MWP –CHOICES FOR A VARIETY OF CLIENT NEEDS

ADVISOR USE ONLY | NOT FOR DISTRIBUTION TO THE PUBLIC LPL Financial Member FINRA/SIPC 1Member FINRA/SIPC

MWP – CHOICES FOR A VARIETY OF CLIENT NEEDSJason Nicastro, AVP, Research

ADVISOR USE ONLY | NOT FOR DISTRIBUTION TO THE PUBLIC LPL Financial Member FINRA/SIPC 2

KEY TOPICS

LPL Research’s Investment Process

MWP Models – Choices for a Variety of Needs

Highlighted Models

MWP Model Combinations

Resources


LPL RESEARCH INVESTMENT PROCESS


INVESTMENT COMMITTEES & OVERSIGHT

Portfolio Management Committee

14 Members 9 Members 12 Members 14 Members

Tactical Core Strategic Opportunistic Implementation

All‐Weather Preservation Quad‐Core

Constrained

High‐Net‐Worth

Exchange‐Traded Products


PORTFOLIO CONSTRUCTION PRINCIPLES

Rely on the three pillars: fundamentals, valuations, and technicals

Set clear portfolio goals

Combinations matter

Up and down market returns are not symmetrical

Portfolios change when you don't trade

Not everything should be working at the same time

Learn from past trades to try to improve future ones


THREE REASONS WE TRADE


EXAMPLE #1 – INCREASE EMERGING MARKETS EXPOSURE

Trigger: Macro Driven Idea

Process

1. Multiple discussions during our daily Macro Policy Team (MPT) meetings

2. Discussions within Investment Committees

3. Pre-trade analysis

4. Discuss timing based on fundamentals, valuations, and technicals

5. Initial trade conducted in mid-April 2016 for Diversified ETP models


EXAMPLE #2 – NEED MORE DOWNSIDE PROTECTION IN ALTS MODELS

Trigger: Portfolio Driven Idea

Process

1. Multiple discussions during our daily MPT meetings

2. Discussions within Strategic Investment Committee


4. Discuss timing based on fundamentals, valuations, and technicals

5. Trades conducted in mid-May 2016


EXAMPLE #3 – SWAP LARGE CAP CORE HOLDING

Trigger: Diligence Driven Trade

Process

1. Discussions between Due Diligence and Strategic Investment Committee


3. Discussion at multiple MPT meetings

4. Implementation trade made in early May 2016


PORTFOLIO PHILOSOPHY


MWP MODELS – CHOICES FOR A VARIETY OF NEEDS


MODELS FOR MULTIPLE RISK/REWARD AND INVESTMENT OBJECTIVES

Absolute Return

Downside Risk Aware

Alternative Strategies

Quad-Core: Balanced

American Funds Active Core

Mutual Fund Diversified Plus

Exchange-Traded Product Diversified Plus

Alpha Focused

Technical EquityIncome Focused

Quad-Core: Income

Socially Responsible Investing

Tax Aware

Exchange-Traded Product Strategic

Mutual Fund Strategic


KEY QUESTIONS TO HELP NARROW YOUR CHOICES

Longer-term oriented (strategic) or shorter-term focused (tactical)?• Strategic Portfolios: Strategic, ETP, Tax Aware, SRI

• Tactical Portfolios: Technical Equity, Alpha Focused, Diversified Plus

Is current income or downside protection important?• Current Income Portfolios: Income Focused, Quad-Core: Income

• Downside Protection Portfolios: Downside Risk Aware, Quad-Core: Balanced, Absolute Return, Alternatives

Active or passive?• Actively Managed Portfolios: American Funds Active Core, Diversified Plus,

Alpha Focused

• Passively Managed Portfolios: ETP, ETP Diversified Plus, Technical Equity


HOW TO DIFFERENTIATE BETWEEN ALL OF THE MODELS

More Conservative

Downside Risk Aware Income Focused

Alternatives

Alpha Focused

Quad‐Core: Balanced

Tax AwareMutual Fund Diversified Plus

Technical EquityAmerican Funds Active Core

Quad‐Core: IncomeAbsolute Return

ETP Diversified PlusSRI

ETPMutual Fund

More Aggressive

We manage models with varying goals of risk mitigation. Some pursue more conservative levels of risk/reward, and some pursue more aggressive levels.


HIGHLIGHTED MODELS


AMERICAN FUNDS ACTIVE CORE

Utilize American Funds for core equity and fixed income allocations, complemented by other fund managers selected by LPL Research.

American Funds Mutual Funds

LPL Diligence

LPL Asset Allocation

LPL Portfolio

Construction

Tactical Risk Positioning and Tactical Investment Horizon

MWP LPL Research

American Funds Active Core

Investing in mutual funds involves risk, including possible loss of principal. Managed investments have numerous specific risks such as manager, concentration, and liquidity risk. For more information on risks, fees, and other important information for a specific fund please refer to the prospectus.


DFA Models

Dimension models 1, 2, and 3 attempt to help you align your investment objectives with your personal risk tolerance, investment time frame, and diversification preferences. The Sustainable and Tax‐Aware models enable you to further align your investments with specific social or tax‐planning considerations.


Source: LPL Research. Data as of 12/30/16“Performance data quoted represent past performance, and are not indicative of future results. Investment return and principal value will fluctuate; an investor’s equity, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted.

Individual client experience may have differed dependent upon the timing of cash flows. Portfolio performance presented is gross. Gross performance is gross of overlay and advisory fees but net of underlying investment management fees and expenses. The impact of overlay fees and advisory fees would decrease performance quoted above. Net performance is net of expenses and the maximum annual advisory fee of 2.50% or 2.58%, depending on the particular portfolio and investment objective. The returns shown include reinvestment of income distributed from the underlying mutual funds.

Portfolio performance assumes a quarterly rebalancing frequency. Rebalancing is a taxable event that may result in a taxable gain or loss; thus, rebalancing in nontax- advantaged accounts may involve higher taxes than tax-advantaged accounts.

Equity Recommended Funds are offered by prospectus. Investors should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The prospectus, and if available, the summary prospectus, contains this and other information about the investment company. Your client can obtain a prospectus from you. They must read carefully before investing.”

Diversification helped Strategic ETP performance in 2016


Strategic asset allocation – resources


TECHNICAL EQUITY MODEL


MODEL COMBINATIONS


THEMATIC MODEL COMBINATIONS

Low Cost

American Funds Active Core + Strategic ETP

Low Cost Active

American Funds Active Core + BlackRock Tactical ETF

Alpha Risk Managed

LPL Research Alpha Focused + Alpha Simples Risk-Efficient


LPL RESEARCH RESOURCES


NEW DIVERSIFIED BENCHMARKS

Index AG G GWI IMG ICPS&P 500 57% 48% 36% 24% 12%

Russell 2000 19% 16% 12% 8% 4%MSCI EAFE Net Return 12% 10% 8% 5% 4%MSCI EM Net Return 7% 6% 4% 3%Barclays US Aggregate 15% 35% 53% 70%

Cash 5% 5% 5% 7% 10%Total 100% 100% 100% 100% 100%

TACTICAL AND STRATEGIC MODELS

Index AG G GWI IMG ICPS&P 500 57% 48% 36% 24% 12%

Russell 2000 19% 16% 12% 8% 4%MSCI EAFE Net Return 12% 10% 8% 5% 4%MSCI EM Net Return 7% 6% 4% 3%

Barclays Municipal Bond 15% 35% 53% 70%Cash 5% 5% 5% 7% 10%Total 100% 100% 100% 100% 100%

TAX AWARE MODELS

All indexes are unmanaged and cannot be invested into directly.


DIVERSIFIED BENCHMARK PERFORMANCE

Source: LPL Research, FactSet Performance as of 4/29/16Aggressive Growth hypothetical diversified benchmark consists of: S&P 500 (57%), Russell 2000 (19%), MSCI EAFE (12%), MSCI Emerging Markets (7%). All indexes are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.

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0

2

4

6

8

10

12

YTD 1 Year 3 Year 5 Year

Diversified Benchmark* Russell 3000


OUTLOOK 2017 BROCHURES

Visit Marketing on Demand via the Resource Center to Order Copies

Copies Available in Packs of 5 or 25


OUTLOOK 2017 RESOURCES

Collateral Suite

Hard Copy & PDF versions

PowerPoint Presentation

Client Letter

Executive Summary

Video

How to Invest Guide

Do‐It‐Yourself Advisor Suite

Institutional White Paper

Institutional PPT


FOLLOW US ON TWITTER & LINKEDIN FOR INSIGHTS


LPLRESEARCH.COMClient-approved blog with commentary & daily market insights


Monday – Friday, 8:45 a.m. ET

Macro Monday

Fixed Income Tuesday

Manager Wednesday

Global Thursday

Technical Friday

Timely discussions

Interactive Q&A

Live polls

WAYS TO UTILITIES LPL RESEARCH

Daily Morning Call



Daily Morning Call



House of Charts

lpl‐research.com/hoc

Client‐approved charts & high‐level takeaways

Shareable via download or social media

Categorized charts for easily searching



Recession Watch Dashboard

Infographic looking at the risk of a recession occurring in the next year

Components:

The Over Index

The Five Forecasters

Beige Book Barometer

Current Conditions Index

Earnings Barometer


IMPORTANT DISCLOSURES

All performance referenced is historical and is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for your clients. Any economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to affect some of the strategies.

Stock and Pooled Investment Risks

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

All indexes are unmanaged and cannot be invested into directly.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Bond and Debt Equity Risks

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.



Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors.

Mortgage-backed securities are subject to credit, default, prepayment risk that acts much like call risk when you get your principal back sooner than the stated maturity, extension risk, the opposite of prepayment risk, market and interest rate risk.

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk.

Preferred stock investing involves risk, which may include loss of principal, and are subject to many of the same risks which affect fixed income securities.

Alternative Product Risks

Alternative strategies may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor's portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit




ADVISOR USE ONLY | NOT FOR DISTRIBUTION TO THE PUBLIC

THANK YOU FOR YOUR BUSINESS

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC.

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MWP –CHOICES FOR A VARIETY OF CLIENT NEEDS