Simply Biz Compliant Investment Process

Agenda  Adviser Needs; Survey Results Summary  Regulatory Risks  The SimplyBiz Compliant Investment Process  Attitude to Risk  Asset Allocation  Selecting Investments  Summary SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 2

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 3 Survey Results  Survey issued November and December 2009  78% of firms recognised the importance of using an independent and impartial process for assessing Attitude to Risk  Less than 25% of you were happy with the current tool and process you use

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 4 Survey Results  82% of Member Firms wanted Simply Biz to provide you with an independent and impartial tool  94% of you said definitely ‘if it was free’!!  Less than 20% of Advisers were happy that the funds they invested in ‘did what they said on the tin’

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 5 Survey Results The main reasons you were unhappy in general with many of the funds you invested client money into were;  Cost of funds (AMC versus TER)  Transparency of underlying investments  Fund descriptions not matching clients expectations (e.g. ‘cautious’ funds up to 60% in Equities)

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 6 Regulatory Risks  TCF reviews have identified the lack of consistency for investment advice; Between advisers of the same firm Between the output of the risk modelling tool Between the different systems (some firms use more than one tool)

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 7 Regulatory Risks Pensions Switching Review found that; Provider/Product selection overshadowed investment planning Insufficient attention was paid to the Client’s attitude to risk when switching pension products Investment decisions were dependent on products / platforms chosen

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 8 SimplyBiz Action A dedicated team was put together to look at the potential for;  A complimentary investment planning tool  An end to end compliant investment process  A completely independent and impartial tool for assessing clients ‘Attitude to Risk’ [ATR]  Access to the whole of market to allow you to select any funds  A range of investment solutions from simple to complex and low risk to high risk  A report to match outcomes and provide a full audit trail

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 9 The SimplyBiz Compliant Investment Process SimplyBiz to provide simple tools to enable adviser to; Determine attitude to risk Compare this with current holdings Model likely scenarios to increase client understanding Map the ‘Attitude to Risk’ to an Asset Allocation Model Use independent data and research to select funds to meet the asset allocation model DO ALL OF THE ABOVE CONSISTENTLY NO MATTER WHICH PRODUCT / PLATFORM OR FUNDS ARE ULTIMATELY SELECTED FOR YOUR CLIENT

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 10 The SimplyBiz Compliant Planning Tools  SimplyBiz has selected an industry leading provider of web based planning technology to provide the Compliant Planning Tools  A new Company has been launched to provide the end-to-end solution for investment planning and management;

The SimplyBiz Compliant Planning Tools Every adviser will have free access to the Compliant Planning Tools; An individual account to create client plans Attitude to Risk Asset Allocation Investment analysis Transaction Planning

The Compliant Planning Tools Simply enter the minimum of client details to create a client;

The SimplyBiz Compliant Planning Tools You can record ‘contact’ details if you want to;

The SimplyBiz Compliant Planning Tools Complete a simple 10-question risk assessment with the client; Paper version available Psychometric test Developed independently with Oxford Risk

The SimplyBiz Compliant Planning Tools Agree a final ‘Attitude to Risk’ Profile with the client; Produces investor risk categorisation Can be easily changed to facilitate discussion Printed version can be presented to the client and kept on file

Produce an Asset Model that describes an ‘Optimised Portfolio ’ Uses Long Term Asset models to optimise risk/reward Demonstrates robust modelling and selection Ensure client has understood risk / reward relationship The SimplyBiz Compliant Planning Tools

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 17  It’s a quick and easy process  Provides reports for files  Demonstrates clear and impartial assessment  Not tied to any product / provider/ platform  Clear and easy to understand The SimplyBiz Compliant Planning Tools

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 18  Simple Tools Provided complimentary to every adviser  Free upgrade to enable Investment & Retirement Planning on request (Year 1)  Full holistic planning tool available for annual top-up payment  Includes all training and support The SimplyBiz Compliant Planning Tools

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 19 The Compliant Planning Tools We have kept the tools simple but they can also be very powerful; Investment ‘Goals’ modelling Analysis of existing holdings Lifetime cash flow analysis (x) Create a holistic financial plan (x)

Establishing Attitude to Risk Accurately assessing client specific risk is not straightforward. The FSA carried out research in 2004 to assess what consumers thought ‘risk’ meant; includes issues such as;  risk sensitivity  desire for profit  tolerance for ambiguity  financial awareness  investment experience SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 20

Establishing Attitude to Risk  We have selected a risk model that recognises; SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 21 A range of emotional factors Can be ‘goal-based’ i.e. Assessed independently for each holding or financial goal

Establishing Attitude to Risk  The model is then used to divide investors attitude to risk into ‘risk buckets’ SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 22 These buckets describe the volatility of investments and risk- reward premiums that are likely to meet their expectations

Asset Allocation SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 23 It’s impossible to predict which asset class or geographic area will deliver the best return over the medium to long term with any certainty. The chart below shows this by ranking the best (at the top) to worst (at the bottom) assets each year over the last 19 years.

Asset Allocation SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 24 The model is built on multi-asset investing Assessing long-term trends of major asset classes to produce a strategic asset allocation that is stable Portfolio Turnover Costs (cost of trading positions and manager costs) can be minimised reducing the drag of charges on performance

Asset Allocation SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 25 A model portfolio of assets is then selected to optimise returns for this risk profile. Data is modelled to describe how such an optimised portfolio might perform over the next 12 months All analysis is based on generic asset classes This indication should be used to stimulate discussion and develop greater understanding of risk & reward. The figures used are only examples of what might happen and are not real minimum or maximum amounts nor are they guaranteed in any way.

Asset Allocation SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 26 Risk & Reward are then Optimised based on Strategic Asset Allocation In many cases a fund switch within product will optimise client position Extremely useful to assess product switches for pensions & investments Ongoing review tool as part of client service schedule

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 27 Selecting Investments Once you have accurately assessed the ATR of your clients and produced an optimum asset allocation mix you can then  Select a DFM to manage the money for you  Select funds from the Whole of Market  Use a Pre-determined portfolio  Invest directly into risk-rated multi manager funds designed to run to the Asset allocation

28 Discretionary Fund Manager Select Funds from the Whole of the Market Risk Rated Funds Use a Pre-determined Model Portfolio (created by RSM) AdviserClient Goal based Financial planning Risk ProfilingAsset Allocation Attitude to Risk established 1,2,3,4,5,6,7,8,9, Multi Manager

MUCH MORE INFO TO COME SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 29 Full details including fact sheets and academic papers will be made available at launch You will be able to download from the website or request from the Compliance Helpdesk / your field Consultant too. Training and implementation workshops will be held over the next few months

SimplyBiz Services plc, The Galpharm Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No Slide 30 Summary  Simply Biz will be providing you with a FREE;  Risk profiling tool  Asset Allocation Modelling  Investment and Retirement planning software  Full range of investment data & research to aid selection  New Company Formed: Verbatim  Helps you with TCF and pre & post RDR independent status