2017A Year InReview

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The calendar year 2017 was another busy and successful year for Pinnacle Advisory Group (PAG).Thecompanycontinues toexcel inprovidingcomprehensivewealthmanagement services toclientswho are looking for high quality financial planning and risk-managed investing. We believe that thefoundationof ourbrandcontinues tobe thestrong relationshipswe’vedevelopedover the yearswithour core and institutional clients.

Financially, 2017 was an excellent year for the firm. The company began the year with $1.7 billiondollars under management and finished by breaking the $2 billion assets under management mark.Pinnacle Advisor Solutions (PAS), Pinnacle’s institutional advisory business, was a major driver ofcompany growth in 2017, beginning the yearwith $250million undermanagement and finishingwith$352 million—a gain of $102 million. The combination of our core and institutional businesses nowserves 1,250+ clients in 47 states in the U.S. and the District of Columbia.

One of the major drivers of growth for the year was the stellar performance of financial markets.Under the direction of Chief Investment Officer Rick Vollaro, Pinnacle’s team of seven-full timeinvestment analysts and traders continues to deliver our risk-managed investment process to coreand institutional clients.

The financial planning industry continues to evolve, giving consumers an ever growing number ofchoices in how they can obtain financial advice. Pinnacle accepts the challenge of adding value toour clients' lives, both by providing new and industry-leading perspectives on financial planningstrategies, and by providing a disciplined, fee-based approach to risk-managed investing. Accord-ing to our clients, the combination of financial planning, risk-managed investing, and a trustedrelationship with their financial advisor leads to long-term satisfaction with our company.

Those are just a few of our highlights from the past year. Join us in looking back at some of the otherexciting developments that took place here at Pinnacle in 2017.

Looking Back At 2017...

Previous page: Pinnacle Advisory Group's Columbia, Maryland headquarters.

John R. HillCEO, Founding Partner

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Sara Riley, Senior Client Relationship Specialist.

Deb Kriebel, Partner and Wealth Manager.

Mike Hamolia, Wealth Manager, with Jeff Troll and DavidKauffman, both Partners and Wealth Managers.

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The signs outside four of our conference rooms.

The Financial Planning TeamTheFinancial PlanningTeam focusedon increasing ourwealthmanagers' breadth of knowledge in a variety of financial plan-ning subjects and simultaneously increasing the depth ofknowledge in eacharea. Through individual efforts and regulareducational meetings, Pinnacle wealth managers have ex-panded their knowledge base and developed a deeper mas-tery of planning topics, bothofwhich substantially improveourclients' financial planning experience.

TheTJCA taxbill, passedonDecember22, 2017,presentedanimportant challenge to theplanning team.Thenewbill requiredasignificant investment in taxplanningeducation, aswell asaninvestment in the tools and software used for taxmodeling. Asa result, our planning process can provide value to our clientsin this shifting tax-law climate.

Under the direction of Kelly Wright, the Director of FinancialPlanning, the Planning Team developed a new set of 'deliver-ables' to help evaluate complex client issues in both our initialand on-going planning processes. These deliverables arebased on extensive financial planning research as well as datacommunication studies. In 2018, Pinnacle clients will be intro-duced to these important new tools, designed to enhance theirplan and make it easier for them to articulate Pinnacle’s finan-cial planning value proposition.

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From the desk of Raoul Rodriguez, Wealth Manager and Director ofPinnacle Advisory Group International.

We are pleased to report that the integration of Pinnacle’sMiami office technology with Pinnacle’s Maryland officewas completed last year. Some highlights included rollingout the client portal for Pinnacle Florida clients, installinga new ShareFile for clients to safely and securely uploaddocuments to their advisors, and integrating new formatsto client statements.

In the future, Pinnacle’s Florida advisors will move to amulti-meeting structure in working with clients, which willallow for more frequent meetings and in-depth planning.We continue to monitor the progress of integrating ourFlorida operations after our 2015 purchase of TEG.

Pinnacle South

There is an extraordinary opportunity to provide qualityplanning advice related to cross-border planning. Peoplewho live or work abroad, are married to a person of adifferentnationality, havechildrenabroad,orownpropertyor investments in another country, are excellent prospectsfor Pinnacle’s international services. We are proud to beone of four firms nationally offering cross-border planningwith Mexico and Canada.

In addition to Pinnacle’s cross-border planning, privatewealth management, and investment management ad-vice, last year Pinnacle’s Florida group created VISION, anew program that allows clients to leverage their wealth tofinance a residence, yacht, jet, or automobile. The primaryobjective of the program is to allow investors to use lesscash and combine it with leverage… similar to how a bankoptimizes the net interest spread to enhance its return onequity. We are looking forward to a more focusedmarket-ing program to support the VISION program in 2018.

Pinnacle Advisory GroupInternational

Director of Financial Planning, Kelly Wright.

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Pinnacle's investment team,clockwise fromupper left: SeanDillon,CarlNoble,SauroLocatelli, JoeZimmermann,RickVollaro,DanMento, andRossCausley.

Natallia Tyshchanka, greeting you at the front desk. Pinnacle's infamous candy bowl, destroyer of diets.

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Our Pinnacle family takes pride in connecting with our community andservingothers. 2017wasnoexception.Somehighlightsofour commu-nity involvement were:

The Ronald McDonald House: This well-regarded organization pro-vides aplace to stay for familieswhohave traveled to receive long-termmedical treatment for their seriously ill/injured children. Our team metat theRonaldMcDonaldHouse to cook and serve breakfast to patientsand families.

Pinnacle Entrepreneurial Prize: Each year Pinnacle sponsors anevent at Howard Community College to benefit students in the en-trepreneurial program. Students participate in a 'shark tank' like eventwhere they pitch their business ideas. Winners win scholarship fundsand Pinnacle staff look forward to the winners joining us at our officesfor lunch. The2017winnerswereThomasHarshamandLaceyCarpen-ter.

Adopt-A-Family: Every year during the holidays, staff gather gifts andgift cards for a special family in need (in partnership with the SalvationArmy).We look forward to helping our 'adopted' family and remember-ing how blessed we are to be able to help others at this special time ofyear.

JuniorAchievement:Aswith the rest of the staff atPinnacle,membersof our wealth management team also donated their time and talent.Sparkedby theongoingconcerns regarding financial literacy in today’seducational landscape, our wealth managers engaged with JuniorAchievement to volunteer at a “JA in a Day” program.

Through partnerships with local businesses, the event offers elemen-tary school students exposure to various career paths and skill setsthey’ll need to succeed in themodernworld. This program is presentedto an entire school in a day, and involves five education modules thatlead to a Junior Achievement certificate for the participating students.WealthManagerJakeMason leads thiseffort forPinnacleaswecontin-ue to support Junior Achievement’s efforts in the coming year.

Pinnacle in the Community

Natallia Tyshchanka, Karen Kellner, and Cybil Bellgather gifts for our Adopt-A-Family.

John Hill, Kristin Tucker, and Karen Kellner at theRonald McDonald House.

Pinnacle Employees: 52

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Clockwise from upper left: (2nd row, left to right) KristinTucker, Hillary Bender, Karen Kellner, Amanda Franklin.(1st row, left to right) Wendi Miller, Karima Escalona,Michelle Wong, Vilas Narallakattu, at the Ronald McDon-ald House.

Raoul Rodriguez with three Junior Achievement partici-pants and a fellow volunteer.

The Pinnacle Entrepreneur Prize competitors at HowardCommunity College.

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New Staff (2017—2018)

Erin WendellChief Compliance

Officer and Controller

Josh RiversWealth Manager

Wendi MillerClient Relationship

Specialist

Ross CausleyTrader

David PoulosDirector of Marketing

Eric GillentineAccountant

Pinnacle encourages our staff and ourfinancial planning and investment pro-fessionals to continue their education.To that end, we congratulate StephenWright, a wealth manager at PinnacleFlorida, for earning his Canadian CFP.The designation allows him to addgreat value to ourPinnacle Internationalsuite of cross-border planning services.

Congratulations also go to CarrieBeren who earned her CFP designa-tion last year. Carrie is an experiencedfinancial planner who is adding thishighly valued professional designationto her long-time experience in workingwith clients.

New Staff Certifications

Pinnacle’s trading team continues to benefit from compa-ny investments in trading technology. The numbers areoutstanding: The team recordedonly five trading errors forthe entire year—a rate of0.003%—where theerrorsresulted in no net lossesfor clients.

As the firm grows, we con-tinue tomonitor the qualityof our trading operationsand are committed tomaintaining the higheststandards for our clients.

Excellence In Trading

Joe Zimmermann, Head Trader

Anniversaries (2017-2018)20 Years - Karen Kellner

15 Years - Michael Kitces

10 Years - David Kauffman, Jake Mason, TomRaynor

5 Years - Cybil Bell, Mike Green, KarimaEscalona, Pete McGratty, Joe Zimmermann,Rebecca Garza

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The founding partners, left to right: John Hill, Ken Solow, Dwight Mikulis.

The process of bringing new clients onto the Pinnacle platform—our “onboarding process”—iscomplex. There are many steps between meeting a new potential client, getting new accounts setupwith custodians, and transferring funds to be activelymanaged by the firm. It takes a coordinatedeffort between many different departments to get this done as efficiently as possible. Last year,Pinnacle’s Technology Manager, Vilas Naralakattu, led a multi-departmental effort to standardizeour onboarding process and automate its many steps. The result is an efficient, easy to manageprocess, that is driven through our Salesforce database architecture. Our goal is to provide the bestintroduction to the firm for our new clients.

Through this process we also identified ways of reaching out to our existing clients to enhance theirexperience.We remain committed to fully utilizing Pinnacle’s investments in technology to increasethe productivity of our staff and make our client experience more enjoyable.

Technology

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Erin Wendell, Chief Compliance Officer and Controller

Karen Kellner, Business Manager

A stack of the second edition of Ken Solow's book

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2017 was an interesting and exciting year for the firm as we engaged an outside marketing firm,Cyphers Agency, to work with us to better define our brand and to help us build a comprehensivemarketing plan for the future. One outcome of the effort was a client survey that allowed clients toopine on how they viewed Pinnacle, what benefits they expected, and how their perception ofPinnacle has changed as they matriculated from prospect to client. Some highlights of the survey:

▲ Most clients equally value portfolio performance and their advisor relationship.▲ Clients highly value the personal relationships with their advisor and comprehensive finan-

cial planning.▲ 50% of clients are not concerned about how we determine asset allocation as long as the

portfolio performs well.

Another outcome of the branding programwas the decision to position Pinnacle as a thought leaderin the financial planning industry. Our new tag line—"ANewPerspective onWealthManagement"—is found on all of our presentation materials. Based on our research, we decided to create a newfinancial planning service calledOnpoint by Pinnacle. Onpoint bundles a series of unique servicesfor clients who are about to retire or have recently retired, including risk-managed investing, tax-efficient spending, security location, and other techniques to maximize retirement assets.

By year-end the company engaged in a pilot program to use programmatic and social mediamessaging to promote both our new brand and Onpoint by Pinnacle. The company will continueto implement digital marketing as part of its comprehensive marketing plan in 2018.

We look forward to all of the elements of Pinnacle’s marketing plan to be managed by our newDirector of Marketing, David Poulos. Dave comes to us with years of experience in all aspects oftraditional and non-traditional marketing strategies.

Marketing

PAS continues to meet the needs of institutional advisors who are looking to outsource investmentmanagement and back-office services in order to grow their business. After conceiving of thebusiness in 2010 and talking to hundreds of independent advisories about their challenges andsolutions, PAS now serves 13 institutional clients who have joined our community as StrategicPartners and 40 firms who have joined as PRISM Partners (a PAS service focused on providingcontinuity and succession to independent wealth management firms).

PAScontinues togain traction in our Level 2 investment serviceswhere institutional clients takeadvan-tage of full-service approaches to practice management. In 2017 PAS rolled out a small accountstrategy ("Alpine") to accommodate children and other small accounts. Pinnacle also developedbrochures for the solutions in the Level 2 Operations Bundle, including Billing, Reporting, PortfolioManagement, Client Portal and Document Management.

In 2017 PAS created SPECTRUMwherein we identify a local advisory firm to serve as successor ofthe client’s advisory relationships while supported by Pinnacle investment and operations services.

Pinnacle Advisor Solutions

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The 2017 Market at a GlanceThis is a word cloud using the text of Pinnacle's 2017 quarterly market reviews.The more frequently a term appears, the larger it is in the word cloud.

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HEADQUARTERS6345 Woodside CourtSuite 100Columbia, MD 21046410.995.6630301.621.8007info@pinnacleadvisory.com

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