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Our Investment Selection Process

Before we ever invest any of your money in a mutual fund or exchange traded fund (ETF) within your advisory account, we evaluate investments on several criteria across a spectrum of quantitative data points on a quarterly basis to determine a minimum fiduciary standard of care is being met. In order to accomplish this, we incorporate the Fi360 Toolkit into our investment selection process. The toolkit leverages the fiduciary Practices developed by the Center for Fiduciary Studies, the standards-setting body of Fi360.

Since 1999, the Center’s team of subject matter experts has leveraged its extensive knowledge of state and federal fiduciary law and its research into the processes employed by successful investment professionals to create the Prudent Practices for Investment Fiduciaries, which provide guidance on all aspects of investment management, including asset allocation, fund evaluation and selection, performance monitoring, reporting, governance, and compliance.

Regulatory oversight: The investment should be managed by: (a) a bank, (b) an insurance company, (c) a registered investment company (mutual fund), or (d) a registered investment adviser.

Expense ratios/fees relative to peers: At a minimum, the investment’s fees should be in the top half (least expensive) of their peer group. The Prospectus Net Expense Ratio is used for the evaluation of mutual funds and ETFs. It includes all fund management costs, 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs.

Minimum track record: The investment should have at least four years of history so that performance statistics can be properly calculated.

Stability of the organization: For mutual funds the same portfolio management team should be in place for at least three years. In a management team setting, the most senior manager’s tenure should be at least 3 years.

Assets in the investment: Investments should have at least $250 million under management (across all share classes for mutual funds).

Composition consistent with asset class: At least 80% of the investment’s underlying securities should be consistent with the broad asset class. For example, a Large-Cap Growth investment should not hold more than 20% in cash, fixed income, and/or international securities. (Only applicable to certain peer groups/asset classes).

Style consistency: The investment should be highly correlated to the asset class of the investment option, i.e., the Morningstar Style Box™ for the current period must match the peer group of the investment. (Only applicable to certain peer groups/asset classes).

Risk-adjusted performance relative to peers: The investment’s risk-adjusted performance (Sharpe Ratio and Alpha) should be above the peer group median manager’s risk-adjusted performance.

Performance relative to peers: The investments performance should be above the peer group’s median manager return for 1-, 3-, and 5-year cumulative periods.

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