Final aepg pitchbook hnw 2013-01-01

“Consistently Good Advice in a Constantly Changing World”®

AEPG® Wealth Strategies

25 Independence BlvdWarren, NJ 07059

908-757-5600www.aepg.com


Agenda

AEPG Wealth StrategiesTM Overview

Investment Strategy

Client Service Model

Appendix

AEPG® Wealth Strategies Overview


AEPG® Wealth Strategies overview and history

Experience: Managing wealth for over three decades as an independent fiduciary and registered investment advisor.

Client commitment: Manage over $750M in Assets, with solid reputation for providing personalized service and comprehensive wealth management for individuals, business owner and corporate clients.

Expertise: Staff of 30 across 5 departments, with expertise in financial planning, investment management, retirement plan solutions, employee benefits and insurance.

Credentials: Team holds highest designations in the

field including 8 CFPs, 3 CFAs, and other specialized credentials.

Reputation for excellence: Recognized by peers and industry publications.


Our Philosophy

Our Mission

• To provide single-source, goal-oriented, comprehensive wealth management services for high net worth individuals and business owners

Our Vision

• To be our clients’ trusted advisor. To continue to be recognized as an industry leader

Our Values

• Accountability

• Professionalism

• Trust

• Outstanding Service

• Loyalty

• Teamwork

• Caring Employer

Mission

Core ValuesVision


Our core beliefs

Our clients’ interests come first and foremost

Client success depends upon customized wealth management advice and execution

Emphasis is placed on defining and understanding each client’s needs/objectives at the onset of the relationship

We communicate with clients proactively

We believe in holistic planning and coordinate with our client’s legal and accounting professionals

Peace of

MindManaging

Pla

nnin

g

Informing


What we offer

Discuss financial/personal goals Cash flow analysis Retirement planning Education planning

Insurance needs analysis Policy audit Asset protection

Wealth transfer Minimize estate tax burden

Allocation based on financial plan Low correlated assets Tax efficient portfolios

Client’sFinancial

Plan

InvestMgmt

EstatePlanning

Insurance

RetirementPlans

EmployeeBenefits

FinancialPlanning Customize benefit package to

meet your budget and goals Attract and retain employees

Investment fiduciary helping reduce or eliminate liability

Plan design & Operation Participant education



AEPG® Wealth Strategies will coordinate your financial plan

Unique combination of independent advice, high level of expertise and personal touch—in a fiduciary wrapper

An investment discipline that strives to optimize return and risk

Wealth management strategies integrated to respond to unique needs of each family

External partners

CPAFirms

Elder Care

EstatePlanningAttorneys

Property &Casualty

firms

Banks

TrustServices

InvestMgmt

EstatePlanning

Insurance

RetirementPlans

EmployeeBenefits

FinancialPlanning

Client’sFinancial

Plan



How you benefitBetter than expected service

Single source for comprehensive

wealth management services

Custom solutions and clarity of safe money versus risk-

based assets

Objective investment management

Dedicated team including Certified Financial

Planner and Chartered Financial Analyst

Lower costs of investment (underlying

management fees & transaction costs)

Transparent investments

Web-based daily reporting and personalized online portal with consolidated

view of finances

Tax-efficient investing

Ongoing investment rebalancing and risk

management

Collaboration with accountants or other advisors to maximize

impact

AEPG®


Reputation for excellence

Best Financial Advisors for Doctors

Top RIA Ranking

Best Financial Advisors for Dentists

Most Influential Advisors of Defined Contribution

Top 100 Retirement Plan Advisors in 2010

New Jersey Top 401(k)Defined Contribution Providers

Top 50 Wealth Managers

Top Wealth Management Firms2002 - 2009

Top 5 RIA’s in NJ

Fastest Growing Advisory Firms

“”

”“

”“

”“

“ ”

“ ”

”“

“ ”“ ”

”“

by Dental Practice MagazineApril 2011& 2012

by 401kWireNovember 2010

by PLANADVISORJanuary 2011

by Investment Advisor Magazine

by Reuters Advice Point

by AdvisorOne.comJune 2010

by Financial Advisor Magazine

June 2010-2012

by Wealth Manager Magazine

by NJ BizSeptember 2010

by Medical Economics Magazine

November 2010

NJ 2012 Five Star Wealth Manager ”“

by NJ Monthly MagazineFeb 2012

Investment Strategy


Disciplined Investment Philosophy

Investment portfolios customized to meet each client’s specific goals and needs.


AEPG® Wealth Strategies’ Investment Model makes a clear distinction between risk-based and lower-risk assets.

• Risk-based assets include: a Core portfolio of low-cost equity exchange-traded funds (ETFs) is designed for long-term growth; tracking the global equity markets through the use of indexing; and an Opportunistic ("satellite") portfolio that allows us to invest more tactically, increasing risk-adjusted returns. Each Opportunistic investment has its own entry and exit points and risk management parameters. We monitor the markets for additional opportunities that present an attractive risk reward ratio.

• Lower-Risk high quality fixed income serves as the primary safety net in your portfolio. Our experience and research has demonstrated that high quality fixed income, particularly US Treasuries, provide true risk diversification – especially in times of market stress, when diversification is needed most. In addition to high quality fixed income, AEPG® Wealth Strategies offers other fixed income solutions to address client specific needs for yield or tax efficiencies.

AEPG ®Wealth Strategies’ Investment Model


Global approach to investing

Based on and benchmarked to the MSCI All Country World Investable Market Index

MSCI All Country World Investable Market


Risk-based portfolio investments

AEPG® Wealth Strategies utilizes a core equity/opportunistic structure for investing the risk-based assets in the portfolio.

The Core portion of the portfolio is designed to offer low cost beta (or market) exposure. Exposure is gained through low cost Exchange Traded Funds (ETFs) and ‘Manager Model Strategies’. Where appropriate the core is also tax-optimized, allowing for capital losses to be realized in the portfolio.

The Opportunistic portion of the portfolio is designed to generate alpha (or excess market return) by allocating to undervalued sectors, asset classes or investment styles. Active management is applied both to manager selection and style/sector allocations.

The ratio of the allocation to core and opportunistic is dependent upon:

Expected after-tax return of the market benchmark

Expected manager after-tax alpha

Expected opportunistic tracking error

Expected active manager turnover

High Quality Fixed

Income

High Quality Fixed

Income

Lower-RiskLower-Risk

Strategic Long TermStrategic Long Term

Core Equity InvestmentsCore Equity Investments

Opportunistic Investments


Risk-BasedRisk-Based

Tactical Short Term

Tactical Short Term


Lower-risk portfolio investments

The AEPG® Wealth Strategies lower-risk portfolio is comprised of high quality fixed income with a significant allocation to US Treasuries. We continuously monitor the yield curve and interest rates and make adjustments to the portfolio as needed. Additional fixed income related risks are constantly monitored. AEPG® Wealth Strategies manages these risks carefully.

High quality fixed income is considered lower-risk due to its low default risk and ability to appreciate or maintain value during times of market stress

The lower-risk portfolio can consist of individual bonds, mutual funds and/or ETFs. The duration of the lower-risk model will be carefully managed and the maturity schedule any individual bonds may change at any time.

In addition to high quality fixed income, AEPG® Wealth Strategies offers other fixed income solutions to address client specific needs for yield or tax efficiencies.

High Quality Fixed

Income

High Quality Fixed

Income

Lower-RiskLower-Risk

Strategic Long TermStrategic Long Term

Core Equity InvestmentsCore Equity Investments



Risk- BasedRisk- Based

Tactical Short Term

Tactical Short Term

“Consistently Good Advice in a Constantly Changing World”®17

AEPG® Wealth Strategies Portfolio approach

Core Portfolio

CashStyle ETF

Commodity ETF

Sector ETF

Country ETF

Regional ETF

Lower-Risk

Client Service Model


Wealth management options

Depending on your needs, AEPG Wealth Strategies offers two Wealth Management Planning Tracks.

• Standard Planning – this track offers a basic initial plan that produces cash flow projections that assist in determining your portfolio allocation, liquidity needs, asset location plan and tax management needs. This basic plan may be updated once a year at your annual investment review meeting. Additional planning items can be addressed on an A La Carte basis.

• Comprehensive Planning – this track provides full, deep planning into all areas of your financial life from Retirement planning, Customized Investment Plan, Life, Disability, and Long Term Care Insurance Needs, Education Funding Analysis, a full Estate plan including beneficiary analysis, trusts and much more. You will also have access to your Financial Advisor throughout the year to assist with any financial items that might arise.


Financial plan construction

Step 1 – Data Gathering Meeting Review of short and long term goals & objectives,

current income, living expenses, investments and risk tolerance

Align with hierarchy of financial needs and goals

Open discussion involving both qualitative and quantitative issues

Step 2 – Initial Plan Presentation Planner and client review preliminary version of

the financial plan

Revisions will be noted and plan adjusted accordingly

Step 3 – Final Plan Review This step involves a number of meetings that will

focus on certain areas

Could be 2 to 4 additional meetings depending on the schedule of the client

Step 4 – Implementation Implement investment proposal and planning

recommendations

Step 5 – Annual Review Review of current plan and changes in

circumstances that may require plan revisions


Ongoing communications

Quarterly Review Conference Calls or Meetings

Semi-Annual Financial Plan Updates

Quarterly Investment Newsletters

Town Hall Meetings

E-mail “bursts” for timely topics

Treasury Debt Ceiling

Opportunistic Portfolio Updates

Money Markets with Exposure to Sovereign Debt

Market Volatility

Year End Financial Planning Tips

Estate Planning Topics

Roth Conversions

Value Added Website


“myWealthStrategies” – Value added website

Simplify your Financial Life with “myWealthStrategies”

Organize all of your important financial information in one place with 24 hour access

Safe & secure access to all of your information remotely for peace of mind

Your personal website will enable you to view and monitor all of your assets (investment accounts, bank account, 401(k)s, stock options, etc.) and liabilities (credit cards, mortgage, etc.) in one place

Budgeting tool

Collaboration across your team of financial professionals (Financial Planner, CPA, Attorney, etc.)


Client fees

Our fees for investment management are based upon assets under management:

1.00% for $1 million in assets under management

0.90% for 2nd million in assets under management

0.80% for 3rd million in assets under management

0.70% for amounts over $3 million in assets under management

$500,000 minimum portfolio requirement

Fees may be tax deductible

In addition to fees charged by American Economic, clients are subject to fees charged by various separate account managers (e.g., Adhesion/Atria), mutual funds and Charles Schwab.

Note: Mutual funds are purchase at net asset value without sales charges.

Appendix


Correlation in “normal” times

Zephyr StyleADVISORZephyr S tyleADVISOR: American Economic P lanning Group Inc.

Correlation Matrix: Returns vs. S&P 500March 1997 - August 2011

1) Dow Wilshire 5000 (full-cap)

(1)

1.00

2) Dow Wilshire REIT 0.58

(2)

1.00

3) HFRI Fund of Funds Composite Index 0.65 0.32

(3)

1.00

4) MSCI EAFE Index 0.86 0.56 0.68

5) Russell 1000 Growth 0.96 0.44 0.62

6) Russell 1000 Value 0.91 0.65 0.51

7) Russell 2000 Growth 0.87 0.51 0.70

8) Russell 2000 Value 0.83 0.76 0.54

9) S&P GSCI 0.24 0.18 0.42

10) Barclays Capital U.S. Aggregate -0.03 0.12 -0.01

11) Barclays Capital U.S. Treasury: Long -0.20 -0.06 -0.17

12) Barclays Capital U.S. Treasury: 7-10 Year -0.25 -0.08 -0.23


14) Barclays Capital U.S. Corporate High Yield 0.64 0.61 0.55

15) Barclays Capital U.S. Treasury: U.S. TIPS 0.02 0.19 0.11

16) Barclays Capital U.S. Municipal Bond 0.02 0.17 0.11

17) Credit Suisse High Yield Index 0.64 0.61 0.59

18) Dow AIG Commodity Index 0.31 0.25 0.46

19) MSCI EM (EMERGING MARKETS) 0.79 0.48 0.74

20) FTSE RAFI Global ex US 1000 0.83 0.60 0.61

21) S&P 500 0.99 0.56 0.59

(4)

1.00

0.80

0.81

0.74

0.73

0.33

0.01

-0.19

-0.23

-0.29

0.64

0.08

0.04

0.65

0.42

0.83

0.97

0.86

(5)

1.00

0.78

0.84

0.68

0.22

-0.04

-0.19

-0.23

-0.29

0.58

0.01

0.01

0.59

0.27

0.74

0.74

0.95

(6)

1.00

0.67

0.84

0.21

-0.01

-0.17

-0.21

-0.27

0.59

0.05

0.03

0.59

0.31

0.71

0.82

0.93

(7)

1.00

0.83

0.27

-0.09

-0.22

-0.28

-0.34

0.60

-0.03

-0.01

0.61

0.30

0.74

0.68

0.79

(8)

1.00

0.23

-0.03

-0.19

-0.24

-0.30

0.62

0.02

0.03

0.63

0.29

0.67

0.74

0.79

(9)

1.00

0.02

-0.07

-0.07

-0.12

0.24

0.26

-0.03

0.26

0.91

0.35

0.35

0.22

(10)

1.00

0.87

0.90

0.72

0.17

0.73

0.67

0.15

0.07

-0.05

0.01

-0.02

(11)

1.00

0.95

0.63

-0.13

0.62

0.51

-0.15

-0.05

-0.21

-0.20

-0.19

(12)

1.00

0.78

-0.18

0.66

0.52

-0.20

-0.04

-0.26

-0.23

-0.23

(13)

1.00

-0.29

0.45

0.34

-0.32

-0.09

-0.33

-0.27

-0.29

(14)

1.00

0.26

0.28

0.99

0.32

0.64

0.64

0.61

(15)

1.00

0.52

0.26

0.30

0.10

0.08

0.02

(16)

1.00

0.28

-0.03

-0.00

0.07

0.02

(17)

1.00

0.33

0.65

0.64

0.61

(18)

1.00

0.45

0.43

0.30

(19)

1.00

0.80

0.76

(20)

1.00

0.83

(21)

1.00

Equalsnegative orzerocorrelation

Equals negative or zero correlation


Correlations in times of stress

Zephyr StyleADVISORZephyr S tyleADVISOR: American Economic P lanning Group Inc.

Correlation Matrix: Returns vs. S&P 500July 2008 - December 2008

1) Dow Wilshire 5000 (full-cap)

(1)

1.00

2) Dow Wilshire REIT 0.86

(2)

1.00

3) HFRI Fund of Funds Composite Index 0.86 0.51

(3)

1.00

4) MSCI EAFE Index 0.90 0.74 0.91

5) Russell 1000 Growth 0.99 0.81 0.91

6) Russell 1000 Value 0.99 0.87 0.82

7) Russell 2000 Growth 0.99 0.90 0.81

8) Russell 2000 Value 0.96 0.94 0.69

9) S&P GSCI 0.84 0.73 0.61

10) Barclays Capital U.S. Aggregate 0.62 0.39 0.81

11) Barclays Capital U.S. Treasury: Long 0.39 0.17 0.61

12) Barclays Capital U.S. Treasury: 7-10 Year 0.34 0.07 0.62


14) Barclays Capital U.S. Corporate High Yield 0.95 0.93 0.78

15) Barclays Capital U.S. Treasury: U.S. TIPS 0.88 0.72 0.88

16) Barclays Capital U.S. Municipal Bond 0.58 0.20 0.88

17) Credit Suisse High Yield Index 0.97 0.94 0.78

18) Dow AIG Commodity Index 0.81 0.66 0.78

19) MSCI EM (EMERGING MARKETS) 0.88 0.76 0.86

20) FTSE RAFI Global ex US 1000 0.93 0.76 0.91

21) S&P 500 1.00 0.84 0.87

(4)

1.00

0.93

0.88

0.89

0.80

0.64

0.86

0.67

0.63

-0.47

0.92

0.98

0.70

0.92

0.87

0.99

1.00

0.90

(5)

1.00

0.98

0.98

0.93

0.80

0.68

0.44

0.40

-0.69

0.94

0.91

0.67

0.96

0.82

0.90

0.95

0.99

(6)

1.00

0.98

0.97

0.89

0.61

0.39

0.34

-0.72

0.93

0.88

0.51

0.96

0.83

0.87

0.91

1.00

(7)

1.00

0.98

0.79

0.56

0.30

0.25

-0.81

0.96

0.84

0.56

0.97

0.74

0.88

0.91

0.98

(8)

1.00

0.84

0.43

0.19

0.12

-0.85

0.93

0.77

0.39

0.95

0.70

0.80

0.83

0.95

(9)

1.00

0.47

0.35

0.29

-0.53

0.70

0.72

0.19

0.76

0.81

0.64

0.70

0.86

(10)

1.00

0.95

0.93

0.03

0.64

0.91

0.64

0.63

0.88

0.85

0.84

0.63

(11)

1.00

0.99

0.32

0.40

0.76

0.44

0.40

0.80

0.67

0.65

0.40

(12)

1.00

0.37

0.33

0.72

0.48

0.33

0.75

0.63

0.62

0.36

(13)

1.00

-0.73

-0.37

-0.28

-0.73

-0.23

-0.47

-0.50

-0.71

(14)

1.00

0.89

0.54

1.00

0.78

0.92

0.93

0.93

(15)

1.00

0.61

0.89

0.95

0.97

0.98

0.89

(16)

1.00

0.51

0.42

0.63

0.67

0.58

(17)

1.00

0.81

0.91

0.93

0.95

(18)

1.00

0.86

0.88

0.82

(19)

1.00

0.99

0.88

(20)

1.00

0.92

(21)

1.00

Equals negative or zero correlation


Appendix

Case Studies

Retirement

Tax

Investment Descriptions

ETFs

Manager Model Strategies

Mutual Funds

Adhesion Unified Managed Account


Case study: RetirementRetirement scenarios

Required Return: 5%

Retirement Age

Return Infl Exp Stl MC

65 5 3 175k 90/87 16

65 6 3 175 98/95 24

65 0 3 175 77/74 <5%

65 5 3 150 96/93 30%

68 5 3 175 92/89 21%


Fact pattern

Case study: Retirement (cont’d)

Age: 55, married 2 children

Occupation: Corporate Executive

Household Income: $300K

Expenses: $170K (excluding taxes)

Goals

Retire at age 65 sustaining the same lifestyle throughout retirement

Estate Planning

Education Planning

Process

Determine Risk Tolerance

Cash Flow Projections

Probability of Success: Monte Carlo Simulation

Retirement Scenarios


Case study: Retirement (cont’d)C/F projections

Total Capital Projection

$062 66 70 74 78 82 86 90 94 98 102 103

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

Ret Plan

Invest


Case study: Retirement (cont’d)Probability of success

Monte Carlo Projections

16% probability of success retiring at 65 living same lifestyle & 2% real rate of return

-30,000,000

-25,000,000

-20,000,000

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000


Case study: Retirement (cont’d)Risk tolerance – behavioral/qualitative component

When faced with a major financial decision you are usually, more concerned about the possible losses

It is somewhat more important that the value of your investments does not fall (than that it retains its purchasing power).

Over ten years you would expect average earnings of about three times the rate from certificates of deposit.

The total value of all your investments could go down by 33% before you would begin to feel uncomfortable.

With these portfolio choices, you would choose Portfolio 4.

Expected Return and Risk Low Medium High

Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Portfolio 6 Portfolio 7

30%

40%

30%


End result

Case study: Retirement (cont’d)

Required Return: 5%

Risk Tol – mod plus

Allocation 70/30

UST

Core

Opp


AEPG can help clients save on taxesCase study: Taxes

Option1: New Comparability Profit Sharing PlanAs of December 31, 2010

Name AgeTesting

CompensationProfit Sharing Plan

AllocationTotal Employer DefinedContribution Allocation

Doctor 60 245,000.00 $49,000.00 90.32%

Assistant 40 45,000.00 $2,250.00 4.15%

Bookkeeper 45 60,000.00 $3,000.00 5.53%

TOTAL NHCEs 2 $105,000.00 $5,250.00 9.68%

Option 2: Triple Decker - Cash Balance / New Comparability Plan / Safe Harbor 401(k)as of December 31, 2009

Name AgeTesting

CompensationProfit Sharing Plan

AllocationTotal Employer DefinedContribution Allocation

Assistant 40 45,000.00 $4,200.00 1.79%

Bookkeeper 45 60,000.00 $5,400.00 2.30%

TOTAL NHCEs $105,000.00 $9,600.00 4.08%

Option 1 reflects a Profit Sharing Plan costing the Doctor $5,250 for 2 staff in order to save $49,000. Option 2, the Triple Decker plan design (inclusive of Cash Balance, New Comparability and Safe Harbor 401(K)) reflects a cost of $9,600 for 2 staff in order to save $225,675. Therefore, the Doctor in this example could save an additional $176,675 for an additional cost of only $4,350.


Exchange traded funds (ETF)

ETFs are open-ended funds that trade on registered national security exchanges similar to stocks.

While mutual funds are bought and sold based on end of day pricing, ETFs trade at different prices throughout the course of the day.

Most ETFs seek to track the performance of an index by holding all or a representative portion of the underlying index.

ETFs can track equity, fixed income, commodity or other indices.

ETFs generally entail lower fee structures and are more tax efficient than mutual funds.

Unlike mutual funds, ETFs do not subject you to taxable events due to other investors selling shares in the fund.

More recently, actively managed ETFs are being created where investors are able to receive the benefits of a tax efficient ETF while in turn receiving the benefits of active management.


Manager Model Studies

Manager Model Strategies are investment portfolios of stocks, bonds or other securities that can be customized on an individualized basis.

Manager Model Strategies offer full, real-time transparency of all underlying securities and trades since the investor owns the actual securities (as opposed to owning shares of a mutual fund).

Manager Model Strategies offer high degrees of tax efficiency. Since cost basis is known for each security, tax harvesting can be done on a continuous basis. Also, since the investor owns the individual securities, you are not subject to taxable events by other investors selling as you would with a mutual fund.

Unlike mutual funds, Manager Model Strategies allow investors to customize portfolios by including preferences and/or restrictions on the purchases of specific securities. This is especially helpful for those who hold company stock from their employer and do not wish to hold an additional position in the company.


Manager Model Strategies vs. Mutual Funds

Manager Model Strategies Mutual Funds

Ownership Sole ownership of underlying securities Own shares of a pool of securities along with other investors

Transparency Daily transparency of all underlying securities

Holdings available on a quarterly basis with a lag

Harvesting Ability to harvest tax losses continuously throughout the year

No ability to harvest losses without selling shares

Customization Ability to customize holdings on a security and industry level

No customization available on a security or industry level

LiquidityDaily liquidity with funds available after T+3 settlement

Daily liquidity with funds available after T+1 settlement

Minimum investment $100K and up As low as $100



Adhesion will provide overlay management of your investments, streamlining the day to day management of your accounts.

By utilizing Adhesion, AEPG can substantially increase the benefits to you, specifically in the areas of:

Tax optimization

Continuous tax harvesting

Rebalancing benefits

Continuous monitoring of investments and the ability to maintain your asset allocation at all times within the acceptable allocation threshold.

Accessibility of managers

Adhesion offers the ability to access managers that would otherwise be out of reach due to account minimums.

Lower manager expenses

Separately managed account expense ratios will be reduced due to Adhesion’s economies of scale.

Net savings vs. current structure

Greater after tax-returns

Additional capital losses to be used to offset capital gains

Lower net portfolio expenses



Adhesion will act as the “Overlay Manager” and will provide rebalancing and active tax management, in addition to an improved web-based reporting platform.

AEPG will continue to act as the “Wealth Manager” and will be responsible for asset allocation and manager selection.

The “Money Managers” selected by AEPG will be responsible for individual security selection and the timing of such investments.

SecurityTiming

SecuritySelection

AssetAllocation

Active TaxManagement

Rebalancing

Overlay Manager

Money Manager

Wealth Manager

Next Steps


Disclosures

Final aepg pitchbook hnw 2013-01-01

Economy & Finance

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