The 6 Benefits of Alternative Investments for Client Portfolios Craig Martin, MS Financial Services The Family Wealth Consulting Group I will talk from my experiences as an angel investor and how important it is to see how angels and entrepreneurs and you are connected.

Craig Martin MSFS, CFP The Family Wealth Consulting Group High and Ultra-High Net Worth Individuals Estate & Income Tax Planning >$100M Assets under Management 2 Alternative Investment Funds Member & Past Sponsor of the Keiretsu Forum I will talk from my experiences as an angel investor and how important it is to see how angels and entrepreneurs and you are connected.

“Diversification is Your Only Safety” Craig Martin “Diversification is a free lunch” Harry Markowitz, Nobel Laureate 1990 “Diversification is your buddy” Merton Miller, Nobel Laureate 1990 Effective diversification using alts

What are Alternative Investments ? Anything But Stocks or Bonds: Direct Real Estate Angel Investments in Start-Ups Direct Lending Funds (Market Loans)

Our 6 Reasons to Use Alternatives Alternatives are inefficient Alternatives decrease volatility Real Estate increases expected returns High Impact Investing Maximizing the Illiquidity Premium Cost Transparency

Alts are Excellent Risk Management Tools Reduce price volatility Increase expected returns Equity Institutional; Alternate Routes: 4 Ways Alts Can Optimize a Portfolio 2016

Yale Endowment has 65% in alts 83% of investors are interested 67% of advisors say they NEED more education 10% of investors own alts $150B new $ allocated to alts by 2020 Source: Alternatives in the Mainstream, March 13, 2017 Blackstone Education and Investment News - 2016

Real estate is in an inefficient market my due diligence has earned higher returns Local demographics, timing, location People, People, People My due diligence locates RELP’s with 20+ year track records of earning 2X of benchmarks Equity and / or Income Public’s resistance is illiquidity

Getting income from non-marketable real estate Original plan is for RELP to sell in 5 years A lump sum investment in 1st year produces expected liquidity in the 5th year Spread that out over 2 years produces 2 years of expected income Annual investments produce annual LTCG income after the 5th year Diversification by the 5th year is in dozens of managers with different investment methodologies owning many addresses in multiple geographies with different demographic drivers AND during many rolling economic timeframes. Unique diversification maximizes all the elements determining returns Diversification is your only safety

FWCG Opportunity Fund, LP -Equity alts in real estate- 14 different RELPs in 26 states 2015 and 2016 sales proceeds earned at 20%+ IRR Law of Large Numbers creates confidence of earning an average 20% IRR There is no guarantee that any of these returns will occur. All investments have a risk of loss of principal or underperformance. “Diversification is your only safety”™

Who is an angel investor? An Accredited investor with greater than $1M assets under management or $300K of family income NOTE: 12.5 million qualify as accredited - maybe only 305,000 angels (2.4%) I am going to talk about start-up businesses and some of the details about how they get funded. I am a fee-only financial planner during the day. I have two funds my clients & I use to invest as angel investors in start-up businesses. For the last 12 years I have been a member of Keiretsu Forum, a worldwide angel investment group with chapters on 4 continents, including China. That location is always amazing to me. This will be relative to you when talking to your clients or associates who are either an angel or an entrepreneur.

What do they do? Angel Investor: invests their own money into a private business that is owned and operated by a stranger to fund business plans Buy stock or a convertible note to be sold at exit for an acceptable multiple …100% IRR Direct investments in high-impact, sustainable, disruptive ideas Invest the 1st $1.25M funding major milestones Trade daily on LEGAL insider information Kauffman Foundation angels earn 25% IRR

How do angels compare to VC’s How do angels compare to VC’s? “Entrepreneurs are changing the world, and angels are perched on their shoulders” angels VC’s # of deals 73,400 3,665 $ volume $24B $50B New EE’s hired 30,000 2,000 Average IRR 26% 13% late; 24% in emerging M Lemerle & A Davis “Build Your Fortune in the FIFTH ERA” JOBS Act Qualified Small Business Stock is Section 1202 = tax free gain JOBS Act is evidence that the politicians definitely want to promote investments in start-up businesses. It offers a new opportunity for non-accredited to participate in this equity growth. You know, if the ROTH IRA is the best tax-wise investment vehicle, then QSBS must be the best investment category. Basically if stock is held 5 years the sale is tax free. That is a major criteria for planning with angel investors.

Angels will be bold and go where other investors will not go Angels combine with new CEO’s to produce disruptive changes that the world wants. It is very exciting to be out in front with such people and ideas. Giving wings to great people, the best ideas with challenge and excitement

Alternative Income using Market Loans Loans from people to people (P2P) or people to businesses (P2B) Digital marketing, credit scoring and payments Collateral Leverage Liquidity Earnings “Diversification is your only safety”™

FWCG Diversified Alternative Income Fund, LP 14 different alt income funds P2P + P2B Leverage Collateral 90 day liquidity As of 3-31-17 paying 7.6% There is no guarantee that any of these returns will occur. All investments have a risk of loss of principal or underperformance. “Diversification is your only safety”™

Professional due diligence required Big Institutions Ultra High-Net Worth Family Offices Individual advisors

Our 6 Reasons to Use Alternatives Inefficient Decrease volatility Best RELP’s earn 2X benchmarks High Impact -saves lives - disruptive Annual investments = annual income Costs managed

Craig Martin FWCG is a financial planning firm in Silicon Valley Maximizing the many benefits of using alternative investments Equity alternative investment Fund offering a choice in either real estate or start-ups Alternative income fund with 14 different funds paying 7.5% “Diversification is your only safety”™ Presentation credits to Chris Apfel, MD, PhD, MBA