client; and iv. any spouse, minor child, and any relative resident in the household of a person named in Sections 3(a)(i) through (iii). b. "Beneficial Ownership" means a direct or indirect pecuniary interest in a security, as set forth in Section 16 of the Securities Exchange Act of 1934, as amended. A person, for example, would be deemed to have a beneficial ownership of securities if he or she directly own the securities, his or her spouse or minor children own the securities, or if such person, by contract, arrangement, understanding or relationship, has sole or shared voting or investment power over the securities held by such person. c. "Client" means any person that has entered an investment management agreement with FWG. d. "Control" means the power to exercise a controlling influence over the management or policies of a company, a person exercises control who has a 25% or more ownership position of a company's equity securities, or otherwise controls a company as defined in Section 2(a)(9) of the Investment Company Act of 1940, as amended. e. "Related Security" means any security convertible within sixty (60) days into a Security and any future or option on the Security. f. "Security" means a security as defined in Section 2(a)(1) of the Securities Act of 1933, as amended, except that it does not include: ii. any security issued or guaranteed as to principal or interest by the U.S. Government, a U.S. government agency, or a U.S. government instrumentality; iii. any security issued by a mutual fund; and iv. any money market instrument, including bankers' acceptances, certificates of deposit, and commercial paper. Page 26 of 36 Revised Guide 12/31/12

27 Prohibitions. a. No Access Person shall in connection with the purchase or sale by such person of a Security held or to be acquired by any Client: i. employ any device, scheme or artifice to defraud such Client; ii. make to such Client any untrue statement of a material fact or omit to state to such Client a material fact necessary in order to make the statements made not misleading; iii. engage in any act, practice, or course of business that would operate as a fraud or deceit upon such Client; or iv. engage in any manipulative practice with respect to such Client. b. No Access Person may: i. purchase or sell, directly or indirectly, a Security for his or her own account any Security or Related Security that the Access Person knows or should know is being purchased or sold on behalf of any Client, until the purchase or sale of the Security for the Client has been completed c. No Access Person shall recommend any transaction in any Securities by any Client without having disclosed his or her interest, if any, in such Securities or the issuer thereof, including: d. No Access Person shall purchase or sell securities for any client without having disclosed his or her interest, if any, in such Securities or the issuer thereof, including: i. the Access Person's Beneficial Ownership of any Securities of such issuer; ii. any contemplated transaction by the Access Person in such Securities; iii. any position the Access Person has with such issuer; and iv. any present or proposed business relationship between such issuer and the Access Person (or a party that the Access Person has a significant interest in). e. No Access Person shall reveal any proposed transactions in Securities by one Client to another Client, any employee of FWG, or any other person. f. The foregoing prohibitions of this Section 4 shall not apply to any Securities or transactions exempt from pre-clearance pursuant to the provisions of Section 5.b. hereof. Reporting. a. Each Access Person shall report all transactions in Securities in which such Access Person has acquired any direct or indirect Beneficial Ownership. b. Reports shall be filed with the compliance officer within ten (10) days after the end of each calendar quarter. c. Reports filed pursuant to this Section 6 shall contain the following information: i. Name of the Access Person making the report; ii. Date of the transaction; iii. Title and number of shares involved; iv. Principal amount of each Security involved; v. Nature of the transaction (buy or sell); vi. Price at which transaction was effected; and Page 27 of 36 Revised Guide 12/31/12

28 vii. Name of the broker-dealer, bank or other financial institution through whom the transaction was effected. d. Every Access Person who opens an account at a broker-dealer or other financial institution shall: i. Immediately notify the compliance officer of the opening of such account; and ii. Direct each such broker-dealer or other financial institution to provide the compliance officer with a duplicate copy of each confirmation and periodic account statement issued to such Access Person. e. Each Access Person who owns Securities acquired in a private placement shall disclose such ownership to the compliance officer if such person is involved in any subsequent consideration of an investment in the issuer by a Client. Certification. Every Access Person shall certify on an annual basis that he or she has: a. complied with these Procedures; b. read and understands these Procedures; and c. disclosed, pre-cleared, and reported all transactions in Securities consistent with the requirements of these Procedures. Compliance Officer Duties. a. The compliance officer shall review and compare all reported transactions in Securities with: i. the transactions of the Access Person indicated on his or her confirmations and account statements; and ii. the transactions of clients of FWG. b. If the compliance officer suspects that an Access Person has violated these Procedures, he or she shall investigate the alleged violation, and, as a part of that investigation, allow the Access Person an opportunity to explain why the violation occurred or did not occur. c. If the compliance officer concludes that an Access Person has violated these Procedures, he or she shall submit a report of such violation, his or her investigation of such violation, and his or her recommendation on what steps should be taken to address such violation, including recommending sanctions against the violator to the chief executive officer of FWG. d. After reviewing the report of the compliance officer and any other relevant information, the President and/or other officers designated to review violations of these Procedures, shall, as he or she deems appropriate, impose a sanction on the violator, which may include a letter of censure, fine, forfeiture of profits, suspension, and/or termination of employment. Records. The following records shall be maintained by FWG for a period of not less than five (5) years: a. A copy of these Procedures; b. Records of any violation of these Procedures and actions taken by FWG in response to such violation; Page 28 of 36 Revised Guide 12/31/12

29 c. Copies of Access Person reports and broker-dealer confirmations and account statements; and d. Lists of Access Persons. Training. a. Each newly hired or newly designated Access Person shall receive a copy of these Procedures and shall be required to certify within thirty (30) days of receipt of such Procedures that he or she has read and understands the Procedures. b. The compliance officer shall review the Procedures with any newly hired or newly designated Access Person. c. At least annually, the compliance officer shall conduct a training seminar reviewing the requirements of the Procedures and the required duties of the Access Persons PERFORMANCE ADVERTISING PROCEDURES PERFORMANCE ADVERTISING SAMPLE COMPLIANCE GUIDELINES It is FWG s policy to advertise performance in a way that is truthful and not misleading and to comply with all provisions of the Investment Advisers Act of 1940 and SEC staff interpretative positions concerning performance advertising. Responsibility The Compliance Department of FWG is responsible for ensuring that all FWG performance advertisements are not fraudulent or misleading, consistent with industry standards, and in compliance with all applicable laws and regulations. Procedures Composite Group Performance FWG typically advertises the performance of a composite of its accounts or certain groups of accounts. When forming and advertising composites, FWG: When selecting accounts for a particular composite, will not select only the best performing accounts; When selecting accounts for a particular composite, will not omit certain terminated accounts for the sole reason that such exclusion will enhance the composite's performance; Will include a particular account in a composite only if such account meets the stated criteria for inclusion in the composite, and will not exclude a particular account in a composite unless such account does not meet one of the criteria for inclusion in the composite; and Will include an account only if FWG has discretionary authority over the account. The Account must be in the composite group the entire reporting period. (Ex: 01/01/04 12/31/04). If an account opened in February 2004 then this account cannot be part of the composite group performance at the end of 12/31/04. The accounts must hold only the securities that are a part of the Money Manager s investment strategies. For example, if you are managing your fee based accounts in Page 29 of 36 Revised Guide 12/31/12

30 Equities only and an account also holds bonds or mutual funds then this account cannot be part of the composite group performance. Presentation FWG may advertise or otherwise disseminate its performance results provided that the advertisement or written communication discloses: 1. The effect of material market or economic conditions on the results advertised (e.g., it would be misleading to advertise that the adviser's composite of equity managed accounts increased 10% without disclosing that the equity market was up 40% during the same period): 2. Performance net of fees (e.g., advisory fees, brokerage commissions and other fees clients actually paid), with the following exceptions: a. gross performance figures may be presented if they are presented side-by-side with the net figures with equal prominence; b. custodial fees do not have to be netted out; c. performance figures may be presented net of a model fee, provided that the model fee is equal to the highest fee charged to the accounts that make up the composite; and d. gross performance figures may be presented in one-on-one presentations. 3. Whether the performance reflects the reinvestment of dividends or other distributions; 4. The possibility that a client may incur loss if the advertisement makes a claim about potential profits; 5. The similarities and differences between how accounts are managed and an index if the advertisement includes the performance of an index; 6. Material conditions, objectives and investment strategies employed by the adviser to achieve the performance; 7. If applicable, the results portrayed relate only to a select group of client accounts, the basis for selecting the particular client accounts, and the effect, if material, of limiting the performance result to a particular group of clients; 8. At a minimum, the average total returns for one, five and ten year periods and clearly identify the end-of-period date for each period presented; 9. Will describe the composite, including the investment strategy used to achieve the composite results; 10. The percentage of non-fee-paying accounts included in the composite, if the returns in the composite are based in part on non-fee-paying accounts; 11. The dollar amount of assets represented by the composite and the percentage of FWG's total assets that the composite represents; 12. State performance returns through at least the most recent calendar quarter; and 13. Make clear any material disparity between the performance of the composite and the actual performance of FWG's accounts. Page 30 of 36 Revised Guide 12/31/12

31 Performance Matrix To be in compliance with the Association for Investment Management and Research (AMIR) Performance Presentation Standards, a firm s presentation of its investment performance must comply with the following requirements on a firmwide basis. Below is a sample Matrix we require from the Advisor acting in a Money Manager capacity prior to any advertising of your Program. Sample Performance Matrix a. Year b. Total Return (%) c. Benchmark Return (%) d. Number of Portfolios e. Composite Dispersion (%) f. Total Assets at End of Period (US millions) g. Percentage of Firms RIA Assets h. Total FWG RIA Assets Under Management (AUM) i. % of non-fee paying accounts included in Composite Description of what each line of the Matrix represents: a. Year The year the data in the performance matrix represents. b. Total Return This is the annual return for the Composite group of clients managed by the Advisor. Time Weighted Return (TWR) is the calculation used in Composite Groups. You must link IRRs together (using the Average Capital Base method see below) to calculate a time-weighted rate of return (TWR) for performance history reports. Hear are some features of TWR: - TWR gives the same weight to time periods, regardless of the amount of money invested. - Because TWR minimizes the effect of cashflows on a portfolio, it is the only calculation that fairly compares the performance of one money manager to another manager or an index. - TWR answers the question: If your entire portfolio had been invested on the start date and then left alone (no contributions or withdrawals), what would your performance be? The Association for Investment Management and Research (AMIR) requires that you calculate performance using TWR, and that you measure performance at least quarterly, preferably monthly. However, you can calculate TWR performance as of any date-quarterly, monthly, or even daily. Ideally, a TWR is computed by calculating a Simple Rate of Return (SRR = ((EMV - BMV) / BMV) x 100) between each cash flow, and linking them. However, cash flows can occur on a daily basis, and reconciling your portfolios and calculating a simple rate of return every day is very time-intensive. The AMIR recognizes this, so you can use the following approximation technique to arrive at a time-weighted return. 1. Divide the evaluation period into sub-intervals whose boundaries are dates more easily valued such as month or quarter ends. Page 31 of 36 Revised Guide 12/31/12

32 2. Calculate an IRR for each sub-interval and then link the results. This technique is accurate as long as the sub-intervals are short enough. You should turn the IRR for each sub-interval into a multiplier before linking them together: IRR1 = 5.00% = 1+ (5.00/100) = 1.05 IRR2 = 2.25% = 1+ (2.25/100) = IRR3 = -1.75% = 1+ (-1.75/100) = After converting the IRRs to multipliers, link multipliers to obtain the TWR: TWR = ((1.05 x x ) 1) x 100 = ( ) x 100 = 5.48% Average Capital Base Method: You can use the average capital base method to calculate an IRR on performance reports. You should run them only for periods of three months or less. If there are any cash flows of 10% or more for a portfolio, make additional evaluations on the dates of the cash flows. Use this formula to calculate Average Capital Base IRR: Average Capital Base IRR = (total profit / average capital base) x 100 Example: The beginning market value of a portfolio is $750,000 and the ending market value is $785,000. The client made $75,000 in additions and $50,000 in withdrawals during the period. Beginning Market Value: $750,000 Ending Market Value: $785,000 Additions: $75,000 Withdrawals: $50,000 Total profit includes the sum of all realized gains and losses, unrealized gains and losses, interest income, dividend income, and all management and portfolio fees. Before Fees: -$2,342 Realized Gains/Losses -1,492 Unrealized Gains/Losses +10,900 Interest +3,500 Dividends +1,100 Change in Accrued Interest 11, Total Profit After Fees: -$2,342 Realized Gains/Losses -1,492 Unrealized Gains/Losses +10,900 Interest +3,500 Dividends -1,666 Management and Portfolio Fees +1,100 Change in Accrued Interest 10, Total Profit Page 32 of 36 Revised Guide 12/31/12

33 The average capital base represents the average paid-in capital for the time period. The formula for average capital base is: Average Capital Base = Beginning Market Value + Sum of (Each Change in Capital x (Days Left in Period / Total Days in Period)) Example: The reporting period is December 31, 1989 to March 31, 1990 and the starting market value of the portfolio is $750,000. There was an addition $75,000 on January 21, 1990 that affected the portfolio for 70 days. There was a withdrawal of $50,000 on March 4, therefore, 28 days remain in the period. The calculation of the average capital base is shown below: $750, Beginning market value +58, First average change in capital (+75,000*70/90) -15, Second average change in capital (-50,000*28/90) $792, Average Capital Base Even though the beginning market value (BMV) is $750,000 and the ending market value (EMV) is $785,000, the average paid-in capital you have to work with during the quarter was $792,777.78, an amount larger than either the BMV or the EMV. Now the IRR can be calculated : IRR = (10,000/792,777.78) x 100 = 1.26% c. Benchmark Return The index used for comparison is the S&P 500. The S&P 500 is an unmanaged index with no expenses, which covers 500 industrial, utility, transportation and financial companies of the US Markets. It is a capitalization-weighted index calculated on a total return basis with dividends reinvested. d. Number of Portfolios The number of Accounts in the Composite Group. e. Composite Dispersion % - The composite dispersion represents a measurement of the consistency of the composite s performance results with respect to the returns of the individual accounts within the composite over an annual period. The annual dispersion is measured by the asset-weighted standard deviation of the composite. Only portfolios that have been managed for the full period are included in the composite dispersion calculation. f. Total Assets at end of period (12/31) Total Composite Assets g. Percentage of Firm Assets The % of Total Firm Assets to the Total Assets h. Total Composite Advisory Accounts Assets Total Assets in the Program i. % of non-fee paying accounts included in Composite This is the % of Accounts that are not paying an Advisory fee. Misleading Performance Advertisements In determining whether a particular performance advertisement is misleading, the following factors, at a minimum, will be considered: Appropriateness and fairness of the time periods; Page 33 of 36 Revised Guide 12/31/12

34 Whether the relevance of the results as related to probable future results are adequately explained; Clarity of chart or table displaying the performance; Adequacy of, or need for, data supporting the results presented; Adequacy of disclosure of all relevant costs; Whether general market conditions during the performance period advertised are disclosed; Presence of a discussion of the general trend of relevant securities prices; and Inclusion of charges and expenses in the performance calculation. If any comparisons are used in the performance advertisement, the following factors should be considered: The purpose of the index being compared and any differences between it and FWG's performance being presented; Whether the portrayal is balanced, and Whether a description of the index and the fact that the index is unmanaged has been included. All performance advertisements should contain the statement that the results presented should not and cannot be viewed as an indicator of future performance. Standards FWG only will claim compliance with any established performance advertising standards if in fact FWG has met the requirements of such standards. Periodically, the Compliance Officer or a third-party service provider, such as an accounting firm, will review FWG's performance to verify that FWG has complied with applicable standards. Benchmarks In performance advertisements, FWG may compare its performance to certain benchmarks. When making such comparisons, FWG will: Use the returns of a benchmark that are for the same time periods of FWG returns shown in the composite; Disclose the effect of any material market or other economic conditions on FWG's performance; Use a benchmark only if such benchmark has similar types of securities of FWG's composite and a similar volatility to FWG's composite; and Will disclose any material differences between the composite and benchmark. Use of Third-Party Performance Standards From time to time, FWG shall consider complying with a third-party's standards governing the presentation of an advisory firm's performance. For example, FWG may elect to meet the Association of Investment Management and Research Performance Presentation Standards (AIMR-PPS). Such standards are designed to provide the investment management industry with a set of fair and ethical standards for advisory firms to follow when presenting their past performance results to prospective clients. If FWG does elect to meet a particular standard, FWG will comply with each of the requirements of such standards, including requirements that: Page 34 of 36 Revised Guide 12/31/12

35 Govern the creation and maintenance of composites; How the performance returns are calculated; The manner in which the performance returns are presented; and The disclosure that will accompany the presentation of the performance returns. Use of Performance Achieved At a Prior Firm FWG may advertise performance figures of an Adviser Representative who achieved the performance at a predecessor firm or performance achieved at a prior firm that was reorganized into the new firm, provided that: 1. No other person at the prior firm played a significant part in the performance of the accounts, and if the accounts were managed by a committee, either the full committee would have to be managing the accounts at the new firm, or at least, the person on the committee responsible for making the final investment decision would have to be managing the accounts at the new firm; 2. The performance of the accounts achieved at the prior firm is not materially different from the performance achieved at the new firm; 3. The accounts managed at the prior firm are substantially similar to the accounts managed at the new firm; and 4. The new adviser has records from the prior adviser or elsewhere that back up the performance in a manner consistent with the requirements of Rule 204-2(a)(16) of the Investment Advisers Act of Books and Records In its books and records, FWG will maintain all accounts, books, internal records and other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return of any or all FWG managed accounts. FWG will take steps to maintain all records to allow the SEC, an accountant or other examiner to verify FWG's performance included in advertisements. The following recordkeeping procedures will be followed in connection with performance advertising. FWG will maintain: 1. Brokerage or other third-party account statements for each account whose performance is included in the composite; 2. Account statements, at a minimum, that reflect all debits, credits, and other transactions in a client's account; 3. Back-up copies of any records or other documents supporting advertised performance at two or more off-site storage facilities; 4. Work papers and documents that set forth the criteria used for selection of accounts in the composite; 5. All worksheets necessary to demonstrate how the performance was calculated; and 6. Reports prepared by independent auditors retained to verify FWG's performance. No advertising is to be disseminated to the public in any form without the prior approval of the Compliance Principal and the RIA Department Principal. Page 35 of 36 Revised Guide 12/31/12

36 15.8 BLOCK TRADING POLICY AND PROCEDURES Overview: The Policy currently in place for same trade orders placed on the same day is that brokers/advisors should only place trades after the client, and in the same direction. Managed Accounts may be set up with discretion where an Advisor may buy or sell the same security in numerous accounts at the same time. This may include the Advisors personal account and/or family member accounts. If an Advisor trades block trades in this manner we strongly encourage, whenever practical, to follow our Block trading procedures below. This procedure would eliminate potential conflicts of interest that could occur when placing the same trade in numerous accounts at the same time. 15.8a Block Trade Order Procedures in a fee based account: 1. How to place the Block Order - To place a block trade order (buy or sell) please contact FWG s trading desk at Allocation Sheet The Trade Allocation sheet must be faxed over to the trading room prior to or at the same time you call in the order. Once the trade is complete, you will receive an execution report giving you the average price of the trade that will then be allocated into all of your accounts involved in the trade. 3. Family Members or Advisor s Personal Accounts - The accounts that are either family members or for the AR s personal account must be noted on the allocation spreadsheet next to each account (Ex: Family / Rep). (Access to form on the FWG Website /Departments / RIA / Average Price Bulk Trade Allocation Sheet.) 4. Crosscheck Trade for Errors - On the same day, you will be responsible for crosschecking in Streetscape the original allocation sheet you faxed to the trading room versus each account. Please review the current Trade Error Policy on page 194 in FWG s Written Supervisory Procedures (WSP). 5. Errors - Any modifications that need to be made to the trade allocation report must be made directly on the report, and faxed to the trading room with the error circled and any additional comments for the correction to be made. All re-allocation requests will be reviewed by the Compliance Department prior to approval Trade Errors: Edvidence of the Adviser s resolution of trade errors shall be maintained in a log and/or file kept amoung central records. The record shall include the manner in which the error was resolved, the client/investor and transaction(s) effectd by the error. All trade errors will be reported to the Compliance Department for review. Page 36 of 36 Revised Guide 12/31/12