One of the most common questions we hear from advisors is this:

"How can you possibly take the hodge—podge of stuff we have and essentially fit it into three or four models...some big accounts, some small accounts?"

This is often a real stumbling block for advisors. We all know that having more consistent portfolios really enhances an advisor's ability to provide a high level of service to the client, largely because we simply know the portfolios better and can make changes more quickly and easily when required.

However, most advisors don't believe there is a clear and concise way to take all the divergent assets they have accumulated over years and years and cram them all into a neat package that is more manageable. We have built appropriate models for large accounts, small accounts, annuity accounts and even socially responsible investors. We've created systems to monitor special assets like individual stocks or even limited partnerships. We want to remove obstacles to you satisfying your client's real needs and wants. The constant theme for your transition team should be, "How can we move ALL assets into a fee—based business model?" We have been doing exactly this for over 15 years and have therefore developed systems to accommodate these assets.

FocusPoint's transition team reviews every account. We confirm each client's basic asset allocation, derived from their individual need for return and their risk tolerance. From there we begin looking at the specific allocation, meaning we determine what weightings are in each specific asset class (small cap, large cap, mid cap, international, specialty equity, government bonds, intermediate bonds, and specialty bonds). Then we can evaluate all the assets held in the account.

We will look for all of the following: cost basis issues, surrender issues, and securities that cannot be sold (deciding if we need to exchange them into another sub—account or build the portfolio around them). We know each portfolio can be a little different.

To give a clearer picture to our process, here is a typical example of a client's taxable portfolio:

Security	Value	Date Sold	Cost Basis
Variable Annuity	$125,000	1994	$100,000
Bond Annuity	$75,000	1996	$60,000
XYZ HighYield Bond Class B	$45,000	2002	$50,000
ABC Fund Class A	$40,000	2000	$45,000
DEF Fund Class A	$65,000	1998	$75,000
Total Value	$350,000		$330,000

The advisor has determined that the client needs an allocation of 70% stocks and 30% equities.

In this example, we would start with the funds and look at cost basis, recommending the following:

We would sell the ABC and DEF and capture the $15,000 in losses.
Next, we would talk to the advisor about the bond annuity to see if we should think about selling it. In this scenario there would be no tax issue; it would just be a matter of asking, "Is it out of surrender or not?" Let's assume we could sell it. (Now we have $180,000 in cash and $170,000 in securities that cannot be sold at this time.)
Our next step would be to evaluate if XYZ is the manager we want to use for specialty bonds. Our CFA team determines the best manager XYZ has and we decide to make the recommendation to exchange these B shares for XYZ's Growth & Income Fund. We capture a $5,000 loss and don't trigger the back—end load.
Now, we would look at the variable annuity and the subaccounts that are offered to the client within it. We see that PIMCO's Bill Gross is running the bonds for them and want to use him for the bond allocation, so we allocate a portion of the annuity to the government and intermediate bond position. They also have a good large cap manager so we allocate the rest of the annuity to that manager.
At this point, we have dealt with all the securities that we cannot sell and we would use the remaining cash to purchase securities in the remaining asset classes.

In the above scenario, we have achieved the proper allocation that the client and advisor wanted—and happened to capture a $5,000 loss.

From this point forward, our experienced team would manage the portfolio in an active manner. We would also flag the B shares so that we know when they should be converted to A shares. We have now captured all the information about the portfolio inside our streamlined systems, and the advisor has all the information at their fingertips (i.e. cost basis of the overall portfolio, information about B shares, and the original cost of the annuity with purchase date).

Now this portfolio can be effectively managed.

As for the portfolios themselves, we currently manage 30+ models:

	Asset Allocations
Extended	6
Extended Focused	6
Companion	3

	Asset Allocations
Variable Annuity	6
ERISA	6
Socially Responsible	3
Limited ETF	6

We also manage Individual Stock and Income Distribution portfolios.

Each of these models is designed for specific accounts and size. Companion accounts have four asset classes and are managed for accounts under $40,000. Extended Focused accounts are managed with all asset classes but one fund per asset class. They are designed for accounts ranging in value from $40,000 to $125,000. Extended accounts are designed with all asset classes and multiple funds per asset classes for accounts above $75,000.

This is just a quick overview of how we help advisors pull in and then manage all accounts on a fee—based business. Our team is happy to go through this in greater detail at any time.

>> The Ideal Solution?

It’s just streamlined and simplified things, but not at the clients’ expense, which is a very important element. Clients are even doing better—they’re getting better returns and paying less, and I’m more accessible. That can’t be bad.”

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