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The evolution of wealth management Mutual funds/pools Until the 1990s, most individual investors could only access institutional-calibre money management through funds and pools. While convenient and accessible, they offer limited customization, flexibility and control. 2 The evolution of wealth management The Separately Managed Account (SMA) Provides customized, tax-efficient portfolios each individually managed by carefully screened worldclass managers. Limited ability to overlay a consistent high-level asset allocation strategy across all the separate portfolios in one account. 3 The evolution of wealth management The Unified Managed Account (UMA) The UMA builds on the SMA’s advantages, accurately and efficiently overlaying an asset allocation strategy to all the manager portfolios/models in a single custody account. It can also hold individual mutual funds, pools and ETFs – and apply the overarching asset allocation to these as well. 4 Welcome to A+ – the next level of wealth management A+ is a new portfolio management system that combines a professional investment process, partnership and peace of mind. Your A+ Portfolio synthesizes the most current thinking of RBC’s senior portfolio strategists with carefully evaluated investment ideas from elite money managers worldwide. A+ is designed to replace the emotions and guesswork of investing with a strictly rational and decisive approach suitable for your core investment assets. 6 What are the key benefits of A+? Professional process “Pension-like” portfolio management Partnership Match your goals / preferences with your portfolio Peace of mind Continuous oversight 7 The importance of asset allocation The asset allocation between equities, fixed income and cash is the main factor determining your portfolio’s risk/ return tradeoff. Everyone has an optimum asset allocation range based on factors such as their stage in life and their personal comfort level with risk. Strategic asset allocation within these ranges can add significant value over time. Your portfolio’s actual asset allocation can drift outside your ideal ranges over time – if left unchecked. 8 The RBC Investment Strategy Committee provides strategic asset allocation quarterly, which is automatically applied to your A+ Portfolio, both to add value and to keep you within your optimum ranges to reduce risk. The importance of Asset Allocation 9 Varying asset class returns causes asset allocation drift 10 Asset class diversification helps removes guesswork 11 Subtracting emotions, adding reason A+ helps you avoid the guesswork and emotions that plague the common investor. Benefit from a professionally managed, highly disciplined process that employs purely rational criteria for all investment decisions made on your behalf. This process is designed to provide consistent, long-term value, while reducing risk through precise diversification and regular asset mix rebalancing. 12 The real cost of emotional investing The real cost of emotional investing Individual investors tend to underperform the markets, largely because they make frequent changes in response to market fluctuations. Average equity investor 1.9% S&P 500 8.4% Source: Quantitative Analysis of Investor Behavior (Dalbar Inc., 2009). Returns include reinvestment of dividends, but do not assume any transaction costs, taxes, management fees, or other expenses. 13 The A+ framework for success The A+ Portfolios framework is comprised of two key components: 1. Aligning your portfolio’s overall asset allocation with the most current thinking of our RBC Investment Strategy Committee. The result – a rational framework for investment decision-making that removes the emotions and guesswork from investing. 2. Populating your portfolio with carefully chosen investments to achieve your individual financial goals. 14 The A+ strategic framework Your A+ Portfolio is aligned with the recommendations of our RBC Investment Strategy Committee. Based on its outlook for the global markets and economy, the Strategy Committee determines optimum portfolio allocations between the three major asset classes, sectors of the economy and geographic regions. Using our next-generation UMA technology, we automatically apply the Strategy Committee’s findings to your A+ Portfolio on a quarterly basis to maintain your optimum asset allocation. 15 The A+ tactical framework We identify the specific managers for your A+ Portfolio, in addition to funds, pools or ETFs that may help round it out. Finally, we utilize UMA technology to align all these investments with your optimum asset allocation. We invite a select group of money managers from RBC’s research universe to provide model portfolios for specific A+ mandates. We continually monitor these managers and, in the event one no longer meets our strict criteria, identify a suitable replacement. The RBC Global Advisory Research Group conducts ongoing independent research on over 4,000 quality managers worldwide. A+ mandates meet investor objectives such as long-term wealth creation, income generation and capital preservation. 16 The Results Recommended Model Portfolios 5 asset allocation models 4 investment tiers Global, Canadian and Income subsets Total of 42 Models Investment Menu All investments on the menu have been carefully selected On-going research “Worth Knowings” 17 Portfolio Sample Balanced Portfolio Example @ $1,000,000 CAD ASSET CLASS FULFILLMENT Canadian Fixed Income 26% Laketon Fixed Income Cdn Short Term FI 6% TD Short Term Bond Fund Global Fixed Income 8% RBC Global Private Bond Pool Canadian Equity 42% Parameters Canadian Equity Jarislowsky Fraser Canadian Equity US Large Cap Equity International Equity Emerging Markets 10.5% 6.5% 1% Earnest US Large Cap Core Philadelphia International Equity AGF Emerging Markets Fund A+ account features Reporting Receive an in-depth A+ Portfolio Monitor every quarter detailing your integrated asset mix among multiple asset types, overall portfolio performance, as well as transactions made during the quarter. Tax benefits We can tailor your A+ Portfolio to accommodate your individual tax situation, for example, by harvesting capital losses that can offset taxable capital gains and reduce your taxes. In addition, we can hold securities with a low book cost in your A+ account until you are ready to sell, thereby deferring potential capital gains taxes. Portfolio customization We can apply personalized screens to your A+ Portfolio to restrict certain companies or sectors of the economy, such as tobacco, military or alcohol. 19 Why A+? Professional process “Pension-like” portfolio management Partnership Match your goals / preferences with your portfolio Peace of mind Continuous oversight 20 Thank you ACCESS+ accounts are not guaranteed by RBC Dominion Securities Inc. Since these accounts are not suitable for all clients, RBC Dominion Securities Inc. needs to review your investment objectives, risk tolerance and liquidity needs prior to accepting an application to open an account. ACCESS+ accounts are subject to minimum investment requirements. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member–Canadian Investor Protection Fund. ® Registered trademark of Royal Bank of Canada. Used under licence. RBC Dominion Securities is a registered trademark of Royal Bank of Canada. Used under licence. © Copyright 2010. All rights reserved. 21