1. Cost of inaction Investment Advisor’s value added: the Investment Review

2. INVESTMENT PROCESS 2 Monitoring investor–related input factors Monitoring Economic and market input factors Investment Review Attainement of investor objectives Performance Measurement Rebalancing Economic, social, political ans security Fiscal factors Investor’s objectives and constraints + preferences Capital Market Expectations Portfolio policies and strategies (Investment Policy) Portfolio Construction & Revision Asset Class Allocation optimization Product Selection Transactions In principle, all investment advisers must complete this process with all their clients. In fact, some advisers candidly admit that lack of time/resources forces them to overlook the last part: Investment Review

3. Investment Advisor’s Alpha = +3% 3 Sources: Putting a value on your value: Quantifying Vanguard Advisor’s Alpha, Vanguard research March 2014, Francis M. Kinniry Jr., CFA, Colleen M. Jaconetti, CPA, CFP®, Michael A. DiJoseph, CFA, and Yan Zilbering

4. Measuring the impact: Investment Review Measure the impact of 2 decisions: Asset allocation and Selection decisions Asset allocation (rebalancing) The impact of rebalancing asset classes on the volatility of a portfolio vs. a non- rebalanced portfolio is well documented : Reduced volatility (investor’s favorite) Decrease ( increase ) return during Bull ( Bear ) market IA’s Value Added : 0.35 % * Selection What if we don’t monitor the portfolio components? What is the impact for the client? How many managers, selected 5 years ago, are on our selected list today? Would we make the same selection? How much a customer can loose if there’s no monitoring? How much value can you add by monitoring your portfolio? 4 *: Putting a value on your value: Quantifying Vanguard Advisor’s Alpha, Vanguard research March 2014, Francis M. Kinniry Jr., CFA, Colleen M. Jaconetti, CPA, CFP®, Michael A. DiJoseph, CFA, and Yan Zilbering

5. Methodology December 2010 We picked the best money managers / category Section criteria: Historical Morningstar™ Ratings QQQQQ QQQQ November 2015 For the selected funds, we check the current Morningstar™ Ratings We split the group in 2 categories: Survirors: funds that maintained their ratings 4+ Q Others : funds that were downgraded <4 Q We compared 5 year median returns of the 2 categories to measure the investor’s potential loss (or the potential IA’s value added) 5

6. RESULTS How many managers, selected 5 years ago, would remain on our list today? 6

7. Canadian Focused Equity 01/01/2010 WWWWW et WWWW= 25 Total 117 (21%) 01/12/2015 WWWWW et WWWW= 13/25 WWW = 7/25 WW = 5/25 W = 0/25 7

8. Canadian Dividend & Income Equity 01/12/2010 WWWWW et WWWW= 21 Total 114 (18%) 01/12/2015 WWWWW et WWWW= 9/21 WWW = 7/21 WW = 4/21 W = 1/21 8

9. US Equity 01/12/2010 WWWWW et WWWW= 33 Total 244 (14%) 01/12/2015 WWWWW et WWWW= 17/33 WWW = 12/33 WW = 3/33 W = 1/33 9

10. Global Equity 01/12/2010 WWWWW et WWWW= 46 Total 304 (15%) 01/12/2015 WWWWW et WWWW= 16/46 WWW = 15/46 WW = 11/46 W = 4/46 10

11. Canadian Neutral Balanced 01/12/2010 WWWWW et WWWW= 25 Total 214 (12%) 01/12/2015 WWWWW et WWWW= 9/25 WWW = 11/25 WW = 2/25 W = 2/25 11

12. Canadian Equity Balanced 01/12/2010 WWWWW et WWWW= 18 Total 88 (20%) 01/12/2015 WWWWW et WWWW= 6/18 WWW = 4/18 WW = 4/18 W = 2/18 12

13. Global Neutral Balanced 01/12/2010 WWWWW et WWWW= 31 Total 228 (soit 14%) 01/12/2015 WWWWW et WWWW= 12/31 WWW = 13/31 WW = 5/31 W = 1/31 13

14. Global Equity Balanced 01/12/2010 WWWWW et WWWW= 27 Total 197 (14%) 01/12/2015 WWWWW et WWWW= 8/27 WWW = 8/27 WW = 8/27 W = 3/27 14

15. Summary More than 60% of managers with top performances 5 years ago, now have performances ranging from mediocre to average Q. What is the impact of not reviewing our selection? The yield spread between the two categories is huge : 2.9% on average over five years ( Min 1.5%, Max : 4.3 %) For a $100K investment, this is the equivalent of loosing $20,700 over 5 years (see next slide) 15

16. Impact of reviewing selection 16 $20 719

17. Summary (cont’d) Fund Category Survivors 4,5 Q Others <4 Q Median 5Yr Return Survivors Median 5Yr Return Others Difference (%) Cdn Focused Eqy52%48%8.74.44.3 Cdn Div&Inc Eqy36%64%8.35.42.9 US Equity52%48%17.615.71.9 Global Eqy35%65%12.79.13.6 Cdn Ntrl Bal36%64%6.65.11.5 Cdn Eqy Bal33%67%7.23.83.4 Global Ntrl Bal39%61%8.26.12.1 Global Eqy Bal30%70%9.65.93.7 Average39%61%9.96.92.9% 17

18. Long and tedious process...? But it pays off! Although the Investment Review is one of the crucial stages of the investment process, it is too often evaded because of lack of time/resources; On the other hand, this study shows that Investment Reviews can have a significant impact on the investor’ performance (-1.5 to -4.3% over 5 years); Investment Reviews not only allow advisers to make better and faster decisions, they measure their value added in the investment process. They also demonstrate professionalism, rigorousness and transparency; Of course, this task can be a long and tedious process but it can now be outsourced by professionals, providing periodic investment reviews of both portfolios and their components at an affordable price. 18

19. www.finalytix.ca 581.995.8942