IMA Webinar Navigating the 401(k) World

1. IMA WebinarNavigating the 401(k) World

2. Fiduciary Management – Increasing Fiduciary Liability “Plan Sponsors are generally unaware that being a fiduciary can put their personal assets at risk… Fiduciary Risk Mitigation should be an important concept for all plan sponsors”

3. Fiduciary Management – Increasing Fiduciary Liability • ERISA CRACKING DOWN ! • ERISA Conducting additional audits • Over 1000 new ERISA employees hired to conduct additional audits • AUDITS growing for middle market firms “In the past, plan sponsors could practically ignore their plans. Now, because of litigation and regulatory scrutiny of plan fiduciaries, chief financial officers are realizing they can’t just turn to their golf buddy as a plan advisor.” – Benefit PRO

4. Four Ways to Manage Fiduciary Responsibility Multiple Levels of Liability Mitigation

5. Fiduciary Management – By the numbers ERISA There are Various Industry Expert Classifications

6. 3(38) Investment Management Service • Investment Policy Statement Development & Review • Quarterly Investment Monitoring Reports • Fund selection & Replacement • Custom Model Portfolio Construction • QDIA Selection / Review • FEE base structure 100% transparency “Among the most important duties of fiduciaries for 401(k) plans are diversifying the risk of the plan investment options, controlling plan costs and helping make sure plan participants are contributing enough to succeed financially at retirement.” –

7. Participant Services • Most participants are lacking the knowledge to properly manage their 401(k) portfolios • Traditional Education materials are extensive, but overwhelming and time consuming for most participants • Most want professional help managing their portfolio • Participants want more dynamic interaction * Charles Schwab Report

8. Participants Are Unprepared

9. Recent Performance Bias

10. Why Not Target Dated Funds? • Pros • Simple • Reduces Investor Mistakes • Cons • Varying Glide Paths • Bias Fund Choices • Misunderstood • One Size Does Not Fit All • Lack of Manager Ownership • Poor Performance • Lack of Transparency • No Investor Education • No Fiduciary Help “The three industry leaders by assets--Fidelity, T. Rowe Price, and Vanguard--all feature closed-architecture target-date funds. Both types of target-date series have average overall Morningstar Ratings of 2.7 stars across their vintages. Morningstar's figures suggest that open-architecture funds on average provide a performance advantage.”– Janet Yang, CFA, Morningstar

11. Steps to a Secure Retirement “I believe that the biggest mistake that most people make when it comes to their retirement is they do not plan for it. They take the same route as Alice in the story from “Alice in Wonderland,” in which the cat tells Alice that surely she will get somewhere as long as she walks long enough. It may not be exactly where you wanted to get to, but you certainly get somewhere.”  - Mark Singer, Author of The Changing Landscape Of Retirement - What You Don't Know Could Hurt You • Personal Finance • Earnings • Budgeting • Saving • Protection • Investing • Economics • Fundamentals • Technical Analysis • Cycles • Retirement • Health Care • Income/Spending • Transitioning

12. The 401(k) Solution “36% of 401(k) participants used professionally managed accounts in 2012 – a percentage double what it was five years earlier and on track to hit 55% in five years.” - Vanguard • Fiduciary Liability Mitigation as a 3(38) Advisor • Fully Discretionary Investment Management • Dynamic Education • Decades of Experience • Investment and Plan Expertise • Strategic Partnerships • TPAs • ERISA Experts • CPAs • Plan Providers

13. Investment Management Process • Multi-factor Approach • Technical Rankings • Fundamental Analysis • Top-down Macro View • Sentiment Analysis • Cycle Analysis • Riskalyze™ Analysis • Risk Questionnaire • Retirement Success Calculator • Dynamic Allocation • Parallel Investing • Aligned Interests • Risk Focused

14. Riskalyze Software Questionnaire Investment Models & Retirement Map Uses historical risk/reward data Calculates risk tolerance based on 6 month volatility probabilities Custom retirement snapshot Suggested retirement changes based on: Investment Amount Monthly Savings Investment Risk Level Retirement Year Monthly Withdrawal • Based on Prospect Theory which won the 2002 Nobel Prize for Economics • Emailed directly to participants • Just minutes to complete • Creates custom risk profiles • Results expressed 0-99 (higher number means higher risk tolerance)

15. Retirement Map Fail

16. Retirement Map Success

17. Custom Investment Models

18. Continuing Participant Education InvestTalk Network KPP Financial Weekly E-Newsletter Market Guidance Investment Education Personal Finance Advice Regular In-Person Wealth Conferences & Webinars Annual Employee Education Workshop & Webinar • Radio Show • 4-5 pm PST M-F • Podcast • iTunes • Tune-in Radio • InvestTalk Website • Bay Area and San Diego • 24–Hour Listener Line • InvestTalk Personal Finance Minute • InvestTalk 101 • InvestTalk Insider

19. Current Key Takeaways • Plan Sponsors have huge liability • Vast majority are not aware • Scrutiny is increasing fast • Various ways to reduce exposure • Participants are unprepared • Most admit they are unprepared to be successful • Most want professional help • Investors underperform due to emotions and lack of education • Target Dated funds fall short as a solution • Education process is not dynamic • Usually once a year workshop • Most do not review the material • Usually investment focused only

21. The 401(k) SolutionProtecting your Tomorrow, Today For more info contact: Justin Klein at JKlein@KPPFinancial.com Or Call 800-557-5461