PITTINOS FINANCIAL ADVISERS, LLC

WHAT WAS THE STRUCTU RE OF PITTINO S FINAN CIAL ADVISERS, LLC? WHAT WAS ITS APPROAC H TO FINANCIAL
PLANNING AND HOW MIG HT THIS HAVE AFFECTE D ITS INVESTMENT REC OMMENDATIONS?

- Primary focus: providing advice to the many individuals and families that alternately struggled and flourished in his neighbourhood
- Traditional set of financial services: financial planning, investment management, insurance, and estate planning
- Clients: owners of small family businesses
- KSF: philosophy of providing its clients with a comprehensive plan developed from transparent and easily understood alternatives
- Recommended investments: mutual funds
o Selected by Pittinos himself which he accredited to being central to his success and therefore could not be delegated
o Pros
 Diversification  spread holdings across number of different investment vehicles thereby reducing effect any
single security or class of securities will have on the overall portfolio
 Expert management  Pittinos may lack financial knowledge with regards to certain classes of securities in
which professionals can put forth their expert analysis
 Liquidity  with retirement being a concern of Pittinos’ clients, the ability of mutual funds to be traded daily
ensures they are able to access funds when needed
o Cons
 Fees and expenses
 No control over portfolio
 Over-diversification  the more securities you hold, the less likely you are to feel their individual returns on
your portfolio

- Philosophy was crafted to address two central concerns of the community in which he was serving:
o Security: ability to provide for oneself and one’s family no matter the circumstances
 Recent market volatility further magnified the importance placed on security and tested many financial plans
 Many clients faced significant portfolio losses due to the market decline in 2008 that they had not yet
recovered from
o Retirement independence: to be able to live without being a burden on others and, moreover, to be able to relax and
enjoy a simple life after a lifetime of hard work
o Two concerns were largely in conflict – security in the short run was typically obtained at the expense of wealth in the long
run
o Purpose of Pittino’s firm’s financial advice was to help clients strike an informed balance between competing needs in a
manner emotionally agreeable as it was financially defensible

BE PREPARED TO DISCU SS PITTINOS’S DEFIN I TION OF MARKET EFFIC IENCY. DO YOU AGREE WITH HIS DEFINITION? HOW
DOES HIS DEFINITION AFFECT HIS INVE STMEN T DECISIONS O N BEHALF OF CLIEN TS?

- Market efficiency: way to think about performance rather than a conclusion about the state of markets; lens through which past
performance and prospects for future performance was viewed
- Evaluation of prospective fund tended to focus on expenses and benchmarked performance
- Issues:
o Pittino’s definition focuses on the idea that past performance can indicate future performance which doesn’t always hold
true

WHICH, IF ANY, OF TH E MUTUA L FUNDS SHOUL D P ITTINOS ADD TO HI S FIRM ’S FUND OFFERINGS? U SE THE FUND
CHARACTERISTICS A S W ELL AS FUND RISK -ADJUSTED PERFORMANCE TO JUSTIF Y YOUR DECISI ON.

Short-term Manager Tenure: provides the risk that the objective and approach of the fund may not be maintained, therefore when Pittinos is
investing in a short time frame the strategy of the fund could change which would make it not an appropriate fund to invest in

Dreyfus Large Cap

- Objective: long-term capital appreciation

 o May be properly aligned with the long term goals of retirement of Pittinos’ clients’
- Large-cap equity funds
o May be less risky, and therefore lower returns
- Different investment styles
o Investment styles may not be consistent to meet with the concerns of the clients of Pittino’s
- Manager tenure 2.00 years

Dreyfus Emerging

- Objective: capital growth

o Turns to higher risk stocks
o May not be adequate for the retirement concern of clients’
- Fundamental analysis to identify stocks believed to be emerging leaders
- Small companies characterized by new or innovative products/services
o As they as not established, may be high risk
- Manager tenure 1.50 years

Stadion

- Objective: long-term capital appreciation, capital preservation

- Proprietary, technically driven asset allocation
- Manager tenure 4.92 years

Wells Fargo

- Objective: long-term capital appreciation

- Diversified portfolio of equity securities
- Manager tenure 5.67 years

Turnover Ratio

- Percentage of a fund’s investment’s holdings that have been replaced in a given year
- A low turnover ratio shows a buy and hold strategy
- A high turnover ratio can result in increased costs for the funds and decreased returns for the shareholders due to commissions being
paid when buying and selling stocks